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United States v. Kyle

September 15, 2008

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ROOSEVELT KYLE, INDIVIDUALLY OR D/B/A CENTURY ONE RESORTS, LTD OR CENTURY ONE ASSOCIATES; REBECCA TYREE A/K/A/ RUBEE TYREE ; COA FINANCIAL GROUP, LLC D/B/A COA FINANCIAL NETWORK TRUST C/O T&N FASHION; EAGLE FINANCIAL SERVICES, LLC DEFENDANTS,
ROOSEVELT KYLE, THIRD-PARTY PLAINTIFF
v.
JOHN R. MONROE, DOES 1 THROUGH 1000 THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER GRANTING UNITED STATES' or RUBY TYREE MOTION TO ALTER OR AMEND JUDGMENT AGAINST ROOSEVELT KYLE AND AMENDED JUDGMENT

Upon motion by Plaintiff, the United States of America, the Court makes the following findings of fact and conclusions of law and enters this permanent injunction.

Plaintiff United States filed its complaint for permanent injunction under sections 7402, 7407, and 7408 of the Internal Revenue Code (26 U.S.C. or I.R.C) on November 15, 2007, seeking to bar Roosevelt Kyle from preparing income tax returns for others. Default judgment against Roosevelt Kyle was entered on July 11, 2008, because Mr. Kyle's repeatedly failed to comply with the Court's scheduling and pre-trial orders and failed to appear at several noticed hearings. Having reviewed the record in this case, the Court grants the United States' motion to alter or amend, makes the following findings of fact and conclusions of law, amends the prior default judgment, and enters this permanent injunction against Roosevelt Kyle.

Findings of Fact

1. Kyle resides in San Diego, California, in this judicial district and does business in this judicial district.

2. Kyle has prepared tax returns for others for compensation since 1983, with the exception of 2006 when he was incarcerated in federal prison for willfully failing to file federal income tax returns.

3. Over the last eight years, Kyle has operated his tax preparation business using several entities or names, including Century One Resorts, COA Financial Group, LLC, and Eagle Financial Services, LLC. Kyle stopped personally signing returns in 2004, but Kyle still interviews customers and prepares returns that are signed by others. He does this to thwart IRS efforts to detect his illegal conduct.

4. The following numbers of returns were filed under the Employer Identification Numbers of the entities listed in paragraph 3 above and under Kyle's identification number:

Name of Number Person/Entity Returns Filed by Entity from 2000-2007: 2000 2001 2002 2003 2004 2005 2006 2007* Roosevelt Kyle 1572 1632 1864 136 12 2 1 5 Century One 0 0 0 1451 2511 57 4 2 Resorts COA Financial 0 0 0 0 0 2527 34 7 Network Trust/COA Financial Group, LLC Eagle Financial 0 0 0 0 0 0 0 1136 Services, LLC * As of September 27, 2007 Kyle's Tax Preparation Business

5. On average Kyle and his businesses prepared and filed approximately 1,500 returns per year since 2000.

6. Kyle most recently operated his business from 2414 Hoover Avenue, National City, CA 91950, in the San Diego metropolitan area.

7. Kyle, individually and through the named entities, prepares federal income tax returns that unlawfully understate his customers' tax liabilities, most commonly by fabricating or inflating deductions on IRS Form 1040 Schedule A, "Itemized Deductions," and Schedule C, "Profit or Loss from Business."

8. As a direct result of Kyle's fraudulent return preparation, his customers' filed federal income tax returns understate their federal income tax liabilities and claim large income tax refunds to which they are not entitled.

IRS's Investigation

9. As of September 26, 2007, the IRS has examined over 200 returns prepared between 2002 and 2007 by Kyle individually and under the auspices of Century One Associates, COA Financial Network, or Eagle Financial Services. The examinations revealed that all but approximately eight of the returns understated the customer's tax liability.

10. Customers consented to the IRS's adjustments on approximately 127 of the examined returns. The total of the agreed tax understatements on those returns was $419,725 which was an average understatement of approximately $3,304 per return.

11. In 2007 the IRS conducted an undercover investigation of Kyle and his tax preparation business, which he operated as Eagle Financial Services, LLC. An IRS undercover agent posed as a customer and paid Kyle to prepare a tax return. Kyle conducted the tax preparation interview with the undercover agent, but the return was signed by Rebecca Tyree, Kyle's office manager and business associate. The return Kyle prepared for the undercover agent fabricated employee business expenses and charitable deductions.

12. The estimated tax loss caused by Kyle's misconduct between 2002 and 2007 is approximately $18 million.

13. Kyle has known about the IRS's investigations of his tax preparation business and activities since at least 1987, but has repeatedly and continually engaged in improper and enjoinable conduct.

14. In 1987 the IRS assessed against Kyle two preparer penalties under 26 U.S.C. § 6694 for conduct occurring in 1983 and 1984.

15. Kyle willfully, intentionally, and/or recklessly understates his customers' income tax liabilities by preparing returns that improperly contain fabricated or inflated deductions on IRS Form 1040, Schedules A and C.

Inflated or Bogus Schedule A Employee Business Expenses

16. Kyle continually and repeatedly prepares federal income tax returns claiming inflated or bogus Schedule A unreimbursed employee business expenses to offset customers' Form W-2 wage income.

17. Approximately 167 of the returns the IRS examined contained inflated or unsubstantiated Schedule A unreimbursed employee business expenses.

18. For example, in 2007 Kyle (under the auspices of Eagle Financial Services) prepared for an undercover IRS agent who posed as a customer a return on which Kyle fabricated over $7,300 of unreimbursed employee business expenses, including over $1,900 of bogus laundry and cleaning expenses. Although Kyle did not sign the return, he conducted the interview with the undercover agent. Kyle promised the ...


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