IRS raids Shakopee tax preparer

IRS criminal investigators say an accounting and immigrant services firm with offices in Shakopee and Florida appears to be running a multimillion-dollar income-tax-fraud conspiracy.

Search warrants unsealed Tuesday in St. Paul show that federal agents seized dozens of boxes of records and computer equipment from the office of American Group US Inc. in downtown Shakopee and the nearby residence of its married executives, Mark and Ornella Hammerschmidt.

An IRS agent said in a sworn statement that American Group and the Hammerschmidts are suspected of submitting more than 700 tax returns that included dubious claims and expense deductions resulting in more than $2.5 million in refunds.

American Group remained open for business this week despite the Feb. 9 raid. Signs out front offer taxes and accounting services, promising "The Best Refund, Guaranteed."

The Hammerschmidts declined to comment on the raid and ordered a reporter to leave the office.

IRS agent Marissa Pitzen said in an affidavit to obtain the search warrants that the alleged scam appears to have relied heavily on immigrants.

In addition to accounting, tax preparation and other financial services, American Group's Web page says it offers criminal defense and immigration services related to applications for citizenship, residency, work permits and visas. It lists Jennifer Casanova, a criminal defense attorney and former prosecutor with a firm in Edina, as an associate. Her website includes photos of herself with GOP presidential candidate Newt Gingrich, entertainer Conan O'Brien, Dakota County Attorney James Backstrom and former U.S. Rep. Jim Ramstad. Casanova did not respond messages seeking comment this week.

Nearly all of the suspect tax returns contained applications for "individual taxpayer identification numbers" rather than Social Security numbers, Pitzen said. The IRS assigns such numbers to people such as illegal immigrants, who are ineligible for Social Security numbers but who file tax returns anyway.

She said most of the taxpayer ID applications listed a UPS Store in Shakopee as the applicants' residence, but the investigation indicates that most of the applicants live in Florida. That's true for many individuals who also filed state tax returns in Minnesota through American Group, Pitzen said.

One thing that raised suspicions is the fact that nearly all of the tax returns included claims for "Household Help Income," which typically applies to wages paid for babysitting, housekeeping and landscaping. Many of the Minnesota income tax returns also included questionable dependent information and education expenses.

State revenue agents wrote to the taxpayers at the UPS Store address. They got more than 40 similar responses stating that the taxpayer was a household employee who was paid in cash and did not get a W-2 wage statement, Pitzen said.

She said the taxpayers' education expenses were supported by receipts paid for with credit or debit cards belonging to Ornella Hammerschmidt. The state received multiple identical copies of receipts from stores such as American Girl at the Mall of America, Nordstrom and TJ Maxx, and most did not appear to be for valid deductions, Pitzen said.

The immigrant connection

The Hammerschmidts first came to the attention of federal investigators in 2004 when they were running an Orlando-based company called All Kinds Services. Agents with U.S. Immigration and Customs Enforcement (ICE) alleged that the company helped foreigners to unlawfully obtain immigration benefits by arranging sham marriages.

In 2008, Venezuela native Ornella Hammerschmidt was indicted in Florida along with two relatives in a marriage and visa fraud conspiracy. News reports said ICE agents who raided All Kinds Services found a plastic wedding cake that "newlyweds" used as a photo prop, a fake reception hall and a rack with several wedding dresses.

At least 11 others charged separately in connection with that case pleaded guilty. But a judge threw out the charges against Ornella Hammerschmidt and her relatives after learning that an ICE agent had told a witness who was about to testify that she needed to identify a particular defendant. The judge ruled in February 2009 that the federal prosecutors could not retry the case.

Shortly before that, however, Ornella and Mark Hammerschmidt were indicted on charges of conspiracy to obstruct justice, witness tampering, and destruction of evidence during the prosecution of the marriage fraud case. They struck a bargain, with each pleading guilty to a single count of fraud and misuse of a visa. They were sentenced in the summer of 2009 to three years of probation.

Dan Browning • 612-673-4493