Manhattan Man Sentenced to 10 Years in Prison for $50 Million Tax Refund Fraud Scheme

Melvin Duarte, a 38-year-old man from the Bronx, New York, was sentenced to 10 years in prison for his role in a massive tax refund fraud scheme that cost the Internal Revenue Service over $50 million.

According to the indictment, Duarte stole Puerto Rican identities and used those identities to obtain more than $50 million in federal tax refund checks to which he was not entitled. The scheme involved co-conspirators operating out of the Dominican Republic and other places who electronically filed thousands of fraudulent federal tax returns, seeking tens of millions of dollars in tax refunds.

The scheme targeted Social Security numbers assigned to residents of Puerto Rico because they are generally not required to file federal tax returns with the IRS, as long as their income is derived solely from Puerto Rican sources. In so doing, the co-conspirators minimized the risk that legitimate federal tax returns were already filed by the holders of the Social Security numbers that they were using in the scheme.

Each of the tax returns at issue falsely represented that the taxpayer resided at an address in the Bronx, New York, where the refund check requested in the return was to be sent. The checks were then stolen by letter carriers assigned to the mail routes where the checks were sent who had been recruited beforehand to participate in the scheme.

The scheme was uncovered by the Internal Revenue Service, Criminal Investigation, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the United States Postal Service Office of Inspector General. Duarte was previously convicted in 2002 for conspiracy to steal federal funds, based on substantially similar conduct, and was sentenced to three years of probation.

U.S. Attorney Preet Bharara praised the work of the law enforcement agencies involved in the investigation and thanked them for their efforts in bringing Duarte to justice. Duarte was also ordered to pay forfeiture of $15 million and to serve a term of three years of supervised release to follow his prison sentence.

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