South Georgia Residents Sentenced in $5 Million Dollar Diesel Fuel Tax Credit Scheme

Maxwell Wood, United States Attorney for the Middle District of Georgia, announced that the final four defendants involved in an eleven person scheme to defraud the Internal Revenue Service were sentenced February 26, 2009 before the Honorable W. Louis Sands in U.S. District Court in Albany, Georgia. Clinton Hughes, Pamela Hughes, Robin Bennett and Rodger Bennett were all sentenced for their participation in a fraud scheme involving the filing of fraudulent claims for refund based on fictitious diesel fuel tax credits.

Sole proprietors and businesses who purchase diesel fuel on which federal excise taxes have already been paid (known as “undyed fuel”), and then use that fuel in off-highway business equipment, qualify for a tax credit (or reimbursement) for the excise taxes paid. The claims for refund in this investigation were fraudulent because the defendants did not purchase, nor did they use, the undyed fuel in their off-highway business equipment. The scheme was lead by Clinton “Basil” Hughes and Patricia Hughes, who prepared the tax returns which contained the false claims to the Internal Revenue Service beginning in 1998 through 2003. Hughes allowed the co-conspirators, all of whom claimed to be associated with the logging industry, to supply Hughes with false fuel invoices and driving logs to document the fuel that was either never purchased or was never used in the reported businesses. Defendants Rodger and Robin Bennett, owners of B Tree Service & Stump Removal, participated in the scheme by claiming fuel tax credits for fictitious businesses called B Logging and B&B Forestry & Chipping. The total amount of fraudulent claims in the scheme was approximately $5,190,000.00. The Internal Revenue Service issued $4,779,073.00 in refunds to the co-conspirators before the scheme was uncovered.

After entering a plea of guilty to conspiracy to file false claims with the government Clinton Hughes was sentenced to 48 months in prison, and ordered to pay restitution to the Internal Revenue Service of $3,969,831.73

After entering a plea of guilty to conspiracy to file false claims with the government Pamela Hughes was sentenced to 33 months in prison, and ordered to pay restitution in the amount of $3,969,831.73

After entering a plea of guilty to conspiracy to file false claims with the government, and filing false tax returns with the Internal Revenue Service for the years 2001, 2002, and 2003 Rodger Bennett was sentenced to 12 months in prison, and ordered to pay restitution to the Internal Revenue Service of $219,459.87.

After entering a plea of guilty to conspiracy to file false claims with the government, and filing false tax returns with the Internal Revenue Service for the years 2001, 2002, and 2003 Robin Bennett was sentenced to 12 months in prison, and ordered to pay restitution to the Internal Revenue Service of $219,459.87.

According to Reginael D. McDaniel, Special Agent In Charge, IRS Criminal Investigation, Atlanta Field Office, “The object of this scheme was to defraud the government and the taxpaying public. The message this case sends is that participation in refund fraud schemes does not pay and those who do participate will be prosecuted.”

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