African American News and Genealogy

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Friday, November 04, 2005

Former tax preparer faces prison, fine for slavery scam

By Kate Brennan, Florida Today A former Brevard County tax preparer facing 26 counts of federal fraud for bilking the IRS out of $624,000 in a slave restitution refund scam has agreed to pay it all back, along with $250,000 in fines, in a plea bargain that could put her behind bars for five years. It's up to a judge to accept or reject the agreement. Marguerite Young Smith, a former Rockledge High School teacher who owned Quick Tax on Merritt Island, admitted Monday in a plea agreement that she claimed a fraudulent slavery deduction for several of her black clients -- as much as $86,000 in one case -- and inflated the refund amounts for many others. By admitting guilt, the government dropped all but one of the charges, sparing Smith a possible 125 more years in prison. Her trial was set to begin Tuesday. The settlement saved Smith and the federal government time and money, said Norm Meadows, a special agent for the Internal Revenue Service Criminal Investigation. "I don't believe she's getting away with a whole lot," he said. "She's being prosecuted criminally. She's going to pay her debt back to society. And she's still going to spend a significant amount of time in prison." A date has not been set for Smith's sentencing hearing. If the judge accepts the plea agreement, Smith will be responsible for paying back the government any of the fraudulently claimed refund money, approximately $624,000. Most of Smith's clients had no idea she was inflating their returns or that the slavery restitution credit was illegal, according to court documents. But if Smith had not been prosecuted, it would have been their responsibility to pay back the government. Smith's case should be a warning to all tax preparers and taxpayers alike, Meadows said. "It's a community service message on the government's part to be careful on who you get to do your tax returns and a message to fraudulent prepares that the government is going to pursue you if you do something wrong," he said. The slavery restitution scam has been around for more than a decade, according to the IRS. Its origins trace back to Gen. William T. Sherman's Special Field Order 15 at the end of the Civil War. The order, which gave rise to the famous "40 acres and a mule" phrase, was to have granted land between South Carolina and Florida to freed slaves but was invalidated months later by President Andrew Jackson. In 2001, the IRS received more than 80,000 such claims, mostly in the South, totaling more than $2.7 billion in false slavery reparation refunds. Smith was indicted in February by a federal grand jury in Orlando for claims filed between 1998 and 2002. The IRS gathered some of its evidence using audio recorders during several undercover visits to Smith's Merritt Island business, according to court records. Smith's attorney Robert Berry said his client agreed to the settlement because it was "reasonable" and it "could have been worse." Still, it's not easy on Smith, who he said suffers from some health issues. "She's depressed about the situation she finds herself in. It's tough on her," he said. "She's in her mid-60s and she's going to prison." Smith already served time in prison in 1993 after a jury found her guilty of fraud. Berry said Smith does "not presently" have the money to pay back the government on behalf of her former clients. But, for other reasons, he hopes the judge accepts the plea agreement. "She's got a good family supporting her through this," Berry said. "We're just grateful to the government for making a reasonable offer that gives her the time to get out (of prison) and have time left with her family." Contact Brennan at 242-3722 or


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