East Texas women indicted for federal tax fraud
BEAUMONT, Texas - Two East Texas women have been charged with federal income tax violations in the Eastern District of Texas, announced U.S. Attorney John M. Bales today. Elizabeth Gayle Bailey, 56, of Spurger, Texas, was indicted on Nov. 16, 2011, and charged with one count of conspiracy to defraud the United States and 14 counts of preparing false tax returns.
Patricia W. Sheard, 61, of Buna, Texas, was also named in the indictment and charged with conspiracy to defraud the United States.
Bailey and Sheard appeared before U.S. Magistrate Judge Zack Hawthorn on Nov. 22, 2011 for arraignments. Bailey was released on bond. Sheard was held in custody after the judge considered a pending murder charge against her in Jasper County, Texas.
According to information presented in court, Bailey founded Gayle's Taxes in 1999 in Spurger, Texas and employed Sheard as a bookkeeper. In 2007, Bailey and Sheard entered into a profit sharing arrangement for the business with Bailey receiving 60% of the profits and Sheard receiving 40% of the profits. Under this arrangement, for the years 2006, 2007, and 2008, Bailey and Sheard prepared IRS forms on behalf of their clients and would electronically file the returns. It is alleged that in preparing Form 1040 individual income tax returns for their clients, Bailey and Sheard would prepare two different tax returns, the first return being an accurate return that was given to the client and the a second but different return to be submitted to the IRS. The purpose of the second return was to inflate certain reported deductions in order to generate a greater refund than what the taxpayer was actually entitled. Without the knowledge of their clients, and relying on an IRS Form 8888, Allocation of Refund, it is alleged that Bailey would then split or allocate the refund, giving the client the amount indicated on the first return while keeping the larger remaining sum for herself and defendant Sheard as a secret profit. It is alleged that during the course and scope of the conspiracy, Bailey and Sheard prepared 103 false Forms 1040 individual income tax returns in the names of their clients allocating falsely inflated refunds to the defendants' personal bank accounts totaling approximately $465,332, causing a loss to the government of that amount.
If convicted, Bailey and Sheard each face up to 5 years in federal prison for the conspiracy charge and Bailey faces an additional three years for each charge of preparing false tax returns. This case is being investigated by the IRS Criminal Investigations and is being prosecuted by Assistant U.S. Attorney Robert L. Rawls.
A grand jury indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.