Five men, including a former IRS revenue officer, were charged with fraud yesterday for cashing more than $600,000 in tax refund checks that had been mistakenly sent to a Baltimore rowhouse for much of the past decade, federal prosecutors said.
James Elwood Lewis Jr., 44, a former Internal Revenue Service employee who later operated a tax preparation business at the rowhouse, was indicted by a federal grand jury on 11 counts of bank fraud, court documents show.
Lewis is accused of forging endorsements on more than $160,000 in checks made payable to former corporate clients, and then depositing them in his business' bank account, between 1991 and 1993.
A separate indictment charges 25-year-old Amos Cedric Benning Jr., a former resident of the rowhouse at 2429 St. Paul St., and three other Baltimore men with stealing almost $500,000 in IRS checks delivered to the house between late 1997 and December 1998.
The charges, along with affidavits filed as part of the investigation, describe what appears to be an exceptional IRS blunder. By mistakenly mailing hundreds of corporate payroll tax refund checks to the St. Paul Street address -- where some sat in piles in a dingy vestibule -- the agency unwittingly fueled the criminal ambitions of a former agency employee and a loose ring of fraud artists, according to court documents.
"It is not yet known precisely how many checks were mistakenly sent by the IRS to 2429 St. Paul Street, nor do investigators know how much money has been lost over the course of the past decade," prosecutors from the U.S. attorney's office in Baltimore said yesterday in a prepared statement.
The IRS declined to comment because of the criminal investigation. But a spokesman said this week that he had never heard of the agency making a similar error.
Assistant U.S. Attorney Andrew C. White, the prosecutor handling the case, declined to comment on the investigation yesterday. The defendants in the case were not in custody last night but were likely to appear in court for arraignment next week, prosecutors said.
Authorities trace the origins of the alleged fraud to 1986, when Lewis, the former IRS employee, began working as a tax representative for a Baltimore payroll and accounting firm. In that position, Lewis had power of attorney for more than 3,000 corporations, allowing him to receive tax refund checks on their behalf.
In 1989, he left that company and opened his own business, Taxation By Representation, in a first-floor office at the St. Paul Street address. Tax officials mistakenly sent checks for Lewis' former corporate clients to the address because agency computers failed to note that he no longer represented the companies, an affidavit filed in the case says.
Prosecutors said that instead of returning the checks to the IRS or his previous employer, Lewis kept them. They said he stole more than 100 such checks, with a combined value of more than $160,000, between February 1991 and January 1993. In December 1992, Lewis moved his business from the St. Paul Street address.
Lewis, who now lives in Hampton, Va., is a car salesman in nearby Newport News.
"These are merely allegations" that will be investigated and vigorously challenged, his attorney, Timothy G. Clancy, said last night.
Neither Clancy nor prosecutors would say when or where Lewis worked for the IRS.
The investigation that led to the charges began last year, after agents from the Secret Service and the Treasury Inspector General's Office for Tax Administration learned that Benning, a Baltimore hairdresser, had deposited a $260,000 tax refund check made out to Jefferson Pilot Communications, a North Carolina-based company, prosecutors said.
Investigators learned that Benning was a co-owner of the Desired Image salon on East Hamilton Street with Andrew Darnell Jackson, 32, a convicted drug dealer who uses the aliases Jeffrey Dantzler and Scarvey McCargo, court documents say.
Authorities also learned that Benning had lived in a second-floor apartment at the St. Paul Street address.
Benning, with Jackson and two other men, pilfered more than 60 Treasury checks, worth nearly $500,000, mailed to the house from late 1997 to December 1998, prosecutors said. All were indicted on 11 counts of bank fraud.
Also charged in the indictments are: Jacques Lee Smith, 28, who according to affidavits operated Unisom Communications, a now-defunct pager company in Baltimore, and guided Benning on the best way to negotiate the Treasury checks; and William Samuel Broaddus III, 27, of Baltimore, a friend of Benning and Smith who owned Innovative Communication Network Services & Associates Inc.