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United States v. Powell

November 1, 2007

UNITED STATES OF AMERICA, PLAINTIFF,
v.
MARY LEE POWELL, DOING BUSINESS AS MP ENTERPRISES OR MLP ENTERPRISES, DEFENDANT.



The opinion of the court was delivered by: Reagan, District Judge

ORDER GRANTING DEFAULT JUDGMENT AND PERMANENT INJUNCTION AGAINST MARY LEE POWELL

A. Introduction

On July 5, 2007, the United States of America ("the Government") filed suit in this Court against Mary Lee Powell, seeking a permanent injunction under Sections 7402, 7407 and 7408 of the Internal Revenue Code (26 U.S.C. or "IRC"). Specifically, the Government sought to permanently bar Powell from preparing income tax returns for others.

Properly served, Powell failed to appear herein, and the Clerk of Court made an entry of default against her on September 4, 2007, under Federal Rule of Civil Procedure 55(a)(see Doc. 6). Three weeks later, the Government moved for default judgment under Federal Rule of Civil Procedure 55(b). The undersigned Judge set a deadline for any response or objection to that motion -- 5:00 pm on October 17, 2007 -- and directed the Government to serve a copy of the Order imposing that deadline on Powell by October 7, 2007 (see Doc. 9). The Government complied with that obligation and filed a proof of service via Affidavit on October 30, 2007 (see Doc. 10).

Thus, Powell was served with the complaint, failed to move, answer or otherwise respond to it, was served with the default judgment motion and Order setting deadlines for objecting to that motion, and failed to timely object thereto. Having reviewed the record in this case, the Court GRANTS the motion for default judgment (Doc. 7), MAKES the following findings of fact and conclusions of law, and ENTERS a permanent injunction against Mary Lee Powell.

B. Findings of Fact

Enjoying jurisdiction over the parties and subject matter of this case, the Court FINDS as follows.

Within the Southern District of Illinois, Mary Lee Powell engaged in conduct subject to penalty under IRC§§ 6694, 6695, and/or 6701 and engaged in conduct that interferes with the proper administration of internal revenue laws.

"POWELL'S BUSINESS

Powell started preparing federal income tax returns for customers in 1976, while employed at H & R Block. She prepared returns at H & R Block for one year. After leaving H & R Block, Powell prepared returns for others using the business names MP Enterprises or MLP Enterprises. Powell last received tax training from H & R Block in 1997, but she received updates from the tax-preparation computer software company she uses.

Powell prepared at least 1,039 federal income tax returns from 2003 through 2006. As of December 15, 2006, Powell had prepared 274 Form 1040 tax returns for the 2006 processing year (2005 tax year).

Powell's customers are primarily wage-earners and small-business owners who rely on Powell's purported expertise on income tax matters.

Powell prepares returns from her home in East Saint Louis, Illinois.

Powell prepares returns that unlawfully understate her customers' tax liability by: fabricating or inflating deductions on Schedule A, "Itemized Deductions," Schedule C, "Profit or Loss from Business," and Schedule E, "Supplemental Income and Loss"; improperly claiming head-of-household filing status on separate returns for married couples; improperly claiming education tax credits or expenses; and improperly claiming dependents to generate larger Earned Income Tax Credits.

Powell encourages and assists her customers in applying for Refund Anticipation Loans ("RAL"s), through HSBC Bank USA and HSBC Taxpayer Financial Services. The RALs are accelerated refunds from which Powell's preparation fees, filing fees, refund account establishment fees, transmitter fees, document-preparation fees, and bank finance charges are automatically deducted.

Powell generates new business through word of mouth as she gains a reputation for being able to generate larger tax refunds than other preparers.

As a direct result of Powell's fraudulent return preparation, her customers have filed federal income tax returns understating their federal income tax liabilities and claiming large income tax refunds to which they were not entitled.

"THE IRSINVESTIGATION

The IRS has examined 109 returns that Powell prepared between 2004 and 2006. The examination revealed that all 109 returns understated the customer's tax liability. The average understatement on the examined returns was $2,794.

Powell prepared the 109 examined returns for a total of 57 customers. Forty-six of those customers (representing 91 of the 109 returns ...


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