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Criminal Corner

We are committed to closing California's $6.5 billion tax gap, defined as the difference between tax that is owed, and tax that is paid. Our special agents work cooperatively with law enforcement agencies throughout California to uncover illegal behaviors that contribute to the tax gap. These include underreporting income, overstating deductions, failing to file returns, failing to pay taxes due, and making illegal cash payments to employees.

Tax fraud is not a victimless crime. You can report suspected tax fraud by calling FTB at (800) 540-3453.

Real estate controller pleads guilty to grand theft, tax charges

On March 1, 2007, an Alhambra woman pleaded guilty to felony charges for embezzling more than $500,000 from her former employer.

Danna L. Rodriguez, 35, pleaded guilty on Wednesday to one count of grand theft, two counts of failing to file tax returns, and one count of filing a false state income tax return.

According to court documents, Rodriguez was employed as the controller of a South Pasadena real estate property management company. She abused her position of trust by printing and using duplicate company checks, which did not show up on the company's financial records, to embezzle more than $535,000 during the years 2000 - 2004. The scheme was discovered when property owners had insufficient funds to cover expenditures paid out from their property management accounts. In addition to the theft, Rodriguez failed to claim the embezzled funds on her state income tax returns. All income is taxable, including income from illegal sources.

Rodriguez surrendered to authorities in February. She was remanded without bail, and faces a maximum of three years in state prison. Restitution to the victims is still to be determined. Rodriguez made a partial restitution payment of $100,000 to the court. She owes the state more than $75,000 in unpaid tax, penalties, interest, and investigation costs.

Tax preparer sentenced in global money laundering scheme

On March 23, an Orange County tax preparer was sentenced to 11 years in state prison for his role in an international money laundering operation that included $28 million in unreported income. The sentencing culminates a multi-year investigation that included the California Attorney General's Bureau of Medi-Cal Fraud and Elder Abuse, the Inspector General of the US Department of Health and Human Services, and the FTB.

Yakoob Habib, 58, of Buena Park, pleaded guilty in February to laundering more than $2.5 million from criminal activity. He also pleaded to charges of flight on bail, and tax evasion. Habib failed to report as income nearly $10 million that flowed through his personal accounts, and another $18 million that went through his corporation, K & K International. Habib was a certified tax preparer who operated K-Tax Services.

The source of the funds included money stolen from Medi-Cal through California Premier Medical Laboratories, located in Baldwin Park, and Professional Service Reference Laboratory, in North Hills.

The Attorney General's Office identified more than $12 million that Habib illegally transferred.

Orange County Superior Court Judge James A. Stotler issued the sentence under a plea agreement between Habib and the Attorney General's Office.

In papers filed with the court, Habib said that he "received money with the goal of rendering it so that it would be difficult for law enforcement to determine the origin of this money, and its ultimate destination." Habib said he used a variety of aliases and businesses to handle the money, and moved funds through traditional banks as well as through hawala, an informal international money transfer system. Money in the hawala stream can be impossible for authorities to follow.

Habib was first arrested in June 2002, along with 11 other defendants in a laboratory fraud case. In 2003, Habib was sentenced to three years in state prison in absentia for violations of his plea agreement. He was later arrested in Canada, and indicted by the Orange County Grand Jury in June 2004. Habib's wife, Rashida Kalia, also was indicted by the Orange County Grand Jury for tax evasion. She remains a fugitive.