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Feds: University Mall business boom was tax fraud

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Published:   |   Updated: June 17, 2013 at 09:35 AM
TAMPA -

Business at a jewelry kiosk in University Mall exploded in September 2011, according to the Secret Service, which says M. Gold and Diamonds can thank the proceeds of tax refund fraud for its new customers.

The federal government is asking a judge to allow it to keep $379,798 seized from a business account believed to contain the proceeds from identity theft tax refund fraud deposited on debit cards. The cards were used to make purchases at the kiosk.

Kiosk owner Aneel Mohammad is not charged with any crime.

The civil forfeiture case raises a question facing local merchants: Should they question purchases made with prepaid debit cards in the face of evidence that the cards are favored by identity thieves who file bogus tax returns?

Mohammad’s lawyer, Michael B. Germain, said Mohammad didn’t know where his customers got their money. “If people were purchasing goods from his store with fraudulently obtained tax refunds, he wasn’t aware of it at the time,” Germain said.

In general, retail advocates agreed merchants can’t be certain they are being paid with fraudulently obtained funds. “We are not aware of any legal requirement for merchants to screen for this, and it’s not clear how that would be possible,” said J. Craig Shearman, vice president for government affairs and public relations at the National Retail Federation.

An official at the Florida Retail Federation said store owners usually would have no way of knowing whether funds on a debit card were the result of fraud. But federation spokesman John Fleming, who read a court document provided by The Tampa Tribune, said “red flags” in Mohammad’s case should have put him on alert.

The Secret Service cites in court papers evidence that Mohammad knew he was benefiting from the fraud.

Credit and debit card business at his kiosk went from less than $17,000 in August 2011 to more than $374,000 the following month, according to a Secret Service affidavit, which cites evidence provided by card-processing company First Data.

Another card-processing company, Elavon Payment Solutions, terminated its business with the kiosk in August 2011 “due to what it believed was fraudulent activity involving falsified documentation and large amounts of prepaid tax return cards.’’

Fleming said the Elavon action and the substantial increase in business should have raised questions for Mohammad.

In September 2011, First Data called Mohammad, who said he was processing IRS prepaid debit cards for customers’ down payments on jewelry, the affidavit states. Mohammad failed to provide follow-up documentation requested by First Data.

First Data closed Mohammad’s business account and put $379,798 into a reserve account, which the government is now trying to seize.

Federal agents from the Secret Service, IRS and U.S. Marshals Service interviewed Mohammad in December 2011.

He told them he had seen news reports about debit cards being used in tax refund fraud, according to the affidavit. “He stated that once he learned – through the news reports – that the debit cards were fraudulent, he stopped accepting the cards for a period of time. However, because his business significantly declined and other businesses around him continued accepting the cards, he began accepting them again.”

Mohammad told agents his business increased significantly when he started accepting debit cards. After Elavon notified him it would no longer accept them, “he saw his business drop off dramatically,” so he changed his card processor.

He told agents he had to change processors at least three times “because processors kept refusing to accept debit cards on his account,” the affidavit states. Mohammad told agents the processors didn’t tell him why he shouldn’t accept the cards.

Although Mohammad told agents some of his customers looked like they didn’t have jobs, he added that it was not his responsibility to ask where the money came from, according to the affidavit. He noted he was not required to ask for identification to accept debit cards and said if he didn’t accept them, customers would go someplace else.

Of 352 card transactions between September and October 2011, 294 “appeared especially suspicious, because they were for whole dollar amounts and were executed with cards whose controlling companies primarily issued prepaid debit cards for electronic tax refunds,” the affidavit states.

The Secret Service subpoenaed records for the 294 suspicious cards and determined 284 of them, representing more than $413,000 in transactions at the kiosk, contained federal tax refunds. The majority had numerous direct deposits payable to people other than the named card holders.

The Secret Service also says another bank identified 586 prepaid debit cards with 700 suspicious IRS direct deposits worth more than $5.3 million.

According to that bank investigation, between Feb. 1, 2012, and Aug. 22, 2012, more than $2.2 million of that money was spent at Mohammad’s business, as well as other jewelry stores in the same mall.

The amount of tax refund debit cards being used at the mall stores was “extremely disproportionate’’ to the typical volume of business, according to the affidavit. That suggests the businesses “are collaborating in a federal tax refund fraud scheme.”

Germain said he didn’t want to respond to allegations in the affidavit “because the case is ongoing.” Mohammad is fighting the forfeiture case, the lawyer said.

“I don’t believe that most retail staff has been trained in how to detect most compromised cards,” the lawyer said. “It’s an interesting question as to what is the store owner’s responsibility since in this case, the government is going after the store owner as opposed to the person committing the tax fraud.”

Germain asked how a store owner is supposed to determine whether the funds on a particular debit card are obtained by fraud and if the store should just stop accepting debit cards altogether, which he said “would seem unreasonable.”

Germain added, “It is interesting that my understanding from him is that the entire mall was experiencing increased traffic and increased sales at this time…I don’t know if the government is investigating these other stores.”

Hillsborough County Sheriff’s Cpl. Bruce Crumpler said the debit cards “are being used very, very openly in all places…It’s hard for anybody to know if they’re funded legally or illegally.”

Crumpler added, “The question is, are you knowingly doing it when you have reason to believe or suspicion that certain cards have a high possibility of being illegal?”

Secret Service Agent James Anderson said the investigation is continuing. “It is a lucrative business there for some of the merchants,” he said, “but it doesn’t make it right what they’re doing.”

Anderson said shop owners should be careful not to turn a blind eye to fraud. “They can say, ‘Hey I can make a lot of money with this.’ But it’s just like selling drugs or anything else. You can make a lot of money, but you can also get arrested and do federal time with it.”


esilvestrini@tampatrib.com

(813) 259-7837

Twitter: @ElaineTBO

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