Fraud, Schemes & Evasion: The IRS-Criminal Investigations Division Answers Your Questions

Topics: Criminal Enforcement, Financial Crime, Government, Government Fraud, Government Regulation, Risk Management

IRS-CI

You know whom you never want to see on the other end of your Ring doorbell camera? A Special Agent from the Internal Revenue Services’ Criminal Investigations Division (IRS-CI). Why? Because the Division is the sole federal law enforcement agency authorized to investigate potential criminal violations of the Internal Revenue Code, and its agents are well-trained, sophisticated and use the latest technologies to make “capturing the crooks” a lot easier.

The IRS-CI’s Director of Operations, Policy and Support, Kathy Enstrom, recently discussed tax fraud investigations with myself and a large, virtual audience during a Thomson Reuters-hosted webinar titled, “Working Smarter, Not Harder: How the IRS-CI is Leveraging Data Analytics to Capture Tax Criminals.”

During the 60-minute discussion, the audience had questions concerning investigations and data analytics tools. Here are several audience questions with responses from Enstrom.

I work at a high-profile state attorney general office. Sometimes we run into cases that may be of interest to the IRS. Are there any criteria for a referral, i.e., what does your agency need from us to investigate the target?

Kathy Enstrom: We don’t have criteria in terms of thresholds or limits as to what will cause us to investigate a complaint. However, we do have limited resources and have to spend those resources in areas that will give us the biggest “bang for our buck”. The more specific a referral is, the better as it helps us use our resources in a more efficient way. We have agents located throughout the United States who will gladly accept any referral you may have.


If you want to learn more about the work of the IRS-CI, see their recently released Fiscal Year 2018 Annual Report.


Have you integrated artificial intelligence (AI) into your data to assess and create algorithms for criminal investigations?

Kathy Enstrom: We use some forms of AI to create algorithms to help us collate data and make connections, but not in a way that is often described as “predictive policing”. Our algorithms are created over many hours by data scientists and our IRS research and analytics department, working with trained Special Agents. However, the results we obtain from these algorithms are carefully screened and researched using law enforcement and financial databases and developed individually by a team of highly trained investigative analysts and special agents. A computer cannot compare to the mind and experience of an IRS-CI financial investigator, and we rely on that more than the algorithm results.

You mentioned a “non-compliant Employer Identification Number (EIN)” during the webinar. Can you explain further? Have you noticed any trends in healthcare provider entities?

Kathy Enstrom: It is difficult to answer this question in such a short amount of written space. There are too many intricacies to describe without a conversation. The IRS has focused on many different industries in the non-compliant employment tax area and healthcare providers are one of them.

IRS-CI

Kathy Enstrom, Director of Operations, Policy, and Support for the Internal Revenue Service’s Criminal Investigations unit

For years, the IRS has prosecuted many healthcare providers; and here are two recent examples of cases we have worked in the healthcare industry:

  •        18-month Sentence in Healthcare and Tax Fraud Investigation — Ali Jama, co-owner of Alpha Star Health Care Inc., was sentenced to 18 months in prison and was ordered to pay $311,306 in restitution to the IRS and $392,000 in restitution to Medicaid. Jama was convicted of making false healthcare statements and making false statements to the IRS in regard to running home healthcare fraud and tax fraud schemes.
  •        Jury Trial Convicts Dental Clinic Owners of $1 Million Healthcare, Payroll Tax Fraud A Marshfield, Mo. couple has been convicted by a federal trial jury of multiple fraud schemes totaling more than $1 million that involved Medicaid payments to their dental clinics, failing to pay payroll taxes and collecting unemployment benefits they were not entitled to receive. Pamela M. Van Drie, 59, and her husband, Lorin G. Van Drie, 60, were found guilty last month on all 40 counts that were contained in a 2016 federal indictment.

How does data analytics help state and local agencies?

Kathy Enstrom: Any time we can connect data to find criminals, it benefits law enforcement at all levels. We are unable to work every tax or financial investigation; however, some data can be shared with state and local law enforcement.

Additionally, we have a large number of state and local law enforcement sworn in as IRS-CI task force officers. Within these task forces, IRS-CI agents, other federal agents, and state and local law enforcement can share information more freely and work in conjunction on local priorities.


Want to stay up-to-date on our thought leadership pieces and other topics such as government fraud, waste, and abuse? Follow the Risk & Compliance Spotlight page on the Legal Executive Institute’s blog.