NYS Office of the Comptroller DiNapoli: Environmental Facilities Corp. Faces Significant Funding Backlog for Essential Water Infrastructure Projects

 

New York State’s Environmental Facilities Corporation (EFC) has provided financing for over 2,000 essential local water infrastructure projects totaling more than $23.7 billion since 1990, but the estimated capital improvement needs for water and sewer projects far exceeds this amount, and tens of billions of dollars in local projects remain in the pipeline, according to a report by State Comptroller Thomas P. DiNapoli. 

“The Environmental Facilities Corporation serves a critical role in financing improvements to New York’s water infrastructure,” DiNapoli said. “New York has spent more on clean water and drinking water projects than any other state, but the resources needed to address aging infrastructure and related challenges remain significant. The state should build on its efforts to help communities access funding to ensure the success of these programs continues.”

EFC is a public benefit corporation that provides financing assistance through grants, loans, and technical expertise to state and local entities, as well as some businesses. The corporation receives state and federal funds and allocates them to participating entities. Major programs include the Clean Water State Revolving Fund (CWSRF) and the Drinking Water State Revolving Fund (DWSRF) which are federally supported. EFC uses these resources along with state funds to provide subsidized loans and grants to municipalities for drinking water, wastewater treatment, and other projects, with interest and loan repayments used to finance additional projects.  

Between 1990 and 2022, New York has spent $18.2 billion for the CWSRF and $5.5 billion for its DWSRF, topping California, Texas, Florida, and Pennsylvania. New York’s cumulative CWSRF spending almost doubled that of California ($10.6 billion), the next highest spender, and was more than other large states on DWSRF Project Assistance Disbursed, and for project starts and completions.

The federal Infrastructure Investment and Jobs Act of 2021 is estimated to make $2.5 billion available for these programs and will target projects that address emerging contaminants, climate change, bioterrorism, disadvantaged communities, and replacement of lead water service lines. Additional funding ($5.4 billion) has come from state grant appropriations since 2015, of which $1.4 billion has been spent.

Despite these investments, funding needs for New York’s aging water infrastructure systems remain significant. The most recent U.S. Environmental Protection Agency (EPA) assessments estimated 20-year capital improvement needs of $28.7 billion for clean water projects and $35.1 billion for drinking water projects in the state. The EPA also estimated that New York has more than 494,000 lead service lines in need of replacement, among the highest in the nation.

While the revolving fund programs have financed many vital projects, EFC’s 2024 Intended Use Plan shows a CWSRF backlog of 876 projects with estimated costs of $17.9 billion, and a DWSRF backlog of 1,004 projects with estimated costs of $8.3 billion, together totaling $26.1 billion.

DiNapoli said more transparency is necessary on the state’s water infrastructure programs. While eligible projects are listed in EFC’s Intended Use Plan, and awards are announced, EFC does not report on completed projects and no list is publicly available to track project spending and the communities that have benefitted. In addition to providing a comprehensive list, description, and location of projects funded and completed, the state should evaluate new methods of assisting local governments in accessing revolving funds and grant resources by streamlining application processes and providing technical assistance.

Steps should also be taken to improve the timeliness of both awards and state funding for water quality improvement projects. EFC should investigate why some spending has lagged and assess how to encourage more communities to apply for project funding.

DiNapoli called on federal policymakers to increase funding for the revolving funds, ensure that funding continues based on traditional allocations, and allow for more access to hardship grants.

Report

Environmental Facilities Corporation: An Overview of Major Water Quality Improvement Programs

Pennsylvania Man Sentenced to Prison for Torture and Illegally Exporting Weapons Parts and Related Services to Iraq

 

A Pennsylvania man was sentenced to 70 years in prison for torturing an Estonian citizen in 2015 in the Kurdistan region of Iraq and for the illegal export of weapons parts and related services.

According to court documents and evidence presented at trial, Ross Roggio, 55, of Stroudsburg, arranged for Kurdish soldiers to abduct and detain the victim at a Kurdish military compound, where Roggio suffocated the victim with a belt, threatened to cut off one of his fingers, and directed Kurdish soldiers to repeatedly beat, choke, tase, and otherwise physically and mentally abuse the victim over a 39-day period. The victim was an employee at a weapons factory that Roggio was developing in the Kurdistan region of Iraq that was intended to manufacture automatic rifles and pistols.

