Tax theft ring hits hundreds of north Georgians

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ATLANTA - A Channel 2 Action News investigation has uncovered a crime ring so intricate, detectives say every trail leads to another bogus identity.

The crooks have already gotten away with more than $3 million by stealing the identities of 600 north Georgians and filing fraudulent tax returns.

Some victims believe the Internal Revenue Service missed warning signs that could have prevented the theft.

"That's what upsets me, is a lot of these people depend on this money," said Sherrie Cornelius, a Dallas tax preparer whose office was broken into in December.


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At first, investigators thought her stolen computers was an isolated incident.

"We're just a little small company that's just trying to make a living and never thought anybody would want to break into a little place like us," said Cornelius.

On the same day, in Kennesaw, thieves also hit the tax office of Priscilla Diggs-Costen, again stealing computers.

"I was shocked. I was just totally shocked," Diggs-Costen told investigative reporter Jodie Fleischer. "I hope these people are caught, they're prosecuted and I hope that this information they have is taken off the street."

Investigators released several surveillance photos showing at least one man and one woman believed to be suspects, in hopes the public can help identify the thieves.

"This is higher level stuff, quite frankly," said Cobb County prosecutor John Melvin, who's part of a task force created to investigate the case.

Later in December, a third tax office in Austell was broken into as well.

During tax season, when all three offices began filing tax returns, they were rejected. The crooks had already used the stolen Social Security numbers to file hundreds of bogus tax returns.

"It makes me very mad for my clients," said Cornelius, "They trusted me with their private information."

All of the fraudulent returns, for Cornelius' and Diggs-Costen's clients, suddenly had the same new tax preparer listed, with the same address.

"It should have been a flag, definitely, [the IRS] missed it," said Diggs-Costen.

She says when a taxpayer's income suddenly drops from $200,000 to $30,000, they had no children last year, but suddenly have several, or are getting big refunds instead of owing money, the IRS should flag the return before paying.

"I would have thought that after so many fraudulent returns were processed that the IRS would have caught on that something's wrong here, and it could have been stopped," said Diggs-Costen.

"The evidence itself is inescapable that the cases are linked," said Melvin.

But investigators still aren't sure how many suspects there are, or who they are, despite the surveillance photos.

"That's prime evidence, and whenever you get that, that's exciting, but then it's quickly mediated by the fact that the identity that was attached to this photograph is a fraudulent identity," said Melvin.

All of the fraudulent tax returns tied back to a post office box in Marietta, which was opened using a fake identity. Inside, investigators found evidence of three bank accounts used to deposit the fraudulent refunds. Those accounts were also opened with fake identification.

"Somebody's out there making pretty decent fraudulent drivers licenses," said Melvin. "It's almost a triple, quadruple layer of fraud. So it's much harder to figure out who these defendants are."

"My stomach really sank," said Dee (Her name has been changed) from Cherokee County, describing her thoughts upon receiving an email from her tax preparer regarding the break-in.

She immediately called the IRS, trying to prevent fraud by warning that her personal information had been compromised.

"They said, 'Well, it's our policy that we can't flag an account for fraud until someone has actually filed a false return and it hasn't happened yet,'" Dee said.

Months later, the thieves did file a fraudulent return under Dee's Social Security number, and those of her husband and son, and the IRS did nothing to stop it.

In fact, the federal agency sent more than $3 million to the crooks, in some cases even handing over money real taxpayers had already sent in as tax payments.

In one refund document obtained by Channel 2 Action News, a self-employed taxpayer pre-paid $28,294 in estimated taxes, but had not filed his return yet.

When the fraudster filed with fake info to get a bogus refund, the IRS also refunded the taxpayer's payment to the crook.

"That is the craziest thing," said Diggs-Costen, "Guess who eats it? The taxpayers."

"Every taxpayer becomes a victim," said Melvin. Once the refunds are paid to the fraudsters, the IRS then has to pay a second time to the real taxpayers owed a refund.

"The money that the IRS sends back to the victims is money that the IRS got from American citizens to begin with," said Melvin. "This crime is out of control."

The real taxpayers could spend a year waiting to get their refund and a lifetime worrying about their credit.

"Until they start getting really serious about this problem, it's going to cost you and I a lot of more money," said Dee.

A spokesman for the IRS declined Fleischer's request for an on-camera interview, but said there are flags in the agency's computer system to pick up on fraud. He just wasn't sure how these cases slipped through.

A Treasury Department investigation last year found the IRS paid out more than $5 billion in fraudulent tax refunds.