A Cortlandt Manor tax preparer whose clients referred to him as The Magician for his ability to generate tax refunds has been sentenced to prison for four years for diverting $145 million from the U.S. Treasury.
U.S. District Judge J. Paul Oetken also ordered Rafael Alvarez, 61, to forfeit $11.8 million that his company collected from customers and to pay $145 million in restitution to the government, on May 29 in Manhattan federal court.
“Rafael’s intent was not primarily driven by the desire the enrich himself,” defense attorneys Michael K. Bachrach and Richard H. Rosenberg stated in a sentencing memo. “What motivated him was a desire to help the poor in his community, for whom every dollar saved provides a lifeline.”
They recommended a prison sentence of one year and a day, “or whatever is the most lenient sentence that Your Honor believes appropriate for Mr. Alvarez.”
Assistant prosecutor David R. Felton noted that year after year, as the IRS audited the clients and investigated Alvarez, he was presented with the choice of “abstaining from further misconduct, or doubling and tripling down on it. Alvarez chose the latter, in order to earn more money.”
Felton recommended a prison sentence of 8 years.
Alvarez was born in the Dominican Republic and emigrated to the U.S. in 1983 when he was 17. He began working the next day as a taxi driver. In 1985, he enrolled in The City College of New York, where he was elected student body president and where he was active in Hispanic and Latinx causes.
He formed ATAX, a Bronx tax preparation firm. He was a leader in community activities, according to his attorneys, and active in local politics.
In 2005, he moved his family to a $800,000 house in Cortlandt Manor.
Alvarez pleaded guilty to conspiracy to defraud the U.S. and steal government funds, and to aiding and assisting preparation of false tax returns.
From 2010 to 2020, ATAX prepared more than 90,000 federal tax returns. About 91% of the returns claimed refunds, and the IRS determined that 89% of the customers who claimed refunds actually owed money.
Tax returns were riddled with fake deductions, made-up capital losses, illegitimate business expenses, and fraudulent tax credits. A tax return prepared for a relative of Alvarez, for example, listed Alvarez’s house as the client’s rental property.
While many of the tax returns were prepared for people of modest means, one client was a Florida doctor making from $400,000 to $1 million a year, according to the prosecutor’s sentencing memo. Alvarez created four false tax returns with $218,861 in losses.
Alvarez had as many as 40 tax preparers working for him. He recruited people who had no legal status in the U.S., according to the prosecutor. Employees who questioned the firm’s practices were intimidated, threatened, embarrassed and demoted, “thereby quashing dissent and reducing the risk of a whistleblower alerting law enforcement.”
Judge Oetken ordered Alvarez to surrender to the Bureau of Prisons on July 28.
