Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 5, 1995 TAG: 9504050084
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: JAN VERTEFEUILLE STAFF WRITER
DATELINE: LENGTH: Medium
Blankenship ran a tax scam from prison that eventually involved 67 people in and outside prison who helped him try to file 45 false returns.
The IRS has delayed mailing out tax refunds this year in an effort to crack down on fraud.
"What I've done, I feel responsible for the 20 million people that does not have their tax returns," Blankenship said in an interview in the U.S. Marshal's Office in Roanoke on Tuesday. "I felt terribly responsible for that."
With a ninth-grade education and GED, Blankenship came up with the idea of forging W-2 forms to show fictitious amounts of withheld tax and using them to file false tax returns. It worked for two years, and when he went to prison on other charges in 1992, he developed the scam on a larger scale. The operation, with Blankenship doing all the paperwork using inmates' Social Security numbers and former employers' ID numbers, lasted eight months.
The scheme got so complicated that Blankenship used Rolodex files to keep the inmates' returns straight and completed all the paperwork to set up his own business. He had filled out a form to register the EZ Tax Service in Bedford County and set up a bank account, he said. He was just waiting for some refund money to come back to deposit in the account and pay the business license fee.
The tax service name would have provided cover, he felt, for the post office box in Goodview where many of the refunds were supposed to be sent. A fellow inmate, Ernest "Wes" Garraghty, had gotten his mother and sister involved, and they would pick up mail from Blankenship and send tax returns on to the IRS.
His closest friends, some who were in a group they dubbed "The Corporation," were recruiters who would interview inmates wanting to get in on the scheme, he said.
"If I had kept it simple, I really don't" think the IRS would have caught on, he said.
The IRS is too small to effectively police all tax returns, he figured, and in the years it might take for the agency's computers to discover any discrepancies between false tax returns and actual withholding tax deducted by employers, "W-2s can get misplaced."
Federal authorities didn't act immediately after "stumbling onto" all the returns being mailed to the Goodview post office box. Instead, they watched the mail and tried to figure out what was going on. Returns sent in still were processed, but no more refunds were sent out after the IRS had paid out $28,000 in fraudulent claims. Blankenship began to suspect someone had caught on.
He believes one of the inmates who was involved may have turned him in to prison authorities after getting in trouble and being thrown in isolation. Assistant U.S. Attorney Ken Sorenson said it was the IRS that discovered the operation.
Meanwhile, some inmates awaiting money were so upset about the delays that they were calling the IRS daily, demanding their refunds. One even filed a missing refund claim, thinking the refund had been lost.
Blankenship said he never told any inmates specifically that the scam was illegal, but figured they had to know.
"I think they all realized - especially in prison - you don't get something for nothing," he said. "The guys I dealt with, they were all players."
He blames the Bland Correctional Center in part for the scam's being allowed to flourish. When an inmate requested that 50 blank W-2 forms be mailed to him, the prison let the mail through, even though employees there open everything first.
"Bland allowed this to happen," Blankenship said.
He has since been moved to Buckingham because of threats from other prisoners. The 37-year-old is serving a 28-year sentence for embezzlement and related charges. The tax scam conspiracy charge could add another five to his sentence. He also will be responsible for restitution of everything the IRS paid to him and the others involved.
He said he wants people to know he's not a con man, but someone who began a scam in order to help his wife and two daughters make ends meet.
"I don't ever plan to do something this stupid again."
by CNB