A Shakopee couple pleaded guilty to federal charges Monday in what authorities characterized as a wide-ranging, multimillion-dollar income tax refund scheme that preyed on immigrants in Minnesota and Florida.
Mark Arlin Hammerschmidt pleaded guilty to conspiracy charges and has agreed to cooperate with authorities investigating the scam. He faces up to nine years in prison. He also agreed to pay more than $1.8 million in restitution to victims.
His wife, Ornella Angelina Hammerschmidt, pleaded guilty to filing a false claim for a tax refund and agreed to pay just over $45,000 in restitution. The agreement calls for a prison sentence of up to 21 months for Ornella Hammerschmidt. She is a native of Venezuela; she said she understood that her guilty plea may result in immigration sanctions.
Their plea agreements say the Hammerschmidts worked together and with others to file more than 1,000 bogus federal tax returns. They operated American Group, an immigration assistance and tax preparation business with offices in Shakopee and Winter Garden, Fla. Their plea agreements do not prevent their prosecution in other federal jurisdictions.
“This case is a fine example of multiple law enforcement agencies working together to investigate and prosecute aggressively those who victimize others to steal taxpayer dollars,” Assistant U.S. Attorney Michelle Jones said in a statement. The IRS and Department of Homeland Security investigated the case with help from the state Department of Revenue.
Mark Hammerschmidt’s agreement describes two conspiracies, one targeting Minnesota victims generally and the other targeting Guatemalans in Minnesota and elsewhere. He concealed the fraud by indicating that the victims had prepared their own returns; the Hammerschmidts did not sign the forms as preparers. The Hammerschmidts used their own bank accounts to receive the refunds and deducted their fees before paying their clients.
Mark Hammerschmidt obtained official identification papers for the Guatemalan victims and used them to obtain taxpayer identification numbers, then filed multiple years’ worth of fake tax returns in their names supported with bogus financial records, false dependents and education credits. The IRS assigns taxpayer ID numbers to people such as immigrants living in the country illegally, who are ineligible for Social Security numbers but who file tax returns anyway.
The IRS paid nearly $1.8 million on bogus refund claims.
The IRS raided American Group’s office in downtown Shakopee in February 2012. Signs out front offered tax and accounting services.
In addition, American Group offered criminal defense and immigration services related to applications for citizenship, residency, work permits and visas.
Most of the taxpayer ID applications listed a UPS Store in Shakopee as the applicants’ residence, but the investigation indicates that most of the applicants live in Florida. That’s true for many individuals who also filed state tax returns in Minnesota through American Group, IRS agent Marissa Pitzen said in an affidavit.
One thing that raised suspicions is the fact that nearly all of the tax returns included claims for “Household Help Income,” which typically applies to wages paid for babysitting, housekeeping and landscaping. Many of the Minnesota income tax returns also included questionable dependent information and education expenses.
The Hammerschmidts first came to the attention of federal investigators in 2004 when they were running an Orlando-based company called All Kinds Services. Immigration and Customs Enforcement agents alleged that the company helped foreigners to arrange sham marriages.
The Hammerschmidts were indicted on charges of conspiracy to obstruct justice, witness tampering and destruction of evidence during that case. They struck a bargain, each pleading guilty to a single count of fraud and misuse of a visa. They were sentenced in the summer of 2009 to three years of probation.