OIG: Office of Inspector General
   Current Section

Investigation Report

United States Attorney
Western District of New York

NOVEMBER 9, 2009

CONTACT: Peggy Kelly McFarland
PHONE: (716) 843-5877
FAX: (716) 551-3051


BUFFALO, N.Y.-- Raymonda Shallowhorn, 36, of Buffalo, New York, pled guilty in U.S. District Court today to two felony counts of student loan fraud and making false claims for income tax refunds, U.S. Attorney Kathleen M. Mehltretter of the Western District of New York announced. The maximum penalty for each charge is five years in prison and a $250,000 fine. The restitution amount payable to the IRS and the Department of Education will exceed $130,000. The guilty pleas were entered before Chief U.S. District Judge Richard J. Arcara.

Assistant U.S. Attorney Paul J. Campana said investigators from the Internal Revenue Service Criminal Investigation Division and the U.S. Department of Education uncovered the fraudulent tax refund and student loan application scheme that Shallowhorn perpetrated from 2002-2008. The prosecutor said Ms. Shallowhorn submitted more than fifteen federal income tax return, making false claims of more than $86,000 in tax refunds. Shallowhorn caused the tax returns to be filed in the names of several different persons, sometimes with their knowledge and sometimes without. All the tax returns were false. Shallowhorn received an additional $45,000 in proceeds from fraudulent student loans. The student loans were applied for by Shallowhorn on behalf of at least five different persons. The loan applications were made over the Internet for correspondence courses that were attended by neither Shallowhorn nor the nominal applicants.

The tax returns prepared by Shallowhorn or with her assistance would feature one or more types of false claims. On some returns, the person in whose name the return was filed would claim income from a child care business when Shallowhorn knew that person never operated such a business. On other returns, the tax filer would file a false W-2 supplied by Shallowhorn and claim to have worked at a job, when in fact the person had not worked. On both kinds of returns, there would be false claims for the Earned Income Credit. The Earned Income Credit is a refundable credit an eligible taxpayer can receive regardless of whether any tax is owed or has been paid. The Earned Income Credit, however, can lawfully be claimed only by taxpayers with modest incomes who actually received earned income during the tax year. Finally, on other tax returns, Shallowhorn arranged for tax filers to list children as dependents who did not in fact live with and were not supported by the tax return filer during the given tax year. On these returns, the false claims were for the Earned Income Credit, the child tax credit and/or the child care tax credit. Shallowhorn received all or part of the tax refund and student loan checks.

Chief Judge Arcara scheduled sentencing for February 18, 2010, at 12:30 pm. Judge Arcara allowed Ms. Shallowhorn to be released pending sentencing

The guilty pleas were the result of an investigation by the Internal Revenue Service, Criminal Investigation Division, under the direction of Special Agent In- Charge Patricia J. Haynes, and the Department of Education, Northeastern Region, under the direction of Special Agent In-Charge Brian Hickey

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Last Modified: 11/17/2009