“Ross Roggio had his victim abducted and detained at a Kurdish military compound in Iraq, where Roggio and others physically and mentally tortured the victim over the course of 39 days,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “During that time, Roggio suffocated the victim and directed others to beat, choke, and tase him. Roggio’s victim worked at a weapons factory in Iraq, where Roggio illegally sent weapons parts and illegally provided services, in violation of export controls laws. Today’s sentence—following the second-ever conviction under the federal torture statute—shows that, no matter where such deplorable acts occur, the United States is committed to holding the perpetrators accountable.”

“The sentence imposed by the court demonstrates the seriousness of Ross Roggio’s crimes and brings some measure of justice for his torture victim,” said U.S. Attorney Gerard M. Karam for the Middle District of Pennsylvania. “Violence against the dignity and human rights of any victim cannot be tolerated and our office will continue to prioritize and pursue those who would do so in violation of federal law. Ross Roggio was also convicted of United States export laws related to illegally producing firearms in Kurdistan, Iraq. Though more technical in nature, these laws are no less important and are designed to take into account human rights considerations on a larger scale, to limit access to our most sensitive technologies and weapons, and to promote regional stability. I commend all the prosecutors and law enforcement agents who worked tirelessly to bring justice in this matter.” 

In connection with the weapons factory project, Roggio exported firearms parts and tools without the required approvals by the U.S. government. He also illegally trained foreign persons in the operation, assembly, and manufacturing of the M4 automatic rifle.

“Torture is among the grievous crimes the FBI investigates and this is the second time we have been able to bring justice under the federal torture statute,” said Executive Assistant Director Timothy Langan of the FBI’s Criminal, Cyber, Response, and Services Branch. “Our investigation into Roggio’s abominable crimes and today’s sentencing would not be possible without the sheer courage of the victim to tell his story. The FBI and our international partners stand with victims by standing up to human rights violations wherever they occur.” 

“This sentence highlights our commitment to stopping those who commit human rights abuses and threaten the security of the U.S. and partner nations,” said Executive Associate Director Katrina W. Berger of Homeland Security Investigations (HSI). “Thanks to our close interagency and international cooperation, Roggio has been brought to justice.”

“Export evasion is often not a standalone crime,” said Assistant Secretary for Export Enforcement Matthew S. Axelrod of the Department of Commerce’s Bureau of Industry and Security (BIS). “Here, the same defendant who was illegally exporting weapons parts to his Iraqi weapons factory was also brutally torturing one of his employees there.”

A federal jury convicted Roggio in May 2023 of 33 counts of torture, conspiracy to commit torture, conspiracy to commit an offense against the United States, exporting weapons parts and services to Iraq without the approval of the U.S. Department of State, exporting weapons tools to Iraq without the approval of the U.S. Department of Commerce, smuggling goods, wire fraud, and money laundering.

Roggio was the second defendant to be convicted of torture since the federal torture statute went into effect in 1994.

The FBI and HSI investigated the torture and were joined in the investigation of the arms export violations by BIS’ Office of Export Enforcement.

Trial Attorney Patrick Jasperse of the Criminal Division’s Human Rights and Special Prosecutions Section, Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section, and Assistant U.S. Attorney Todd K. Hinkley for the Middle District of Pennsylvania prosecuted the case.

The Estonian Internal Security Service, Justice Department’s Office of International Affairs, and Pennsylvania State Police also provided valuable assistance.

Members of the public who have information about human rights violators in the United States are urged to contact U.S. law enforcement through the FBI tip line at 1-800-CALL-FBI or the HSI tip line at 1-866-DHS-2-ICE, or complete the FBI online tip form or the ICE online tip form

Former President And Head Bookkeeper Of Moving Company Convicted Of Multimillion-Dollar Payroll Tax Fraud Scheme

 

Damian Williams, the United States Attorney for the Southern District of New York, announced that a jury returned a guilty verdict against JOSEPH EUGENE LEMAY, a/k/a “Gene Lemay,” and JOEL LINGAT for criminal tax conspiracy.  LEMAY is the former president of a company that provides moving and storage services (“Company-1”), and LINGAT is Company-1’s head bookkeeper.  LEMAY and LINGAT conspired to perpetrate a long-running scheme to evade more than approximately $7.7 million in federal payroll taxes owed by Company-1 and affiliated companies to the Internal Revenue Service (“IRS”).  The defendants were found guilty following a two-week trial before U.S. District Judge Mary Kay Vysckocil. 

