CLEVELAND -- A federal grand jury returned a 31-count indictment Wednesday, charging a Brian D. Krantz with crimes related to filing income tax refunds totaling more than $8.8 million.
Krantz, 45, of Twinsburg, was indicted on one count of conspiring to make false claims against the United States and 30 counts of making false claims for income tax refunds totaling approximately $8,825,147, according to the indictment.
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 indictment.
"This defendant is accused of violating tax laws to enrich himself," U.S. Attorney Steven Dettelbach said. "Those individuals who engage in this type of financial fraud should know they will not go undetected and will be brought to justice.
The indictment names Bryan D. McCallum as Krantz's co-conspirator.
McCallum previously pleaded guilty to a two-count information charging him with the false claims conspiracy and with making the same 30 false claims.
During the years charged in the indictment, Krantz owned and controlled two corporations engaged in financial services and/or real estate investment business activities, in which he employed McCallum as an accountant / bookkeeper.
The indictment charges that 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.
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 the indictment, 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.