LOS ANGELES (CN) — In what may be the last gasp of a $250 million tax refund scheme, a world champion boxer from Mexico has sued Chase Bank and a father and son pair of convicted fraudsters, claiming they stole $2.3 million in refunds from him.
In his March 24 complaint in Superior Court, Juan Manuel Marquez claims onetime tax preparers Adel and Heber Cotton forged a power of attorney from him, set up bank accounts in his name at Chase and claimed $2,308,439 in tax refunds withheld from his winnings, then had the refund checks mailed to their house.
“Surprisingly, but plainly, plaintiff’s stolen tax refund checks were mailed directly to the personal residence of both defendants A. Cotton and H. Cotton” in Hacienda Heights, Marquez say. Hacienda Heights is a bedroom community southeast of Los Angeles known for having the largest Buddhist temple in the United States.
Both Cottons are in federal prison, for involvement in what the Department of Justice called “the largest tax refund fraud in history.” Fifty-three people connected to a company called the Old Quest Foundation were convicted of filing hundreds of phony income tax returns and claiming bogus refunds totaling more than $250 million on behalf of clients who paid them large fees.
The leaders of the scheme, Old Quest CEO Arturo Ruiz and president Francisco Mendoza, sold clients on the idea that they could seek refunds from a “secret government account” using an uncommon type of 1099 form called a 1099-OID for Original Instrument Discount, according to a string of 34 federal indictments unveiled in October 2011.
Ruiz was sentenced to 14 years in prison and ordered to pay $3 million in restitution. Mendoza died before he was sentenced.
Prosecutors described Old Quest’s leaders and many of its clients as “tax defiers.” Tax preparers working with the company would file inflated returns for clients in exchange for fees up to $10,000 plus a 25 percent cut of refunds. Several of those convicted were clients who filed for false returns.
Adel Cotton, the father, was one of the tax preparers. He was sentenced in 2014 to 27 months in federal prison for conspiracy.
He and his son also pleaded guilty to a separate tax-fraud scheme based on identity theft. From 2008 to 2010, they filed 275 phony tax returns using stolen identities and pocketed the refunds.
Adel Cotton was sentenced last year to 51 months on those charges, his son to 30 months.
Marquez was not snared by either scheme, according to his lawsuit. He simply had the bad luck of hiring the Cottons to do his taxes. They were tax preparers “who prepared income tax returns on plaintiff’s behalf pursuant to contract,” the lawsuit states.
Marquez is a four-weight world champion boxer who has held seven world titles over the past 20 years, according to his 63-page complaint. He “is regarded to be one of the greatest Mexican boxers in the history of the sport, and is a national hero in his home country.”
His attorney Alan J. Romero of Pasadena said Marquez boxed often in Nevada, where large amounts were withheld from his winnings for taxes.
The Cottons filed returns for him in 2013, claiming refunds of $898,057 for 2008 and $1,410,382 for 2012. That year they also forged his signature on “a document entitled ‘Chase – Durable Power of Attorney for Deposit Accounts’ … in order to fraudulently and illegally open an account in the name of plaintiff, without plaintiff’s knowledge or consent,” according to the complaint.
Then they opened savings and checking accounts in his name with Chase Bank, where they deposited the refund checks as they arrived, Marquez says. He says he found out about the scheme in 2015, when his new tax preparer obtained his IRS records.
The Cottons spent or moved into other accounts about $1.9 million of his refunds, according to the lawsuit. He has not been able to find the rest.
A spokeswoman for co-defendant JPMorgan Chase declined comment.
Attorney Romero said the Old Quest perpetrators worked with a U.S. Bank branch manager, Michael Rodriguez, who helped them open illegal bank accounts in others’ names. Rodriguez is scheduled to be sentenced May 15.
Romero said he suspects the Cottons had an inside confederate at Chase Bank as well. He said he plans to amend Marquez’s complaint to add racketeering counts.
As of now, Marquez seeks restitution, treble damages and punitive damages on 17 causes of action, including negligence, breach of contract, misrepresentation, concealment, conversion, breach of fiduciary duty and unfair competition.