Wall Street Journal – by Joe Palazzolo
A raft of federal prosecutions has uncovered tax-fraud schemes involving the theft of Social Security numbers of U.S. prisoners, in many cases by corrections employees.
Last year alone, federal courts meted out prison sentences to an Alabama bail bondsman, two former Alabama corrections employees, a Florida corrections officer and a Georgia man, who were convicted separately of stealing the identities of more than 1,200 prisoners and claiming more than $6.5 million in tax refunds under the inmates’ names.
In January, a Kentucky judge sentenced a local corrections officer to three years in prison for filching prisoner information to open up credit-card accounts with Capital One, Barclays Bank and Victoria’s Secret.
Scores of prisoners also have been prosecuted in recent years for preparing false tax returns from behind bars to generate refunds, using their own and other inmates’ Social Security numbers.
A report by the Treasury Inspector General for Tax Administration, released last year, found that false returns filed with prisoners’ Social Security numbers had surged to about 137,000 in 2012 from 37,000 five years earlier. Refunds claimed in the false returns in 2012 amounted to about $1 billion; the Internal Revenue Service prevented all but about $70 million from leaving the Treasury, the report said.
The report doesn’t separate false returns filed by prisoners from returns filed by third parties using prisoner information, but the IRS said identity theft is prevalent. “Frequently, inmates are also victims of identity theft, which can lead to an overstatement of fraudulent returns filed by prisoners,” the agency said in a response to the September report.
The Senate Finance Committee discussed the report and other types of tax fraud at a hearing Thursday in Washington.
Alexis Roldan discovered his identity theft soon after his release in 2011 from a Rhode Island prison, where he served an 18-month sentence for drug crimes. A financial coach told Mr. Roldan that his credit report revealed several thousand dollars in unpaid medical, energy and insurance bills. “They got me pretty good,” said Mr. Roldan, a father of four who works at a restaurant in Providence.
Identity theft can make it even harder for ex-convicts, who already face hurdles getting a job or housing, to support themselves as they try to re-enter society, social workers say.
The Local Initiatives Support Corp., which provided nearly 7,000 ex-offenders around the country with financial coaching and job training in 2014, found that more than 20% of prisoners had inconsistencies on their credit reports, a large portion of which were linked to identity theft, a spokeswoman said.
Stephanie Jones-Pringle, Mr. Roldan’s financial coach at an LISC center in Providence, spent more than six months scrubbing his credit report, she said. Meanwhile, he couldn’t get a car or insurance, and housing was out the question; he stayed at Amos House, a nonprofit that houses the center where Ms. Jones-Pringle works.
“You can find a slumlord who won’t check your credit card, but then I’m putting them back into an environment where they came from,” said Ms. Jones-Pringle. Mr. Roldan said he doesn’t know who was masquerading as him while he was imprisoned.
In another case, a former shift clerk at Staton Correctional Facility in Alabama used prisoner names and Social Security numbers to file false tax returns, collecting about $176,000 in refunds from claims totaling more than $750,000, prosecutors said.
The clerk, Bryant Thompson, had access to identifying information for the roughly 25,000 inmates in state custody, as well as past prisoners, according to evidence presented at his January 2014 trial. He and another former state corrections employee, Quincy Walton, were sentenced last year to 10 and seven years in prison, respectively.
Mr. Thompson’s lawyer, Andrew Skier, argued at trial his client couldn’t be pegged as the thief beyond a reasonable doubt, given the ease with which corrections employees could access prisoner information. Authorities traced one of the Internet protocol addresses used to file the tax returns to Mr. Thompson’s home.
“The main problem that we pointed out to the jury was that up until the week of the trial, the Department of Corrections had no security on their [computer] system at all,” Mr. Skier said. “Any DOC employee could walk up to any terminal. There were no individual logins.”
Bob Horton, a spokesman for the Alabama Department of Corrections, declined to comment on login procedures for accessing inmate files, citing “security reasons.” Access to prisoner information among the state’s roughly 3,000 corrections employees varies by job description and supervisor authorization, he said.
Messrs. Thompson and Walton are awaiting decisions on their appeals. Mr. Walton’s lawyer, Jon C. Taylor, declined to comment.
Write to Joe Palazzolo at joe.palazzolo@wsj.com
http://www.wsj.com/articles/identity-theft-tax-fraud-snares-prisoners-1426167463