SANTA ANA - Two Inland Empire men who ran the Fontana-based Old Quest
Foundation have been convicted of running a tax fraud scheme that resulted in
more than 400 fraudulent federal income tax returns being filed with the IRS
that cumulatively sought more than $250 million in fraudulent refunds,
according to federal officials.
Arturo S. Ruiz, 55, of
Moreno Valley, who was the chief executive officer of Old Quest, was found
guilty Wednesday of one count of conspiracy to defraud the United States and 41
counts of filing false claims against the United States, including four of his own
federal tax returns.
Francisco J. Mendoza,
51, of San Bernardino, who was the president of Old Quest, was also found
guilty of one count of conspiracy to defraud the United States and 37
counts of filing false claims against the United States, according to officials.
Ruiz is facing a maximum sentence of 215 years in federal
prison, and Mendoza faces a statutory maximum sentence of 195 years.
This is how Ruiz and Mendoza did business, according to
authorities.
Ruiz and Mendoza fraudulently told Old Quest clients they
each could receive tax refunds of hundreds of thousands of dollars by accessing
"secret government accounts" through a process that included the filing of IRS
forms, federal authorities stated.
During presentations in the Southland, members of Old
Quest promoted the secret account theory and other anti-tax arguments.
Ruiz and Mendoza falsely told clients who attended
seminars that they had employees who were attorneys, accountants, CPAs and
former IRS employees to give their scheme the appearance of legitimacy.
Taxpayers who signed up were required to pay fees as high
as $10,000, and were made to promise to "donate" to Old Quest 25 percent of any
tax refunds they received, federal authorities stated.
Old Quest filed false income tax returns that routinely
sought hundreds of thousands of dollars, and sometimes, millions in income tax
refunds, federal officials stated.
Bank records showed that Old Quest received approximately $1.9 million from
clients who used the fraudulent scheme, a figure that includes kickbacks from
tax refunds erroneously issued by the IRS.
When customers received IRS letters warning that their tax returns were
frivolous, Old Quest employees assured customers that the IRS sent letters only
to "intimidate" them because the "IRS did not want to pay," according to
authorities.
After several refund
checks were erroneously issued and the IRS froze the bank accounts of the
customers who had received them, Ruiz and Mendoza instructed their employees to
open new accounts for customers at different banks in an attempt to avoid
further IRS scrutiny, authorities stated.
Prior to the tax refund
scheme, federal officials stated that Ruiz
and Mendoza had promoted a "land patent" program to many of the same clients,
according to the evidence at trial. Under this program, Ruiz and Mendoza
promised to eliminate the clients' mortgages through an obscure and mysterious
process, again in exchange for substantial fees, authorities state. The land patent program
quickly failed, and dozens of clients lost their homes to foreclosure.
In addition to selling
the fraudulent schemes to customers across the Southland, Ruiz and Mendoza
failed to report to the IRS hundreds of thousands of dollars of their own
income, and they filed their own false federal income tax returns that
fraudulently sought refunds, officials stated.
The evidence at trial showed that Ruiz bragged
about not paying taxes for more than 25 years, federal officials stated.
