It's easy to imagine identity thieves as unsavory sorts hiding in the dark recesses of the underworld. We don't usually think of them as married professionals living in Manhattan's Upper East Side.
That is, however, exactly what Jeffrey S. Stein and his wife, Marla Stein, are alleged to have done in an effort to cheat the Internal Revenue Service. The Steins, who are husband and wife, used identities of third parties to generate phony documents designed to support false deductions that the pair claimed on their joint tax returns for the years 2009-2012.
Over the years 2009-2012, Jeffrey Stein was a vascular surgeon who ran his own practice, “Jeffrey Stein, M.D.” As part of his practice, he was also affiliated with and earned income from certain medical groups, including one based in Brooklyn that had contracts with the United States Department of Veterans Affairs ("V.A.").
Over the same period of time, Marla Stein was an attorney who performed legal services largely as an independent contractor to certain Manhattan-based personal injury law firms.
They were clearly not just scraping by. According to Salary.com, the median annual salary for a vascular surgeon practicing in New York is $421,605. The average annual salary for a personal injury lawyer is $73,000. That puts the two of them pretty comfortably in the top 2%.
Despite the fact that the pair did pretty well financially, they apparently developed an aversion to paying taxes. The couple filed a joint return and reported the profits from their medical and law practices, respectively, on separate Schedules C (Profit or Loss From Business). Those Schedules, had they been properly filed, would have indicated that the Steins had made a lot more in income than they wished to report to the government. So they set about to change that.
As part of their scheme, the Steins provided "false and fictitious information" to their accountant. The plan was to create fake deductions to offset actual business income.
To do this, Jeffrey Stein simply made up Schedule C expenses that didn't exist in his medical practice, such as contract labor expenses and transcription services. He also falsely inflated Schedule C expenses, including travel and auto expenses, deductible meals and entertainment, and the amounts of wages paid to employees of his medical practice.
Not to be outdone, Marla Stein provided the accountant with contract labor and advertising expenses for her law practice which were never incurred or paid. And, as her husband did, she falsely inflated Schedule C expenses purportedly incurred by her law practice, including those for office supplies and deductible meals and expenses.
In February 2013, the Steins were notified by IRS that their returns had been selected for audit. Those pesky made up expenses and deductions would have clearly been a problem so the Steins took action: they made up documentation to support their lies. They handed those documents over to their accountant to provide to the IRS auditor.
Creating fake documents isn't that easy. So the Steins had to be creative. Jeffrey Stein used the names of four disabled military veterans - yes, disabled military veterans - including two former patients whose identities Stein obtained through his work for the V.A. Using those names, Stein then created bogus invoices stating that the vets had performed services (as in worked) for Stein during 2010 and 2011. The four vets were escalated to such occupations as "ultrasound technologist" and "vascular technologist." Only it was all a lie: none of the individuals on those invoices provided any of the services. And in fact, one of the vets whose name appeared on the invoice was not even alive in the year Stein submitted the invoice.
That didn't stop them. Stein also created invoices purportedly sent to his medical practice in 2010 and 2011 by a Long Island hospital reflecting payments sought by the Hospital for "surgical physician assistant cost sharing." Those hospital invoices were never actually sent meaning that Stein never paid them. It wasn't just the hospital: Stein also created invoices allegedly sent by a company that provided transcription services. Again, that company never provided any transcription services to Stein, and Stein never paid them.
But Stein didn't work alone. He had a partner in crime: his wife. Marla Stein also "borrowed" the names and tax ID numbers of other people in order to create bogus invoices. She claimed that two individuals had provided services to her law firm and had been paid for those services. That didn't happen. Those "borrowed" names and tax ID numbers actually belonged to a household employee and a medical professional who had performed services for a member of Marla Stein's family.
And all of those photos and videos of family religious celebrations that the Steins paid for personally? With a few fraudulent alterations, those invoices were suddenly attributed to Stein's law practice.
Not content to make up employees, the Steins failed to inform their accountant that they actually did have a real employee. They paid approximately $15,000 annually in cash to a household employee who performed cleaning and childcare services in their Upper East Side home. Not only did they fail to pay employment taxes for the employee, they also helped her avoid detection by the IRS as she failed to report her cash wages to the IRS for the tax years 2007-2013.
The total damage? According to Manhattan U.S. Attorney Preet Bharara, the pair claimed "hundreds of thousands of dollars of false deductions on their tax returns" and then "they doubled down on their fraud by using the identities of others to create false documents in an attempt to snooker the IRS again – this time during an audit."
IRS Special Agent-in-Charge Shantelle P. Kitchen said about the charges, "It is inexcusable when financially successful individuals, with the resources to meet their tax obligations, defraud the tax system. By doing so, they increase the burden on law abiding American taxpayers, effectively forcing them to make up the difference. As we approach the April 15th tax deadline, this investigation serves as a timely warning to those who contemplate filing fraudulent tax returns through falsifying their expenses. It also reinforces the message that falsifying books and records "after the fact," in preparation for a tax audit, is also a criminal offense and will be dealt with accordingly. IRS-Criminal Investigation remains committed to protecting the American tax system and ensuring that everyone pays their fair share."
Sentencing is scheduled for July 28, 2015. Jeffrey Stein faces a maximum sentence of eight years in prison on the charges for which he pleaded guilty. Marla Stein faces three years in prison on the charges for which she pleaded guilty.
For now, the Steins appear to both be gainfully employed in their current professions. Jeffrey Stein is identified on the Mt. Sinai Hospital website as an Assistant Clinical Professor of Vascular Surgery. Marla Stein is listed as a current attorney on the Burns Harris firm website.