U.S. Attorney Damian Williams said: “Gene Lemay and Joel Lingat cheated the systems that are in place to protect hardworking Americans at the end of their careers.  As a result, Social Security and Medicare were deprived of millions in payroll taxes.  This Office will not stand by when employers violate the public trust by refusing to pay taxes meant to support their workers.”   

According to the allegations in the Indictment, the criminal Complaint previously filed against LINGAT (where LEMAY is identified as CC-1), and the evidence at trial:

From in or about 2010 through in or about December 2016, LEMAY, LINGAT, and other co-conspirators perpetrated a scheme to defraud the U.S. government of payroll and income taxes due and owing to the IRS by Company-1 and affiliated companies.  As part of the criminal scheme, LEMAY, LINGAT, and their co-conspirators created front companies, nominally owned by close associates or family members of LEMAY or others at Company-1; assigned (on paper only) foremen and movers working for Company-1 to the sham companies; and fraudulently made it appear that the sham companies were independent contractors, including by creating fake invoices by which the sham companies purportedly billed Company-1 for labor.  Because the conspirators fraudulently made it appear that the labor was performed by independent contractors, Company-1 was able to deduct the cost of the labor as an expense on its tax returns, without withholding or paying over any payroll taxes to the IRS.  Through the criminal scheme, Company-1 and affiliated companies evaded in excess of approximately $7.7 million in payroll taxes, including FICA and Medicare contributions, during the charged period.

LEMAY, 63, of Delray Beach, Florida, and LINGAT, 62, of Jersey City, New Jersey, were convicted of one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison.             

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the IRS-Criminal Investigation.

Governor Hochul Announces Agreement on FY 2025 State Budget

 

Governor Kathy Hochul announced a conceptual agreement with legislative leaders on key priorities in the Fiscal Year 2025 New York State Budget.

“I promised to fight the right fights for New Yorkers, deliver common sense solutions, and tackle the thorny issues that others might ignore, and that's exactly what we’ve done,” Governor Hochul said. “We’re delivering on a common-sense agenda: fighting crime, fixing our mental health system, and building more housing so people can finally afford to live in New York.”

Highlights of the budget include:

