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Financial Crimes
11/12/2013

NY man pleads guilty in huge stolen identity refund fraud case

NEWARK, N.J. — A New York man pleaded guilty Tuesday to his role as the leader of one of the nation's largest and longest running stolen identity tax refund fraud schemes ever identified. The guilty plea resulted from an investigation by the District of New Jersey Financial Crimes Task Force, which is composed of investigators from U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the IRS and the U.S. Postal Inspection Service, the U.S. Secret Service and the Drug Enforcement Administration.

Jose Torres, aka "Jose Quilestorres," aka "Carlos Jose Luis," 47, of Bronx, N.Y., pleaded guilty before U.S. District Judge Claire C. Cecchi in Newark federal court to conspiracy to defraud the United States, theft of government property and aggravated identity theft.

The scheme caused more than 8,000 fraudulent U.S. income tax returns to be filed, which sought more than $65 million in tax refunds and resulted in losses to the United States of more than $12 million. Torres admitted the fraudulently obtained tax refund checks in which he was personally involved totaled $9.9 million.

According to court documents:

An investigation led by the New Jersey Financial Crimes Task Force revealed that from at least 2008, dozens of individuals in the New Jersey and New York area have been engaged in a large-scale, long-running SIRF scheme that caused more than 8,000 fraudulent 1040 forms to be filed, seeking more than $65 million in tax refunds, with more than $12 million in losses to the U.S. Treasury.

Torres and others obtained personal identifiers, such as dates of birth and Social Security numbers, belonging to Puerto Rican citizens. Torres then directed others to use those identifiers to create fraudulent 1040 forms to create the appearance they were entitled to tax refunds. The fraudulent 1040 forms were created and filed electronically. By tracing the specific IP addresses that submitted the electronically filed 1040s, law enforcement officers learned that only a handful of IP addresses created many of the fraudulent 1040 forms, which, in turn, led to the issuance of refund checks that the conspirators obtained, sold, cashed and spent.

Torres and others gained control of the refund checks by bribing mail carriers to intercept checks and deliver them to other conspirators. In exchange for cash payments, the carriers gave checks to conspirators, who sold the checks to other conspirators.

Torres and others also purchased "mail routes," lists of addresses covered by a single mail carrier. Conspirators applied for refunds, inserted addresses along the mail route as the purported home addresses of the taxpayers, and obtained the refund checks sent to the addresses. In other instances, the conspirators applied for checks using addresses otherwise controlled by, or accessible to, certain conspirators, and collected the checks after they were delivered to those addresses. During the course of the scheme, hundreds of tax refund checks were mailed to just a few different addresses in a few different towns, including Nutley, Somerset and Newark, N.J., and Shirley, N.Y.

The New Jersey task force identified certain "hot spots" of activity; millions of dollars of tax refund checks were being directed to just a few towns and cities in and around New Jersey. Task force members then interacted with U.S. Postal Service employees in these hot spots and identified the characteristics of refund checks connected to the scheme. As a result of these efforts, more than $22 million in fraudulent refund checks were not delivered to the conspirators or others, but were instead interdicted by law enforcement officers.

The conspiracy count is punishable by a maximum potential penalty of five years in prison and up to a $250,000 fine. The substantive count of theft of government property is punishable by a maximum potential penalty of 10 years in prison and up to a $250,000 fine. The aggravated identity theft count is punishable by a statutory mandatory minimum sentence of two years in prison, which must run consecutively to any other sentence.

Torres previously pleaded guilty in the Southern District of New York to charges arising out of the same scheme. He will be sentenced in the Southern District of New York on the charges from both states at a date to be determined.