Magazine article American Banker

Indictment: Head of Tax Service Bilked Banks

Magazine article American Banker

Indictment: Head of Tax Service Bilked Banks

Article excerpt

Federal prosecutors have charged the president of a nationwide tax preparation service with committing a series of electronic frauds that bilked two banks of over $1 million.

Richard M. Hersch, president of Quik Tax Dollars Inc., a tax preparation service based in Bryn Mawr, Pa., was arraigned this week on charges of filing false claims, conspiracy, and money laundering.

Mr. Hersch's company was one of many designated by the Internal Revenue Service to transmit Federal income tax returns electronically, a service that speeds the refund process to taxpayers.

IRS officials said Tax Quik also had relationships with Banc One Corp. and Beneficial Corp. to provide taxpayers with so-called "refund anticipation loans," whereby financial institutions advance money to consumers due tax refunds for a fee.

Prosecutors said Mr. Hersch used this access to IRS computer systems to illegally obtain $1,131,000 in refund anticipation loans from Banc One and Beneficial by filing over 400 false tax retums.

Leading Players

Banc One and Beneficial are two of largest players in the refund-anticipation loan business, which a number of financial institutions have entered since the IRS started accepting electronic returns in the mid-1980s.

The business has attracted banks because of the perceived low credit risk and relatively high fees charged for these short-term loans.

The indictment of Mr. Hersch is "one of the largest electronic filing cases ever prosecuted and represents the first time that an officer of a large tax preparation firm has been prosecuted for abusing the electronic filing system," said Donald Stern, the U.S. attorney in Boston who is heading the case.

25,000 Returns a Year

Quik Tax marketed its tax refund service through relationships with check-cashing centers around the country, and was filing about 25,000 legitimate electronic returns a year, said Fred Aufiero, branch chief of the criminal investigation division of the IRS. …

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