• Securing a historic agreement to address New York’s housing crisis by creating a new 485x tax incentive for affordable housing; extending the 421a incentive for projects already in the pipeline; making it easier to convert unused office space into affordable housing; eliminating outdated density caps in New York City; unlocking the potential of units that have been vacant since 2019; establishing a new law to protect tenants from price gouging.
• Creating a statewide tax incentive for multi-family housing; making $650 million in discretionary funds exclusively available to Pro-Housing Communities; providing incentives for communities that want more accessory dwelling units; investing $500 million to develop up to 15,000 new housing units on State-owned sites; and protecting homeowners from deed theft.
• Cracking down on retail theft by increasing penalties for offenders who assault retail workers; $40.2 million for retail theft enforcement; and a $3,000 tax credit for business owners to invest in security resources.
• Shutting down illicit cannabis storefronts by authorizing the Office of Cannabis Management (OCM) to padlock businesses for a full year; allowing local governments to pass laws to execute padlock orders; establishing fines for landlords knowingly renting to retailers selling cannabis without a license.
• Fighting the rising tide of hate by expanding the number of offenses that can be prosecuted as hate crimes and investing $35 million in the Securing Communities Against Hate Grant that protects houses of worship, religious schools and other at-risk sites.
• Improving public safety through targeted investments in communities, including $347 million to continue New York’s efforts to reduce and prevent gun violence and $35.7 million to prevent and prosecute crimes of domestic violence.
• Investing $7.1 million to reduce recidivism and improve reentry into the workforce by providing more intensive supervision of individuals on parole, expanding transitional housing opportunities, expanding college programming to all state prisons, and providing transportation for visitors to and from State Correctional Facilities.
• Making our streets safer with new efforts to fight toll evasion on our roads and fare evasion on our subways.
• Making record investments in mental health, including $19 million for mental health services for school aged children, $55 million to establish 200 new inpatient psychiatric beds at State-run facilities; and mandating better mental health care at hospitals.
• Investing $31 million to expand mental health services for first responders and for individuals struggling with mental illness who are involved in the criminal justice system.
• Maintaining our $3.9 billion commitment to support distressed hospitals and $20 billion multi-year investment to build new healthcare infrastructure, expand Medicare coverage for seniors and pregnant New Yorkers and increase the home care worker minimum wage.
• Protecting mothers and babies by becoming the first state in the nation to offer paid leave to expecting mothers; requiring employers to provide time for nursing mothers to express; addressing the proliferation of surgical procedures in situations where they’re not necessary; and increasing access to care for postpartum depression.
• Securing $200 million in Medicaid savings through fiscal intermediaries and by cracking down on CDPAP fraud; investing $7.5 billion in the health care system over the next three years through an amendment to New York’s Medicaid Section 1115 Demonstration program to support a comprehensive series of actions to advance health equity, reduce health disparities, and strengthen access to primary and behavioral health care across the state.
• Authorizing the State to pursue federal approval for a managed care organization (MCO) tax, which could generate significant revenue for the State to provide a multi-year investment in New York’s health care system.
• Investing $150 million to advance NY SWIMS and build pools across the state, helping New Yorkers learn to swim, and keeping them safe in and near the water.
• Supporting New York students through record funding for P-12 schools; investing a record $35.9 billion in total school aid, including $24.9 billion in Foundation Aid; lowering the inflation factor in the Foundation Aid formula to right-size funding for the 2024-25 school year and commissioning a Rockefeller Institute study to examine the Foundation Aid formula to prepare for changes next year; ensuring every school district utilizes instructional best practices grounded in the Science of Reading to improve reading proficiency among New York kids.
• Advancing a Consumer Protection and Affordability agenda to reduce costs and keep money in New Yorkers’ pockets by eliminating cost-sharing for insulin for thousands of New Yorkers; strengthening protections against unfair business practices; achieving the largest increase in benefits for paid medical and disability leave in more than three decades; and helping New Yorkers combat medical debt.
• Establishing Empire AI, a nation-leading consortium that will create and launch a state-of-the-art artificial intelligence computing center in Buffalo to be used by New York colleges and universities to secure New York's place at the forefront of artificial intelligence and advance AI for the public good.
• Providing critical funding support to mass transit systems statewide, including $7.9 billion in operating aid for the MTA, $333 million for upstate transit systems, and $551 million for non-MTA downstate systems, a 5.4 percent increase in funding.
• Advancing nation-leading infrastructure programs by contributing $2.6 billion for the third year of a record $32.9 billion five-year DOT Capital Plan, funding projects that are reconnecting communities across the state, and $100 million for local programs through the CHIPS program.
• Making record environmental investments with $500 million for clean water, $400 million for the Environmental Protection Fund, and $47 million to support the Governor's goal to plant 25 million trees by 2033.

With a conceptual agreement in place, the legislative houses are expected to pass bills that will enact these priorities. Based on a preliminary assessment of the negotiated changes to the Executive proposal, the total budget for FY 2025 is currently estimated at $237 billion. The FY 2025 budget does not raise income or statewide business taxes and maintains state reserves at the gold standard of 15 percent for a “rainy day.”

MAYOR ADAMS’ STATEMENT IN RESPONSE TO FRUITFUL NEW YORK STATE BUDGET AGREEMENT

 

After Months of Collaboration and Advocacy, Major Adams Administration Priorities to Be Delivered in New York State Budget

New York City Mayor Eric Adams today released the following statement in response to the $237 billion Fiscal Year 2025 budget agreement reached by New York Governor Kathy Hochul and the New York state Legislature this afternoon:

“This budget will be a win for New Yorkers. Every day, this administration works to deliver on our vision that supports working-class families by protecting public safety, rebuilding our economy, and making this city more livable. As a result, crime is down, jobs are up, and our administration continues to deliver each day for everyday New Yorkers. But we’ve been clear that we need additional support from our partners in Albany to fully realize those goals and today we celebrate as most of our key asks were granted by our state partners.

