Edwin Forrest Ludwig III, Tax Fraud, California 2017

Two Oklahoma residents have been brought to justice for their roles in a brazen tax fraud scheme that exploited the trust of inmates at the California Correctional Center in Susanville.

Edwin Forrest Ludwig III, 61, and Donald Loyde Harned, 72, pleaded guilty to their involvement in a conspiracy to defraud the United States with false tax claims, announced U.S. Attorney Phillip A. Talbert.

According to court documents, the scheme began in 2011 and involved Ludwig III, Harned, and five other co-conspirators. Four of the co-conspirators, who were inmates at the correctional center, obtained personal identification information from other inmates. Harned and the other co-defendants, who were not incarcerated, used this information to prepare and file false income tax returns with the IRS, claiming refunds that they knew were false and to which the inmates were not entitled.

Ludwig III, who was not an inmate, played a key role in the scheme by depositing the fraudulently obtained refunds in bank accounts he opened and transferring the proceeds to the prison accounts of the incarcerated co-defendants. Both Ludwig III and Harned received money in return for their participation in the scheme.

This case is the result of a joint investigation by the Internal Revenue Service, the Federal Bureau of Investigation, and the Investigative Unit at the California Correctional Center. Assistant U.S. Attorney Amy Schuller Hitchcock is prosecuting the case.

Ludwig III and Harned are set to be sentenced by U.S. District Judge Garland E. Burrell Jr. on June 30, 2017. Both face a maximum statutory penalty of 10 years in prison and a $250,000 fine. The actual sentence will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines.

To date, four co-conspirators have pleaded guilty and been sentenced for their participation in this scheme, including Ludwig III’s son, Ludwig IV, who was sentenced to seven years in prison for his role in the scheme. The charges against one remaining co-defendant are pending, with the defendant presumed innocent until proven guilty beyond a reasonable doubt.

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