As prosecutors tell it, Patricia Fountain was more than a run-of-the-mill tax cheat.
She was a tax cheat who used her standing as a longtime IRS employee to find and exploit an agency soft spot, then recruited others and helped them fraudulently claim hundreds of thousands of dollars in bogus refunds, they say.
Fountain claimed a cut of every one and punished those slow to pay, Assistant U.S. Attorney Joseph J. Khan said as her trial opened Monday.
"The records don't lie," Khan told jurors.
Witnesses do, Fountain's lawyer noted.
The lawyer, Michael Engel, said the government's case was built on admitted tax frauds who had turned his client, a former "top-notch" IRS worker, into an undeserving scapegoat.
At least two cooperating witnesses are expected to testify in hope of getting a break in their own cases, Engel said. Other witnesses admitted tax frauds but were never charged.
"Despite their wrongdoing, despite their criminal conduct, they're getting a free pass," Engel said. "What did they have to do? Point the finger at Ms. Fountain."
Fountain, 35, faces charges of conspiracy, extortion, and filing false returns. On trial with her are her boyfriend, Larry Ishmael, 40, and Calvin Johnson Jr., who prosecutors say recruited filers for the scheme. The trial before U.S. District Judge Stewart Dalzell is expected to last less than two weeks.
Fountain had been at the IRS nearly a decade and was earning more than $50,000 a year as a service representative when she began having "financial problems," Khan said. Her solution: the Telephone Excise Tax Refund.
In 2006, the IRS gave refunds to consumers who had been overtaxed for phone service. The typical homeowner got a credit or refund of $30 to $60, Special Agent Cheryl Tinkham of the Treasury Inspector General for Tax Administration told jurors.
Fountain took that credit, but then tried what Khan called "an experiment" that set her scheme in motion. She concluded there was a threshold amount - about $1,500 - that would trigger IRS suspicions about a claim. So she filed an amended return for a telephone tax refund of $1,379, the amount due to someone whose typical monthly phone bill was $1,000.
The IRS sent her a check, no questions asked.
Fountain and Ishmael allegedly began recruiting others to file forms seeking the refunds under the trigger amount. None had to submit actual phone bills, just names and identifying information.
Then they used the same scheme to fraudulently cash in on other credits, including the First Time Homebuyer Credit and the American Opportunity Credit, an education-related reimbursement, prosecutors say.
Fountain found willing participants through her hairdresser at a North Philadelphia salon, Headz R Us, while Ishmael lined up his friend, Johnson, and others from their West Philadelphia neighborhood, prosecutors say.
And when her cut wasn't paid "or paid quickly enough" by her straw filers, Khan said, Fountain turned vindictive, filing forms in which they purported to renounce their credit claims, prompting the IRS to send them letters demanding they return the money.
The fraud unraveled when one of the undeserving filers called the IRS and complained that Fountain had taken her money, Tinkham told jurors. That led investigators to the hair salon and a list of others in the scheme.
Prosecutors have not said how much money Fountain allegedly netted, though they say it was enough for her and Ishmael to buy a Mercedes-Benz.
Her lawyer said that was a bit of hyperbole. "It was a used car," Engel said.
