PALMDALE MAN WHO BILKED IRS OF $1 MILLION GETS PRISON.

Byline: Staff and Wire Services

A Palmdale man who admitted masterminding a scam that bilked the Internal Revenue Service out of $1.1million in income-tax refunds has been sentenced to nearly four years in federal prison.

Mervin J. Butler pleaded guilty earlier this year to conspiracy and filing false tax claims, and acknowledged the scam involved the filing of nearly 800 false income tax returns seeking refunds on bogus earnings and withholdings.

Had the IRS paid all the refunds that were requested, the government would have lost $3.58million, according to court papers.

The IRS says it paid out about one-third of that amount before uncovering the scam.

In recommending the 46-month sentence for Butler, Assistant U.S. Attorney Thomas Coker said the defendant cooperated with the government, helping prosecutors secure guilty pleas from 10 other defendants in the case.

According to Butler's plea agreement, the co-defendants obtained the names and Social Security numbers of other individuals -- many of them homeless or with little income -- so Butler could file false tax returns using their names.

In exchange, Butler paid the co-defendants a flat fee or a cut of the tax refunds, his plea agreement states.

The scheme was carried out from 2001 to 2003 with counterfeit W-2 forms from fictitious employers reporting fake wages and withholding, officials said. The forms were sent in with false income tax returns to claim refunds, officials said.

IRS officials declined to give specifics on what aroused suspicion, but they said investigators typically look for tax returns sharing common features, such as the same refund address or the same employer.

Frequently, false W-2 forms report a fairly low income, and the applicants apply for the earned-income tax credit in addition to seeking funds supposedly withheld.

In court Wednesday, Butler told U.S. District Judge Edward Rafeedie that he kept about $200,000 of the money received from the IRS.

Of the 10 co-defendants, four have been sentenced. Three received terms of one year and one day in prison, Coker said. They are George Allan Smith of Lynwood, Byron Hayes of Compton and Bryan Mays, a Palmdale resident who authorities say goes by the first name of Romeo.

The fourth co-defendant to be sentenced, Phyllis Yvonne Perryman of Los Angeles, was ordered to serve six months of home confinement, Coker said.

The remaining defendants are Wendell Jermaine Payne of Palmdale; Patricia Sullivan of Palmdale; Dawn Swink of Palmdale; Hector Pacheco Jr. of Long Beach; Yvette Marcel Hayes of Los Angeles; and Joseph Darnell Donaldson of El Sobrante.