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Tax-Refund Scheme Exploiting Social Security Numbers of
Residents of Puerto Rico Leads to 57-Month Sentence
LEV L. DASSIN, the Acting United States Attorney for Southern District of New York, PATRICIA J. HAYNES, the
Special Agent-in-Charge of the New York Field Office of the
Internal Revenue Service, Criminal Investigation Division ("IRSCID"),
JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge
of the New York Field Office of the Federal Bureau of
Investigation ("FBI"), RONALD J. VERROCHIO, the Inspector-in-
Charge of the New York Division of the United States Postal
Inspection Service ("USPIS"), and JANE HUGHES, the Special Agentin-
Charge of the New York Office of the United States Postal
Service, Office of Inspector General ("USPS-OIG"), announced that
LUIS MERCEDES, a/k/a "Alfred," was sentenced yesterday by United
States District Judge PAUL G. GARDEPHE to 57 months in prison on
charges of conspiracy to steal mail, theft of mail, and
conspiracy to defraud the Government with respect to claims.
According to the Information filed in Manhattan federal
court, to which MERCEDES previously pleaded guilty, as well as
other documents filed in the case and statements made during his
guilty plea and sentencing proceedings:
This case stems from a two-year investigation into the
use of stolen Social Security numbers and other identity
information to submit fraudulent state and federal tax returns.
The investigation to date involves the electronic filing of tens
of thousands of fraudulent federal tax returns, and tens of
millions of dollars of fraudulently obtained tax refunds and
stimulus checks. Social Security numbers assigned to residents
of the Commonwealth of Puerto Rico are specifically targeted for
use in obtaining fraudulent refunds because residents of Puerto
Rico whose income derives solely from Puerto Rican sources are
generally not required to file federal tax returns with the IRS.
This minimizes the risk that a legitimate federal tax return was
already filed by the owner of the Social Security number.
One way participants in the scheme arranged to actually
obtain the fraudulent refund checks was to request the IRS to
mail them to addresses that were on particular United States
Postal Service routes. The letter carriers on those routes would
be paid to steal the checks from the mail, normally for a percheck
fee.
In this case, from mid-2007 through early September
2008, refund checks totaling approximately $2.9 million were
directed to the Manhattan postal route of a particular letter
carrier. These checks stemmed from more than 1,000 fraudulent
federal tax returns, seeking over $9.5 million in refunds, that
were filed with the IRS. The letter carrier stole over 400 tax
refund and stimulus checks from the mail and provided them to
MERCEDES. MERCEDES was arrested on September 3, 2008, as he was
taking possession of decoy checks that had been inserted into the
mail by investigators, as well as additional tax refund checks,
from the corrupt letter carrier.
Prior to his arrest in September 2008, MERCEDES, 34,
resided in Manhattan. MERCEDES pled guilty to the charges on
February 4, 2009 and was detained.
In addition to the prison term, MERCEDES was sentenced
to two years of supervised release, ordered to pay approximately
$2.9 million in restitution and to forfeit two cars traceable to
the fraud.
Mr. DASSIN praised the work of the IRS-CID, the FBI,
the USPIS, and the USPS-OIG, and thanked them for their work in
this case.
This case is being prosecuted by the Office's Major
Crimes Unit. Assistant United States Attorney DANIEL W. LEVY is
in charge of the prosecution.
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