A Honolulu woman pleaded guilty Thursday for her role in a scheme to file false tax returns and use Hawaii businesses, banks and trusts to launder the refunds.
The scam cost the Internal Revenue Service more than $1.6 million.
Hannah Heart, 66, of Honolulu entered into a plea agreement with the U.S. Department of Justice on Thursday when she also pleaded guilty to conspiracy to defraud the U.S. and to mail fraud.
Heart caused a tax loss to the IRS of $1,618,985.54. She is free on bond until sentencing Sept. 8.
Her co-conspirator, Sook Young Jung, accepted a plea agreement March 20, 2024, and pleaded guilty to conspiracy to defraud the federal government. Jung will be sentenced Sept. 25.
Heart and Jung were among six people charged in connection with the scam.
At the center of the scheme was “co-conspirator 1,” the owner of Gimmel Group LLC, a domestic limited-liability company in Hawaii that “purported to be a personal investment business,” according to the 15-count indictment handed down July 15, 2021.
Gimmel Group was incorporated April 29, 2015, and administratively terminated by the state on Dec. 7, 2018, according to records from the Department of Commerce and Consumer Affairs.
Heart and Jung conspired with Gimmel Group’s owner and a signatory of Mortgage Compliance Advisors & Solutions LLC, a Florida company, by recruiting at least five other people to file false tax returns to get refunds they did not deserve.
From 2015 to 2019, Heart, Jung and the owner of Gimmel Group allegedly used MCA&S to act as their recruits’ mortgage lender to help fill out Internal Revenue Service Form 1099-MISC and Form 1040 to claim fake, sizable tax withholdings.
Heart filed a false 2014 amended individual income tax return that claimed a refund of $464,904 that the IRS paid.
Heart and Jung paid the owner of Gimmel Group “substantial fees” based in part on a percentage of tax refunds received and the amount of work done to facilitate false returns.
The pair created fake trusts and opened bank accounts in the name of the trusts to conceal the proceeds and prevent the IRS from recovering the money.
Heart and Jung cut cashier checks from the accounts to pay co-conspirators.
Some received $200,000 cashier checks in 2016, and others got $34,424 and $532,424 for “assisting in the false tax filings and concealment,” according to federal court documents.
They also authored letters and sent faxes to the IRS to block its collection efforts and asserted the fraudulent returns were real.
“When the IRS began trying to collect the fraudulent refund from Heart, she took several steps to thwart the IRS. For example, Heart deposited the refund check into a trust bank account and immediately transferred most of the balance to a separate bank account, both of which she controlled,” read a statement released Thursday from the U.S. Department of Justice in Washington, D.C. “She also sent numerous false, fraudulent, and frivolous letters to the IRS in response to IRS communications.”
Jung was arrested Sept. 4, 2021, in Seattle, and Heart was arrested Sept. 18, 2021, in Honolulu.
Heart took out a mortgage for her home in 2006 and stopped making payments in 2010 toward her mortgage, according to federal prosecutors.
“The mortgage lender initiated foreclosure proceedings in 2022 against Heart. In response, a co-conspirator sent the lender a fictitious document purporting to be a check for the full amount due for Heart’s mortgage,” read the statement. The lender initially accepted the check but later rejected it as fraudulent. Afterward, Heart sent mail to the lender demanding that it accept the fraudulent check as full payment of her remaining balance.
In total, Heart “intended to defraud the mortgage lender” of $2,066,522.22.
Heart faces up to 20 years in prison for mail fraud and up to five years in prison for conspiracy to defraud the IRS.
IRS Criminal Investigation, the Treasury Inspector General for Tax Administration, and the FBI are investigating the case.
Trial attorneys Sarah Kiewlicz and Megan Jones of the Tax Division and Assistant U.S. Attorney Gregg Paris Yates for the District of Hawaii are prosecuting the case.