“We want to thank Governor Hochul, Senate Majority Leader Stewart-Cousins, Assembly Speaker Heastie, and the Legislature for hearing us out and delivering today on a number of our administration’s and this city’s priorities in the state budget.

“From the beginning of this process, we carried our bold agenda to Albany to achieve several key requests, including legislation that will allow New York City to build the affordable housing New Yorkers need and deserve, regulatory authority to finally close down illegal smoke shops plaguing our streets, and funding for the unprecedented migrant crisis that New York City has overwhelmingly shouldered.

“We are thrilled that there has been agreement on most of our core priorities, including the major package of legislation to grow our affordable housing supply and protect tenants, municipal enforcement of illegal smoke shops, and $2.4 billion for migrant support. We will continue to fight for New Yorkers on crucial issues, especially preserving mayoral accountability as we advocate to support public school children and families and boost student test scores and graduation rates, while decreasing racial disparities.

“Today, we celebrate along with our colleagues in state government and look forward to our continued partnership to advancing the critical issues that working-class New Yorkers expect and deserve.”

Cox: Hochul's housing policies doomed to failure

 

NYGOP Chair Ed Cox released the following statement in response to Democrats' latest disastrous housing policy proposal:

 

“Governor Hochul and legislative Democrats continue to ignore reality regarding housing. Their policies will continue to mean fewer housing choices, less investment in new housing, and a continued deterioration of existing housing stock. 

 

"Socialist schemes such as so-called 'good cause eviction' will only make the situation worse. Now they want to export the decades-long failed housing policies in New York City to the rest of the state.  These policies are doomed to failure.”

Canadian Man Sentenced for Operating $175M Psychic Mass-Mailing Fraud Scheme

 

Scheme Defrauded Over 1.3 Million Victims in the United States

A Canadian man was sentenced to 10 years in prison today in the Eastern District of New York for perpetrating a massive psychic mass-mailing fraud scheme that stole more than $175 million from more than 1.3 million victims in the United States.

Following a two-week trial, a federal jury convicted Patrice Runner, 57, a Canadian and French citizen, in June 2023 of conspiracy to commit mail and wire fraud, conspiracy to commit money laundering and multiple counts of mail fraud and wire fraud.

Runner operated a mass-mailing fraud scheme from 1994 through November 2014. As part of the scheme, Runner sent letters to millions of U.S. consumers, many of whom were elderly and vulnerable. The letters falsely purported to be individualized, personal communications from well-known so-called “psychics” Maria Duval and Patrick Guerin and promised that the recipient had the opportunity to achieve great wealth and happiness with the assistance of the “psychics” in exchange for payment of a fee. Once a victim made a single payment in response to one of the letters, the victim was bombarded with dozens of additional letters, all purporting to be personalized communications from the “psychics” and offering additional services and items for a fee.

Although the scheme’s letters frequently stated that a “psychic” had seen a personalized vision regarding the recipient of the letter, in fact, the scheme sent nearly identical form letters to tens of thousands of victims each week. Runner and his co-conspirators obtained the names of elderly and vulnerable victims by renting and trading mailing lists with other mail fraud schemes. In reality, Duval and Guerin had no role in sending the letters, did not receive responses from the victims, and did not send the additional letters after victims paid money. In fact, no “psychics” played any role in Runner’s operation. Some victims made dozens of payments in response to the fraudulent letters, losing thousands of dollars.

Runner directed the scheme for the entirety of its twenty-year operation, directing co-conspirators, who ran the day-to-day operations of the scheme through a Canadian company. Runner used a series of shell companies registered in Canada and Hong Kong to hide his involvement in the scheme while living in multiple foreign countries, including Switzerland, France, the Netherlands, Costa Rica and Spain.

Spanish authorities extradited Runner to the United States to face federal charges in December 2020.

“This case demonstrates that the Justice Department’s Consumer Protection Branch and its partners in the U.S. Postal Inspection Service (USPIS) are committed to investigating and prosecuting transnational fraud schemes targeting Americans consumers,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The global nature of this scheme meant that we had to rely on law enforcement from around the globe to provide evidence of criminality. We want to thank officials from France, Liechtenstein, Switzerland and Canada, and in particular the Canadian Competition Bureau, for providing assistance in securing evidence in this matter, as well as Spain for arresting and extraditing Runner, ensuring that justice could be done.” 

