Seven Indicted in False Tax Refund Scheme Run in a Prison
|U.S. Attorney’s Office February 27, 2014|
SACRAMENTO, CA—An indictment was unsealed Wednesday after the arrest of three of seven defendants charged in a conspiracy that used the identification of prison inmates to make fraudulent tax refund claims, United States Attorney Benjamin B. Wagner announced.
On February 20, 2014, a federal grand jury returned a 10-count indictment charging the following individuals with conspiring to defraud the United States: Edwin Forrest Ludwig, IV, 32; Daniel Allen Coats, 32; Scott Albert Johnson, 34; and Joseph Robert Sharpe, 35; (all were inmates in the California Correctional Center in Susanville at the time of the fraud scheme), together with Judy Ruth Mullin, 24, of Azusa and Elk Grove; Donald Loyde Harned, 68, of Oklahoma City, Oklahoma; and Edwin Forrest Ludwig, III, 57, of Tulsa, Oklahoma.
Mullin, Harned, and Ludwig, III were arrested Wednesday at their residences in Southern California, Oklahoma City, and Tulsa, respectively. The other defendants are incarcerated at institutions in California and Oklahoma.
According to court documents, beginning in March 2011, Ludwig, IV, with help from fellow inmates Sharpe, Coats, and Johnson, obtained personal identification information of other inmates at the correctional center. Ludwig, IV then provided the information to Harned and Mullin, who prepared and filed false income tax returns with the Internal Revenue Service, claiming refunds to which the inmates were not entitled. False tax returns also were filed in some of the defendants’ own names. The defendants caused the false refund checks to be deposited to various bank accounts controlled by them, including some controlled by Ludwig, III. According to the indictment, the investigation to the conspiracy began on January 11, 2012, when a correctional officer found some records behind Ludwig, IV’s personal locker.
According to the indictment, the refunds were used for personal expenditures, the purchase of prepaid debit cards and adding money to inmates’ commissary accounts. The indictment further alleges that, as part of the conspiracy, approximately 247 false income tax returns were filed with the IRS, resulting in the erroneous issuance of approximately 138 refunds totaling over $219,000.
This case is the product of an investigation by the Internal Revenue Service-Criminal Investigation, the Federal Bureau of Investigation, and the Investigative Service Unit at the California Correctional Center. Assistant United States Attorney Sherry D. Hartel Haus is prosecuting the case.
If convicted of conspiracy, each defendant faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. Ludwig, IV, Harned, Coats, and Johnson face additional counts of false claims, each count of which carries a maximum sentence of five years in prison and a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.