Palm Springs Man Pleads Guilty to $2.1 Million Tax Refund Scheme

Summary

A U.S. Attorney's Office release for the Central District of California, published September 5, 2024, stating that William Mandel Musgrow pleaded guilty to one count of wire fraud and one count of aiding and assisting in the preparation of a false tax return. According to the release and his plea agreement, he issued at least 87 fraudulent IRS Forms W-2 and the returns requested $2,769,600 in refunds, of which the IRS paid $2,136,630. The release also says he submitted 14 loan applications for Paycheck Protection Program and Economic Injury Disaster Loans between March 2020 and August 2020 and obtained approximately $970,000. Sentencing is scheduled for January 16, 2025 before United States District Judge Kenly Kiya Kato.

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RIVERSIDE, California
– A Riverside County man pleaded guilty today to scheming to defraud the IRS out of more than $2.1 million via the issuing of fake W-2 forms and to fraudulently obtaining nearly $1 million of COVID-19 economic-relief loans.
William Mandel Musgrow, 48, of Palm Springs, pleaded guilty to one count of wire fraud and one count of aiding and assisting in the preparation of a false tax return.
According to his plea agreement, Musgrow used one of his business entities to issue fraudulent IRS Forms W-2. These forms false represented to the IRS that the recipients were employed by defendant’s various businesses, received wages, and had federal tax withheld from their paychecks when, in fact, the Forms W-2 either overstated the recipient’s income, or were wholly fraudulent as the recipient either did not work for the business at all or had no federal income tax withheld from their paychecks.
Musgrow then would help the recipient file fraudulent federal income tax returns that utilized the bogus Forms W-2 to generate a tax refund to which the recipient was not entitled.
In total, Musgrow issued at least 87 fraudulent IRS Forms W-2 and assisted in the filing of at least 87 false income tax returns.  These returns requested a total of $2,769,600 in tax refunds, and the IRS paid out $2,136,630 of the requested refunds.
Separately, during the spring of 2020, Congress created federal programs to provide financial assistance to Americans suffering economic harm because of the COVID-19 pandemic.
From March 2020 to August 2020, Musgrow submitted 14 false and fraudulent applications to the United States Small Business Administration (SBA) and banks for Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
In these applications, Musgrow made false statements including the number of employees to whom were paid wages, falsely certifying that the loan proceeds would be used for permissible business purposes, and in some cases, that the businesses were legitimate business when, in fact, they were not operating in any fashion and had no employees whatsoever.
In total, Musgrow submitted 14 fraudulent loan applications which requested more than $1.9 million. Relying on Musgrow’s false information, the SBA and lenders approved and funded many of the loans. Musgrow obtained approximately $970,000 in fraudulent proceeds.
United States District Judge Kenly Kiya Kato scheduled a January 16, 2025, sentencing hearing, at which time Musgrow will face a statutory maximum sentence of 20 years in federal prison for the wire fraud count and three years in federal prison for the tax fraud count.
IRS Criminal Investigation is investigating this matter.
Assistant United States Attorney Benjamin J. Weir of the Riverside Branch Office is prosecuting this case.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit
https://www.justice.gov/coronavirus
.
On September 15, 2022, the Attorney General selected the U.S. Attorney’s Offices for the Central and Eastern Districts of California to jointly head one of three national COVID-19 Fraud Strike Force Teams. The Department of Justice established the Strike Force to enhance existing efforts to combat and prevent COVID-19 related financial fraud. The Strike Force combines law enforcement and prosecutorial resources and focuses on large-scale, multistate pandemic relief fraud perpetrated by criminal organizations and transnational actors, as well as those who committed multiple instances of pandemic relief fraud. The Strike Force uses prosecutor-led and data analyst-driven teams to identify and bring to justice those who stole pandemic relief funds. Additional information regarding the Strike Force may be found at
https://www.justice.gov/opa/pr/justice-department-announces-covid-19-fraud-strike-force-teams
.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at (866) 720-5721 or via the NCDF Web Complaint Form at
https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form
.

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