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Names Were Sold to Tax Thieves


September 3, 2011 (Tampa Tribune, Fla.) TAMPA -- When he was rejected three times filing his tax return, Tampa police Lt. Mark Scott suspected that his identity had been stolen.



His instincts were right. Someone had taken his account information, filed a fraudulent return in his name and took the money.

More frustration set in when he tried to get his tax information from the Internal Revenue Service to assist in an investigation.

He was told that federal tax laws prevented the IRS from doing that.

"I felt I was victimized twice," Scott said about the identity theft and then the lack of help from the federal agency.

At the time, Scott didn't know how big the scam was or how many people were victims.

The full scope of the operation came to light when a multiagency task force uncovered a tax fraud scheme that raked in more than $130 million across the Tampa Bay area.

So far, 49 people have been arrested and a fleet of luxury cars have been impounded. Businesses fronting the scam have been shut down, a mountain of paperwork has been seized and hundreds of false tax returns have been intercepted by authorities.

The privacy restrictions on federal tax laws are so strict that no one arrested this week was charged with tax fraud. Instead, authorities have brought charges of identity theft and money laundering.

The investigation is ongoing, and law enforcement officials said taxpayers in Tampa, which appears to be the epicenter of the scam, could be losing$15 million a day.

That's just the "tip of the iceberg," said Tampa Police Chief Jane Castor.

"I doubt this is happening only in Tampa," she said at a news conference Friday during which hundreds of fraudulent tax returns were laid out on a table and half a dozen high-end cars bought with stolen tax money were displayed.

The scheme could involve hundreds of people and may be happening across the nation, Castor said.

Anyone with a laptop computer can do it.

Castor said people would search the Internet, using sites such as Ancestry.com, to find personal and account information of others.

Some would "buy" identities from people who worked at businesses or health clinics that had access to other employees' information.

One such transaction involved the sale of 10 names for $200, police spokeswoman Laura McElroy said.

"One individual was selling thousands of names," she said.

After obtaining identities, the scam artists would then use electronic filing programs such as TurboTax, Tax Hawk and Tax Slayer to file false returns.

Detectives don't think identities were stolen through those programs, McElroy said.

The refunds were sent to vacant homes, the address of another person involved in the scheme or a random house where the mail was then intercepted.

False bank accounts were opened to receive direct deposit returns, and the crooks also used preloaded debit cards to cash in.

Thousands of dollars were withdrawn from local ATMs and spent on big-ticket items such as Mercedes-Benz and Bentley sedans, jewelry and Gucci purses. In one raid on Thursday, authorities recovered three luxury cars, $26,000 in cash, $250,000 in U.S. Treasury checks and stacks of preloaded debit cards.

For at least two months, ringleaders were brazen enough to offer classes in an Ybor City social club, teaching others how to pull off the scam.

Parties were held in local hotels where groups of people would file fake returns on an array of laptops.

Those who participated in the fraud dubbed it "Turbo Tax," after the popular tax filing software.

Rap videos filmed in Tampa and posted on YouTube show people flashing wads of cash and boasting about getting rich by using stolen Social Security numbers to file illegal tax returns.

"The scheme is extraordinarily simple," said special agent in charge John Joyce of the U.S. Secret Service. "But incredibly lucrative."

The fake returns averaged about $5,000 to $10,000 per check, authorities said.

Logan Pennypacker is another victim. The parents of Pennypacker, who is disabled and a client of a local group home, said it's ironic that criminals took their son's identity and used it to obtain a $2,600 return while state funds for the developmentally disabled are being slashed.

"These individuals weren't just stealing from him, but were going out there and having parties," his father, Keith Pennypacker, said.

Keith's wife, Valerie, said she isn't sure exactly how thieves swiped her son's Social Security number.

Police uncovered the identity theft in June when two men used a fake credit card with Pennypacker's name to withdraw cash from an ATM on Nebraska Avenue.

"I was shocked," Valerie Pennypacker said. "It's not fair. You shouldn't take advantage of people that way."

The investigation, dubbed "Operation Rainmaker," took about a year and a half.

"The money was raining down on these suspects," Castor said.

"But the only thing that will be raining down on these individuals now is justice."

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2011 the Tampa Tribune

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