A Parma Heights man was sentenced to more than three years in prison and ordered to pay nearly $1.2 million in restitution, according to U.S. Attorney Steve Dettelbach and Kathy Enstrom, IRS-Criminal Investigation Special Agent in Charge.
Bryan D. McCallum, 40, previously pleaded guilty to a two-count information charging him with a false claims conspiracy and with making 30 false claims.
"Those individuals who engage in this type of financial fraud should know they will not go undetected and will be brought to justice," Dettelbach said.
"This sentence sends an important message to America's taxpayers who play by the rules that we have no tolerance for those who make up their own rules," Enstrom said.
McCallum worked as an accountant/bookkeeper for two corporations owned and controlled by Brian D. Krantz, 46, of Twinsburg. These companies engaged in financial services and/or real estate investment business activities.
From approximately April 2009 through June 8, 2010, Krantz and McCallum conspired to make false claims for tax refunds using income tax returns filed with the IRS in the names of Krantz, companies formed by Krantz and McCallum, and several "shelf" companies purchased by Krantz. A "shelf" company is a corporate or other formal non-operating business entity established for the purpose of being held for sale to another person, according to court documents.
The scheme involved the use of fake IRS Forms 2439, titled "Notice to Shareholder of Undistributed Long-Term Capital," which is a form to be issued by a regulated investment company (RIC) or real estate investment trust (REIT) to report undistributed capital gains and taxes withheld from those gains on behalf of the shareholders. Under federal tax law, RICs and REITs are entities that are not taxed on their earnings but instead pass those earnings to their shareholders who, in turn, have the obligation to report those earnings and any resulting tax liabilities on the shareholders' income tax returns.
The returns filed pursuant to the conspiracy claimed substantial amounts of Form 2439 withholding credits, when, in fact, none of the companies listed on the forms were actually RICs or REITs or had any undistributed capital gains or withheld taxes, according to court documents.
Krantz used more than $1 million of the refund proceeds to finance a real estate venture he established with other partners, known as Phoenix Ventures Partners LLC. Krantz and McCallum misled Krantz's real estate partners to believe that a group of Colorado-based hard money lenders had provided the funds.
Krantz was pleaded guilty to earlier this year to a 31-count indictment related to filing income tax refunds totaling more than $8.8 million. The U.S. Treasury issued 17 refund checks totaling approximately $3,615,586 payable to Krantz and various corporations controlled by Krantz as a result of the alleged scheme, according to the court documents. He is scheduled to be sentenced in March.