CNBC, Prison inmate stole $550 million in Covid tax credits (February 26, 2024)

Summary

A CNBC article published February 26, 2024, reporting that federal prosecutors in the Eastern District of California charged Kristopher Thomas, an inmate at Kern Valley State Prison, with leading a fraud that cost the U.S. government more than $550 million in Covid-era tax credits. According to a criminal complaint quoted in the article, Thomas and others filed more than 400 payroll tax returns from early 2022 through July 2023 claiming employee retention credits for fake businesses and for real companies that overstated wages and headcounts. Kettisha Thompson-Dozier, Charmane Dozier and Sharon Vance were charged with Thomas with conspiracy to defraud the government with respect to claims. Thomas and five others were also charged in a separate drug trafficking case, in which prosecutors say agents seized more than 90 pounds of meth in Oahu and 14 pounds of fentanyl.

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Politics & Policy

Prison inmate led scheme swindling U.S. out of $550 million in Covid tax credits, feds say

Published Mon, Feb 26 2024 3:57 PM EST Updated Tue, Feb 27 2024 3:44 PM EST

Dan Mangan @in/danmangancnbc/ @_DanMangan

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Key Points

- A California prison inmate locked up on a gang-related murder conviction led a scheme that defrauded the U.S. government out of more than $550 million in Covid-era federal tax credits, prosecutors said.
- The inmate, Kristopher Thomas, was also charged with running a drug trafficking operation from his cell at Kern Valley State Prison that shipped large amounts of methamphetamine to several states and smuggled fentanyl into that prison, court filings show.
- Thomas is a member of the Main Street Mafia Crips, a Los Angeles street gang, according to the U.S. Attorney's Office for the Eastern District of California, which is prosecuting him.

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A California prison inmate locked up on a gang-related murder conviction led a scheme that defrauded the U.S. government out of more than $550 million in Covid-era federal tax credits , prosecutors said.

The inmate, Kristopher Thomas, was also charged with running a drug trafficking operation from his cell at Kern Valley State Prison that shipped large amounts of methamphetamine to several states and smuggled fentanyl into that prison, court filings show.

Thomas' mother, 55-year-old Kettisha Thompson-Dozier, and her spouse, Charmane Dozier, 44, who both live in Waldorf, Maryland, were charged with him in the tax credit scheme, along with Sharon Vance, 36, of Hawthorne, California, according to prosecutors .

All four defendants are charged in that case with conspiracy to defraud the government with respect to claims.

Five other people were charged with Thomas in the alleged drug trafficking scheme.

Thomas, 36, has been in prison since December 2010 following a murder conviction. He was sentenced to 50-years-to-life behind bars for the August 2009 killing in Los Angeles of Dequawn Allen, whom he shot after asking where Allen was from.

Thomas is a member of the Main Street Mafia Crips, a Los Angeles street gang, according to the U.S. Attorney's Office for the Eastern District of California, which is prosecuting him for both alleged schemes.

A criminal complaint accuses Thomas and his co-conspirators of filing, from early 2022 through July 2023, more than 400 payroll tax returns that claimed the employer retention credits in the names of fake businesses, and in the names of real companies that overstated the wages and numbers of workers they had.

The employee retention credits became a refundable federal tax credit for employers during the Covid-19 pandemic to encourage businesses to retain workers. The credit maximum was $5,000 per employee in 2020 and was increased to $7,000 per employee per quarter in 2021.

"Thomas provided instructions to co-conspirators about how to file payroll tax returns, how to respond to correspondences to the IRS, how to deposit the tax refund checks received, and more," a criminal complaint said.

Thomas and the other conspirators used the money from the scam for personal expenses, which included Thomas paying for his family and friends "to be driven to Las Vegas from Los Angeles, party for the night at a luxury penthouse, and then fly back to Los Angeles on a private jet" to celebrate his birthday, the U.S. Attorney's Office said.

"It is remarkable that a prison inmate coordinated with others on the outside to distribute over 100 pounds of methamphetamine into the community," said U.S. Attorney Philip Talbert.

"But that apparently was not enough: he also conspired to pursue over half a billion dollars in federal tax credits that were meant to help struggling businesses during the COVID-19 pandemic," Talbert said.

Both the tax scheme and the drug trafficking operation came to light after August 2022, when the Drug Enforcement Administration began an investigation into Thomas at his prison in Delano, California, after identifying him as the source of methamphetamine in Hawaii, Talbert's office said.

Thomas used a prison-issued electronic tablet to call "numerous romantic partners, family members, and other individuals believed to be involved in drug trafficking," the U.S. Attorney's Office said.

DEA agents intercepted those calls and also intercepted text messages showing Thomas communicating about the tax fraud scheme, prosecutors said.

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Agents seized more than 90 pounds of meth linked to Thomas in Oahu, Hawaii, more than 94 pounds of the same drug in Alabama, New Jersey and Oklahoma, and elsewhere, prosecutors said.

Agents also seized 14 pounds of fentanyl, 9.5 pounds of heroin, and 8.5 pounds of cocaine as a result of the DEA's wiretaps on Thomas, according to prosecutors.

And "a half a pound of fentanyl was seized after it was smuggled into [Kern Valley State Prison] at Thomas's direction," the U.S. Attorney's Office said.

Charged with Thomas in the drug scheme were Justin Damonte Mitchell, 31, of Los Angeles; former Kern Valley State Prison inmate Derrick Charles, 41; Natasha Michelle Bailey, 44, of Bakersfield, California; Antrell Maeshack Sr., 41, of Santa Clarita, California; and 29-year-old Marie Joo-Yeon Choi of Los Angeles.

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