Palm Springs man pleads guilty to stealing millions in tax and COVID-19 loan fraud scheme
A Palm Springs man pleaded guilty to scheming to defraud the IRS out of more than $2.1 million and to fraudulently obtaining nearly $1 million of COVID-19 economic relief loans, the Department of Justice announced.
William Mandel Musgrow, 48, pleaded guilty on Thursday to one count of wire fraud and one count of aiding and assisting in the preparation of a false tax return.
According to his plea agreement, Musgrow used one of his business entities to issue fraudulent IRS Forms W-2.
Authorities said the forms falsely represented to the IRS that the recipients were employed by Musgrow's various businesses, received wages, and had federal tax withheld from their paychecks. The Forms W-2 actually either overstated the recipient’s income or were wholly fraudulent as the recipient either did not work for the business at all or had no federal income tax withheld from their paychecks.
Musgrow then would help the recipient file fraudulent federal income tax returns that utilized the bogus Forms W-2 to generate a tax refund to which the recipient was not entitled.
In total, Musgrow issued at least 87 fraudulent IRS Forms W-2 and assisted in the filing of at least 87 false income tax returns. The returns requested a total of $2,769,600 in tax refunds and the IRS paid out $2,136,630 of the requested refunds.
Separately, during the spring of 2020, Congress created federal programs to provide financial assistance to Americans suffering economic harm because of the COVID-19 pandemic.
From March 2020 to August 2020, Musgrow submitted 14 false and fraudulent applications to the United States Small Business Administration (SBA) and banks for Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
In these applications, Musgrow made false statements including the number of employees to whom were paid wages, falsely certifying that the loan proceeds would be used for permissible business purposes, and in some cases, that the businesses were legitimate when, in fact, they were not operating in any fashion and had no employees whatsoever.
In total, Musgrow submitted 14 fraudulent loan applications which requested more than $1.9 million. Relying on Musgrow’s false information, the SBA and lenders approved and funded many of the loans. Musgrow obtained approximately $970,000 in fraudulent proceeds.
United States District Judge Kenly Kiya Kato scheduled a January 16, 2025, sentencing hearing, at which time Musgrow will face a statutory maximum sentence of 20 years in federal prison for the wire fraud count and three years in federal prison for the tax fraud count.
IRS Criminal Investigation is investigating this matter. Assistant United States Attorney Benjamin J. Weir of the Riverside Branch Office prosecuted this case.
