While investigating Anchorage cocaine dealers, authorities discovered a massive identity theft and tax fraud operation that illegally claimed about $19 million in federal tax refunds, prosecutors said.
U.S. Attorney for Alaska Karen Loeffler said Thursday it's unclear exactly how much cash the federal government paid out to the defendants: seven illegal immigrants, three living in the country legally and a corrupt Wells Fargo bank employee, the U.S. citizen, who helped the alleged fraudsters. The 10 residents of Mexico and the Dominican Republic, working with a United States citizen, sent at least some of the money they allegedly stole from the U.S. Treasury out of the country, according to an indictment handed up this week.
"It's a very large tax fraud case, and what I would call organized crime," Loeffler said Thursday. "This is certainly the biggest (tax) case we've brought down in Alaska."
Federal prosecutors said seven of the people named in the indictment are behind bars, two are out of custody but not likely to run, and two others are considered fugitives from justice. Their names are Joel Jose "Primo" Santana-Pierna, Abel Santana-Pierna, Misael "Jose" Polanco-Villa, Nicolas Jimenez-Sanchez, Isaac Amparo-Vazquez, Randin Paredes Henriquez, Japhet Soto Santiago, Wedys Ramirez-Javier, Samuel "Nino" Peguero, Fatima Augilar-Martinez, and Hilda Josephine Hernandez McMullen
Federal investigators caught on to the scheme through a drug investigation that started with undercover cocaine purchases last year.
According to a charging document in the drug case, Jimenez-Sanchez sold an ounce of cocaine to an undercover Anchorage police officer in March 2011. That purchase led to many more from three other members of the ring, with the undercover officer eventually buying as much as 20 ounces on two separate occasions, once in the parking lot of the Century 16 movie theater in Midtown, the charges say.
In the deals listed in the charges, members of the drug ring sold undercover officers 54 ounces of cocaine for a total of $66,800. In January, federal prosecutors charged four men, all included in the recent indictment, with selling cocaine.
The investigation soon grew to a multimillion-dollar tax fraud case, said Loeffler, who would not comment on exactly how the authorities discovered the fraud case.
On Tuesday, a grand jury handed up an indictment adding 77 counts to the previous indictment, which ballooned to include seven more defendants. They are now charged with international money laundering, forgery, defrauding the government, filing false tax returns, passport fraud, falsely claiming U.S. citizenship, possession of stolen mail, and aggravated identity theft. The charges are for alleged criminal acts between January 2010 and March 2012, according to the indictment.
The defendants allegedly received laptop computers with stolen personal information from more than 2,600 residents of Puerto Rico, according to prosecutors.
Puerto Ricans, as residents of a U.S. commonwealth, usually hold U.S. citizenship but are not required to pay income tax unless they earn money elsewhere in the country. Through the course of the alleged conspiracy, the defendants used the Puerto Ricans' names and Social Security numbers on W-2 forms -- a tax form issued by employers -- and real employer identification numbers with false amounts for wages earned and taxes withheld, according to the indictment.
In some cases, members of the ring used physical addresses in Anchorage and Eagle River in the filings, then took the tax return checks out of the mailboxes at those addresses when they arrived later, the indictment says.
"Some of the claims went through, and some of them were caught before they actually received the refund," said IRS Special Agent Tamera Cantu.
But to cash the checks they did get or to receive electronic deposits, the defendants needed fake identification and a bank accounts, the prosecutors said. They used information from the stolen identities to apply for bank accounts, ID cards from the Alaska Department of Motor Vehicles and, in one instance, to apply for a passport, the indictment says. McMullen, the bank official accomplice at Wells Fargo, also helped create bank accounts for the fake identities, according to the indictment.
Loeffler would not comment on what position McMullen held, though prosecutors said she no longer worked at the bank. She knowingly aided the conspirators by filing account applications on seven occasions, according to the indictment.
With the accounts and documents in place, the defendants deposited the checks and made large cash withdrawals when the checks cleared, the indictment says.
"Finally, the conspirators often sent the fraud proceeds to the Dominican Republic via wire transmission through money service businesses, mailed packages, or bulk cash smuggling by individuals," the indictment says.
Loeffler said the prosecutors will try to get the money back through forfeiture, if the 11 defendants are convicted. According to the indictment, prosecutors are seeking forfeiture of more than $130,000 in drug proceeds.