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The owner of a home in Raleigh that became a notorious party mansion has pleaded guilty to tax fraud, healthcare fraud and money laundering in two separate cases in federal court, according to federal officials.
Claude Arthur Verbal II, formerly of Raleigh, N.C., and now of Miami, pleaded guilty to one count of conspiracy to defraud the United States, one count of aiding and assisting the preparation of false tax returns, one count of healthcare fraud and one count of money laundering April 9.
Sentencing is set for Aug. 11, and Verbal faces up to 28 years in a federal prison and $850,000 in fines.
Verbal was the owner of a home in North Raleigh that quickly became known as a “Party Mansion” for lavish, late-night parties thrown in a quiet neighborhood. The 15,000-square foot, $2.9 million house in the Radcliffe subdivision – just off Falls of the Neuse Road – frustrated neighborhoods with loud noise and large crowds late into the night.
WNCN’s investigation showed the home was owned by Verbal and his ex-wife, Pamela, said she lived in the home. Claude Verbal had identified himself as a party promoter, and people were charged to enter the home for parties.
Neighbors said the parties violated multiple neighborhood covenants, including using the home as a business and being a nuisance in the neighborhood. As a result, the HOA filed a lawsuit against Pamela Verbal, and a Superior Court judge ordered that she can no longer host the parties or have more than five guests in her home at a time.
As for the recent charges, a government news release said Claude Verbal has agreed to pay restitution to the Internal Revenue Service (IRS) and Medicaid.
According to court documents, Verbal was the owner of Nothing But Taxes, a tax return preparation franchise with 10 branches throughout the state of North Carolina that operated from 2005 to at least 2012. Verbal personally prepared false tax returns for clients of NBT and taught and encouraged his employees to do so as well, the government said. Verbal and NBT employees frequently offered clients a dramatically larger tax refund if the clients agreed to make a cash payment to the person who prepared their return. These cash payments were over and above the flat return preparation fee that NBT charged every client, whether or not their return was falsified, the federal government said in a news release.
According to court documents, from 2005 to 2007, Verbal prepared dozens of false tax returns on a computer at NBT’s location on Fayetteville Street in Durham. One such return was a 2006 tax return for an NBT client that falsely reported the client had a Schedule C business and a dependent, which Verbal knowingly prepared and electronically filed with the IRS.
According to court documents, the most common types of falsifications at NBT were false dependents, false Schedule C businesses, false tip income, false Earned Income Tax Credits and false education credits.
According to court documents, in a series of related cases in the Middle District of North Carolina, multiple other individuals employed by NBT – including branch managers, return preparers and client recruiters – have also pleaded guilty to charges involving federal tax fraud, fraud, and identity theft crimes. In particular, each of the individuals listed below pled guilty to one count each of wire fraud, aggravated identity theft and aiding and assisting the preparation of false tax returns:
· Leslie Brewster, branch manager, 70 months
· Nikki Brewster, branch manager, 61 months
· Tiffany Rogers, return preparer, 48 months
· Dawn Williams, return preparer, 36 months and one day
· Saichelle McNeill, return preparer, 27 months
· Ronald Hairston, client recruiter, 24 months
· Jennifer Bullock, return preparer, 15 months
“The tax fraud committed by Claude Verbal and the other Nothing But Taxes defendants is an affront to honest, hard-working taxpayers,” said Assistant Attorney General Kathryn Keneally of the department’s Tax Division. “The Justice Department will prosecute and seek just punishment against those who prepare fraudulent tax returns.
Also, according to court documents, Verbal was the owner and operator of Infinite Wellness Concepts (IWC), a Medicaid behavioral health provider with locations in Burlington, Durham and Greensboro, N.C. IWC was contracted to provide group therapy, intensive in-home services, enhanced mental health and substance abuse services. Court documents state that Verbal acquired at least $1 million in fraudulently obtained funds from the Medicaid program. The fraudulent activities included:
· Changing diagnosis codes so that codes with higher reimbursement rates could be billed;
· Falsely inflating the number of clients treated during group therapy;
· Billing for services not rendered and submitting false treatment notes in support of the services not rendered using forged signatures from counselors and therapists,
· Unqualified personnel conducting therapy; and
· Creating fraudulent clinical assessments and creating clinical assessments prepared and signed by unqualified preparers.
According to court documents, Verbal used the proceeds of the tax and healthcare fraud schemes to make extensive purchases of luxury cars, homes and jewelry. The money laundering charge to which Verbal pleaded guilty relates to the purchase of a $52,000 diamond ring with the proceeds of healthcare fraud.
In the course of the health care fraud investigation, law enforcement authorities seized $765,917 from bank accounts controlled by Verbal, a 2011 Toyota Camry and four pieces of diamond jewelry, including a seven-carat diamond ring. The United States initiated a civil forfeiture action alleging the properties constituted proceeds traceable to the health care fraud and on Sept. 19, 2013, Judge Eagles entered an order forfeiting the property to the government.
“Mr. Verbal’s fraudulent schemes victimized taxpayers in multiple ways, damaging Medicaid, the patients who rely on it, and the taxpayers who support it,” said U.S. Attorney Ripley Rand. “Stopping these fraudulent activities is a priority of the Department of Justice, and we are committed both to bringing the fraudsters to justice and returning the ill-gotten gains to the victimized agencies.”