LOS ANGELES – A Hollywood man has been arrested and is scheduled to be arraigned this afternoon on federal charges alleging he sought more than $65 million from the IRS by falsely claiming on tax returns that his nonexistent farming business was entitled to COVID-19-related tax credits.
Kevin J. Gregory, 55, who is charged in a federal grand jury indictment with 17 counts of making false claims to the IRS, was arrested Thursday morning by special agents with IRS Criminal Investigation.
In response to the COVID-19 pandemic and its economic impact, Congress authorized an employee retention tax credit that a small business could use to reduce the employment tax it owed to the IRS, also known as the “employee retention credit.”
To qualify, the business had to have been in operation in 2020 and to have experienced at least a partial suspension of its operations because of a government order related to COVID-19 (for example, an order limiting commerce, group meetings or travel) or a significant decline in profits. The credit was an amount equal to a set percentage of the wages that the business paid to its employees during the relevant time period, subject to a maximum amount.
Congress also authorized the IRS to give a credit against employment taxes to reimburse businesses for the wages paid to employees who were on sick or family leave and could not work because of COVID-19. This “paid sick and family leave credit” was equal to the wages the business paid the employees during the sick or family leave, also subject to a maximum amount.
According to the indictment that was returned on May 11 and unsealed today, from November 2020 to April 2022, Gregory made false claims to the IRS for the payment of nearly $65.4 million in tax refunds for a purported Beverly Hills-based farming-and-transportation company named Elijah USA Farm Holdings.
The IRS issued a portion of the refunds Gregory claimed, and Gregory allegedly used that portion – more than $2.7 million – for personal expenses.
An indictment contains allegations that a defendant committed a crime. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
If convicted, Gregory would face a statutory maximum sentence of five years in federal prison for each false claims charge.
IRS Criminal Investigation is investigating this matter.
Assistant United States Attorneys Valerie L. Makarewicz and Gregory D. Bernstein of the Major Frauds Section are prosecuting this case.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at (866) 720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
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