Arnold Tobias Gervais, 34, said in federal court Wednesday he engaged in a scheme to defraud the IRS out of more than $3.4 million in federal income tax refunds while he was in state custody.
Gervais was convicted in May 2008 and sentenced to five years in prison by the Superior Court of Cobb County for theft by taking for submitting a fraudulent tax return in an attempt to obtain a tax refund of more than $600,000 from the state. He was incarcerated on that charge from July 13, 2007, through February 26, 2010, according to United States Attorney Sally Quillian Yates.
On March 16, 2009, while in state custody, Gervais convinced his then-wife to file with the IRS a phony income tax return, Form 1040, for tax year 2008, which contained a claim for payment of an income tax refund in the amount of $811,073, which Gervais knew to be false.
“There’s no evidence that his wife received any of the money or that she was in any way criminally responsible for what happened,” assistant U.S. attorney Russell Phillips said.
Phillips, who said the couple has since divorced, described how Gervais convinced his wife to file the phony returns.
“Just like you would if you asked your wife to do it for you,” Phillips said. “‘Take these tax returns and go put them in the mail,’ or in his case go online and file them. Go to TurboTax or whatever source you plan to use to file your income tax returns.”
In addition, Gervais filed, or caused to be filed, six additional false claims for federal income tax refunds — five in his own name for tax years 2004, 2005, 2006, 2007, and 2009, and one in the name of an acquaintance for tax year 2009.
All seven of the returns claimed false wages and federal tax withholding. And all seven of the returns falsely claimed that the taxpayer had earned a significant amount of wages from a fictitious company called Safety Shoes & More, Inc., which was allegedly located in Rome. The returns also falsely claimed the corporation had withheld from those wages a significant amount of federal income tax.
The total intended tax loss to the IRS was $3.5 million, and of that amount, $2.8 million was paid to Gervais by the IRS.
The U.S. Attorney’s Office filed two civil forfeiture actions, which resulted in the seizure of $2.2 million from accounts controlled by Gervais, reducing the out-of-pocket loss to the IRS.
Phillips said Gervais was caught when he placed a substantial sum in the account of a brokerage firm that engages in online trading.
“He tried to move some of that money, and for some reason it aroused their suspicion and they contacted the FBI,” Phillips said.
Gervais pleaded guilty to a criminal information charging him with one count of filing false claims for income tax refunds. He could receive a maximum sentence of five years in prison and a fine of up to $250,000.
Sentencing is scheduled for March 28 at 10 a.m., before United States District Judge Timothy C. Batten Sr.