“Patrice Runner’s extravagant lifestyle, born on the backs of millions of older and vulnerable Americans, has come to an end,” said Inspector in Charge Chris Nielsen of the USPIS Philadelphia Division. “The conviction and federal sentencing of Patrice Runner is the appropriate punishment for someone who routinely preyed on vulnerable and elderly Americans. Postal Inspectors will continue to work tirelessly to ensure you can trust that the US Mail is free of these types of predatory schemes.”

Four other co-conspirators previously pleaded guilty to conspiracy to commit mail fraud in connection with this mass-mailing fraud scheme: Maria Thanos, 60, of Montreal, Canada; Philip Lett, 53, of Montreal; Sherry Gore, 73, of Indiana, and Daniel Arnold, 62, of Connecticut.

USPIS investigated the case.

Assistant Director John W. Burke and Trial Attorneys Charles B. Dunn, Rachel Baron and Ann Entwistle of the Civil Division’s Consumer Protection Branch prosecuted the case. The Justice Department’s Office of International Affairs provided critical assistance in securing Runner’s extradition.

The department urges individuals to be on the lookout for fraudulent “psychic,” lottery, prize notification and sweepstakes scams. If you receive a phone call, letter or email promising a large prize in exchange for a fee, do not respond. Fraudsters often will use official-sounding names or the names of real lotteries or sweepstakes, or pretend to be a government agent purportedly helping to secure a prize.

If you or someone you know is age 60 or older and has experienced financial fraud, experienced professionals are standing by at the National Elder Fraud Hotline: 1-833-FRAUD-11 (1-833-372-8311). This Justice Department hotline, managed by the Office for Victims of Crime, can provide personalized support to callers by assessing the needs of the victim and identifying relevant next steps. Case managers will identify appropriate reporting agencies, provide information to callers to assist them in reporting, connect callers directly with inappropriate agencies and provide resources and referrals, on a case-by-case basis. Reporting is the first step. Reporting can help authorities identify those who commit fraud and reporting certain financial losses due to fraud as soon as possible can increase the likelihood of recovering losses. The hotline is open Monday through Friday from 10:00 a.m. to 6:00 p.m. ET. English, Spanish and other languages are available.

More information about the department’s efforts to help American seniors is available at its Elder Justice Initiative webpage at www.justice.gov/elderjustice. For more information about the Consumer Protection Branch and its enforcement efforts visit www.justice.gov/civil/consumer-protection-branch. Elder fraud complaints may be filed with the FTC at www.reportfraud.ftc.gov or at 877-FTC-HELP. The Justice Department provides a variety of resources relating to elder fraud victimization through its Office for Victims of Crime, which can be reached at www.ovc.gov.

Bronx Tax Preparer Charged With Filing Tens Of Thousands Of False Tax Returns Causing Over $100 Million In Fraudulent Tax Loss

 

Rafael Alvarez Is Alleged to Have Perpetrated One of the Largest Ever Tax Frauds by a Return Preparer

Damian Williams, the United States Attorney for the Southern District of New York; Thomas Fattorusso, the Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”); James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”); and Trevor R. Nelson, the Deputy Inspector General for Investigations for the Treasury Inspector General for Tax Administration (“TIGTA”), announced today the unsealing of an Indictment charging RAFAEL ALVAREZ, a/k/a “the Magician,” with conspiracy to defraud the United States, aiding and abetting the filing of false federal tax returns, attempting to interfere with the administration of the internal revenue laws, making false statements, and aggravated identity theft.  These charges arise from ALVAREZ’s alleged orchestration of a wide-ranging scheme to file tens of thousands of federal individual income tax returns that included false information designed to fraudulently reduce the individuals’ tax burden and to make false statements to the IRS.  ALVAREZ was arrested today and will be presented in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker. 

U.S. Attorney Damian Williams said: “Rafael Alvarez was allegedly so prolific in falsifying his customers’ tax returns that he came to be known as ‘the Magician’ for his ability to make customers’ tax burden disappear.  But, Alvarez’s sleight of hand was criminal tax fraud, a serious federal tax crime he was allegedly committing for over a decade, depriving the IRS of more than $100 million in tax revenue.  Today’s charges, on Tax Day, should serve as an important reminder to tax professionals that when they try to cheat the public fisc they will face grave consequences.” 

