Susanville Prison Tax Scam Lands Oklahoma Men in Hot Water

SACRAMENTO, Calif. – Two Oklahoma men are facing serious time after pleading guilty to a brazen tax fraud scheme orchestrated from within the walls of California Correctional Center in Susanville. Edwin Forrest Ludwig III, 61, and Donald Loyde Harned, 72, both of Oklahoma, confessed to their roles in a conspiracy that siphoned off federal tax refunds through false claims, according to U.S. Attorney Phillip A. Talbert.

The scheme, which began back in 2011, wasn’t a solo operation. Court documents reveal that Ludwig III, Harned, and five others worked in concert to exploit the system. Four of the co-conspirators, already serving time at the Susanville prison, allegedly pilfered personal identification information from fellow inmates. Harned and other accomplices on the outside then used this stolen data to file bogus income tax returns with the IRS, demanding refunds they knew were entirely fraudulent.

Edwin Forrest Ludwig III, acting as a key facilitator from the outside, wasn’t directly involved in obtaining the stolen information. Instead, he allegedly opened bank accounts to deposit the fraudulently obtained refunds and then transferred the ill-gotten gains to the prison accounts of his incarcerated co-conspirators. Both Ludwig III and Harned profited from their participation in the criminal enterprise, lining their pockets while defrauding the government.

Federal investigators from the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, and the Investigative Unit at the California Correctional Center brought the operation to light. Assistant U.S. Attorney Amy Schuller Hitchcock is leading the prosecution, determined to see justice served. This wasn’t a quick hit; it was a sustained, decade-long effort to cheat the system.

The pair are scheduled to appear before U.S. District Judge Garland E. Burrell Jr. on June 30, 2017, to receive their sentences. Both Ludwig III and Harned face a maximum sentence of 10 years in federal prison and a hefty $250,000 fine. However, the judge will consider a range of factors, including statutory guidelines, when determining the final punishment.

This isn’t the first conviction in this case. To date, four co-conspirators have already pleaded guilty and been sentenced, including Ludwig IV, the son of Edwin Forrest Ludwig III, who received a seven-year prison sentence for his involvement. Charges remain pending against one final co-defendant, who is presumed innocent until proven guilty beyond a reasonable doubt.