Former TAS Employee Implicated in ID Theft Refund Scheme

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There are bad seeds in any organization, and IRS is not exempt from that. Despite that reality, the news release that the Northern District of Alabama US Attorney’s office issued the other day is particularly disturbing because it highlights how one of the IRS’s own allegedly was involved in using her position at the Taxpayer Advocate Service to steal taxpayer identities and use that knowledge to facilitate the receipt of over a million dollars in bogus refunds.

The US Attorney’s Office announced that it indicted former TAS employee Nakeisha Hall and co-conspirators for  “their involvement in a 2008 to 2011 scheme operated out of Birmingham that involved stealing personal identity information from the Internal Revenue Service to create fraudulent tax returns and collecting the stolen refunds.”

We have written a few times about the scourge of identity theft in the past year, with excellent guest posts on the topic from former prosecutor Justin Gelfand and practitioner Rachael Rubenstein. This story, however, is particularly disturbing because Hall abused her position of trust in a way that can seriously undermine confidence in the tax system, and in particular given her position at TAS, which has a major role in helping taxpayers resolve identity theft issues.

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The news release expands on that:

Taxpayers trust, and expect, that IRS employees, as a whole, will safeguard their most sensitive personal information. Taxpayers also must trust that IRS employees in the Taxpayer Advocate Service will not only protect their sensitive information but will actively assist them when it has been compromised by others,” [US Attorney] Vance said. “An IRS taxpayer advocate who exploits that trust, and with full knowledge of the significant impacts of identity theft, uses her IRS access to compromise taxpayers’ identities and steal a million dollars from the U.S. Treasury is committing a particularly egregious crime that will not go unpunished,”  Vance said.

The release detailed the scheme:

Hall obtained individuals’ names, birth dates and Social Security numbers through unauthorized access to IRS computers. Hall used the personal identity information to prepare fraudulent income tax returns and submitted them electronically to the IRS. Hall requested that the IRS pay the refunds onto debit cards and directed that the cards be mailed to drop addresses that she controlled. Hall solicited and received drop addresses from Goodman, Coleman and other co-conspirators, who also collected the refund cards from the mail.

Hall activated the cards by using stolen identity information. She, Goodman, Coleman and other co-conspirators took the money off the debit cards at ATMs or used the cards for purchases. If the fraudulent returns generated U.S. Treasury checks rather than the requested debit cards, Hall and her co-conspirators used fraudulent endorsements in order to cash the checks. Hall compensated Goodman, Coleman and other co-conspirators by giving them a portion of the refund money, or by giving them refund cards for their own use.

Parting Thoughts

No doubt the misdeeds of an IRS employee will draw much attention, and it should. As the US Attorney notes, it is particularly egregious when someone in a position of trust violates that trust. That has an impact not only on the public, but also on the morale of the many IRS employees that day in and day out try their best to help the public.

Identity theft is a major problem that exists independent of misdeeds of a rogue IRS employee. TAS on an individual case level and on a systemic level has been and continues to be a major force for good. For example, in reports and in testimony the National Taxpayer Advocate has detailed IRS’s administrative process errors and recommended “Congress establish a timeframe for the IRS to develop a strategy and timeline for accelerating third-party information report processing and providing taxpayers with electronic access to such data.” 2105 Testimony Before the House Committee on Oversight and Government Reform.

Recent PATH legislation accelerates the timeframe for the filing of information returns and mandates a delay in the payment of refunds attributable to refundable credits, actions consistent with those recommendations and reflective of how TAS continues to be a positive force in identifying problems and proposing solutions to tax administration problems.

There is still much to do in this area. This story is depressing and to the extent there are other problems within IRS and TAS one hopes that TIGTA and prosecutors chase down all of the bad actors. The problem though goes well beyond the bad actors, and Congress and IRS still have their hands full as we enter a new filing and identity theft season as well.

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8:35 AM 12/31: Note: The story was updated to reflect that the indicted person is a former TAS employee

 

Leslie Book About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

Comments

  1. Deborah Percell says:

    What has happened to background investigations of employees who are hired to work for the IRS? Has IRS diluted funds for TIGTA investigations before employees are permanently hired and placed in position of manipulating identity data of the taxpaying public? What happen to responsible supervision of this TAS employee?

  2. Bob Kamman says:

    The TAS CEO was busy hosting some of her friends from around the world last year. Perhaps more time could be spent on program management, like hiring and supervisory procedures. In November, PT promised “As papers become publicly available we will update this post so readers can review conference materials.” Not that I expected anything useful to come out of the festivities, but is there a time frame on when this might happen? Does the State Department have to review them for classified material?

  3. Norman Diamond says:

    Read this:
    https://www.treasury.gov/tigta/oi_highlights.shtml
    Around half a dozen other IRS employees were caught participating in stolen identity refund fraud in 2015. Nakeisha Hall isn’t even lissted yet.

    Read archives of past years linked on the same page, particularly 2011 listing Monica Hernandez. Even TIGTA hid most of the theft by IRS employees, by writing that Form 1099 reports withholding from interest and dividends. Withholding from gross sales proceeds (not capital gains) from sales of shares might be 100 times larger and is also reported on Form 1099, but TIGTA didn’t mention it.

    The thieves frame the victims as fraudulent and frivolous so that no one will help the victims. Their stolen withholding remains stolen. When Kathryn Keneally was Assistant Attorney General for Taxation, she told Congress that the IRS makes good to victims of stolen identity refund fraud, at the same time as she was opposing victims’ refund suits in Court of Federal Claims and Court of Appeals for the Federal Circuit.

    I don’t think the ring leaders have been caught yet.

  4. Norman Diamond says:

    TIGTA’s 2015 highlights have been archived. To see around 6 other IRS employees who were arrested for stolen identity refund fraud in 2015 (not even including Nakeisha Hall), the URL now is:
    https://www.treasury.gov/tigta/oi_highlights_2015.shtml

  5. Norman Diamond says:

    TIGTA reported this in 2016, I guess because the sentencing was in 2016.

    “Former Internal Revenue Service (IRS) Special Agent Donald Centreal Smith was sentenced in the Northern District of Alabama on November 10, 2015 for his role in a tax refund scheme. Smith entered a guilty plea to conspiracy, wire fraud, and aggravated identity theft in June 2015.
    […]
    According to the court documents, Smith began his employment with IRS Criminal Investigation (IRS-CI) as a trainee in 2005 and became a special agent with IRS-CI in 2007.”

    CI, eh? Is that better or worse than TAS? I think TAS insiders aren’t even in a position to frame their victims for fraud.

  6. Norman Diamond says:

    (Not quite on topic.)

    I was surprised to see one of my comments approved instantaneously without waiting for moderation. Is moderation required for any comment containing a link to http://www.treasury.gov? Yeah I don’t trust that site either, I wonder why.

    • Norman, comments with links to other web pages are flagged as potential spam, and we have to mark it is not being spam. I do not think the page itself matters, just the fact that you are linking to another website.

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