IRS-CI Special Agent in Charge Thomas Fattorusso said: “While Alvarez may have been known as the ‘magician,’ he can’t say abracadabra and make these charges disappear.  This one person is charged with creating a criminal enterprise that defrauded the government of more than $100 million.  The evidence points to Alvarez’s alleged scheme to file tens of thousands of fraudulent tax returns, while his company, ATAX, grossed over $15 million in revenue in just three years.  Today’s arrest was no magical illusion, and Alvarez now faces the reality of his actions.”

FBI Assistant Director in Charge James Smith said: “Rafael Alvarez, the CEO, owner, and manager of ATAX New York, allegedly orchestrated one of the largest ever tax fraud schemes by submitting false federal tax returns that ultimately cost the IRS over $100 million in revenue while simultaneously generating $15 million for his own company.  Alvarez’s alleged 10-year fraudulent operation is not a magic act, but rather a deliberate slight against the integrity of our country’s tax system. Today, Alvarez must pay the price for his actions – the FBI does not tolerate those who steal from the government for personal economic fortune.”

TIGTA Deputy Inspector General Trevor R. Nelson said: “The Treasury Inspector General for Tax Administration aggressively investigates tax preparers who attempt to corrupt our Nation’s tax system.  Our mission at TIGTA is to protect the integrity of our Nation’s system of tax administration.  We are committed to working with our law enforcement partners to ensure those who endeavor to corrupt Federal tax administration are prosecuted to the fullest extent of the law.”

As alleged in the Indictment unsealed in Manhattan federal court and court filings:[1]

From at least in or about 2010, up to and including in or about 2020, RAFAEL ALVAREZ was the CEO, owner, and manager of ATAX New York, LLC, also doing business as ATAX New York-Marble Hill, ATAX Marble Hill, ATAX Marble Hill NY, and ATAX Corporation (together, “ATAX”).  ATAX was a high-volume tax preparation company located in the Bronx, which prepared approximately 90,000 federal income tax returns for its customers during this period.  ALVAREZ both prepared tax returns for ATAX customers and recruited, supervised, and directed other ATAX personnel who in turn prepared tax returns for customers.  During this period, ALVAREZ oversaw a sweeping fraudulent scheme, whereby he and his employees submitted false information to the IRS in ATAX customers’ tax returns.  This false information, which included, among other things, bogus itemized tax deductions, made-up capital losses, phony business expenses, and fraudulent tax credits, served to fraudulently reduce the customers’ tax liability and increase the customers’ tax refunds from the IRS.  In total, ALVAREZ oversaw ATAX’s fraudulent submission of tax returns on behalf of customers that deprived the IRS of substantially more than $100 million in tax revenue.  ALVAREZ was so consistent at falsifying ATAX customer tax returns that he became known to ATAX’s customers as “the Magician.”  Additionally, as part of ALVAREZ’s unlawful operation of ATAX, he and an ATAX employee made false statements to an IRS Revenue Agent.  ALVAREZ’s operation of ATAX helped the company generate at least approximately $15 million in gross revenues over the period of in or about 2016 to in or about 2019.

RAFAEL ALVAREZ, 60, of Cortlandt Manor, New York, is charged with one count of conspiracy to defraud the United States and making false statements, each of which carries a maximum sentence of five years in prison.  He is also charged with four counts of aiding and assisting preparation of false and fraudulent U.S. individual income tax returns and attempting to interfere with the administration of the internal revenue laws, each of which carries a maximum sentence of three years in prison.  He is further charged with aggravated identity theft, which carries a mandatory minimum sentence of two years in prison.

The statutory minimum and maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge. 

Mr. Williams praised the investigative work of the IRS-CI, FBI, and TIGTA.

This case is being handled by the Office’s Illicit Finance and Money Laundering Unit.  Assistant U.S. Attorneys David R. Felton and Samuel Raymond are in charge of the prosecution.

The allegations in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth herein constitute only allegations, and every fact described should be treated as an allegation.