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The Amended Tax Return Fraud Scheme

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June 2, 2015

By Bob Coleman
Editor, SBA OIG Report

Coleman SBA OIG Report

I always wondered if anybody pulled this one off.

File bogus tax returns with the IRS, have the lender certify the returns with the IRS Form 4506, and then file an amended return.

Someone did, and got caught.

This just in from the SBA Inspector General Spring 2015 Semiannual report to Congress.

A Minneapolis-area entrepreneur pled guilty in a U.S. court in Wisconsin to submitting false statements to a financial institution.

He had been charged in connection with the 2009 sale of a Wisconsin auto parts and repair business for $1.14 million.

To profit from the sale of his failing business, the entrepreneur directed his bookkeeper to make false entries into the business’ accounting software.

The data manipulation resulted in grossly inflated sales income on corporate financial statements and tax returns, which were provided to the bank and its appraiser to support an inflated business value and a commercial loan application for the buyer.

As a result, the bank approved SBA-guaranteed loans of $947,500.

Shortly after the sale, most of the false entries were removed in order for the man to file amended tax returns and lower his tax liabilities.

The business failed immediately following the sale.

The entrepreneur’s actions caused a full default and increased losses to the buyer, the bank, and SBA.

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