Two Buffalo IRS employees recently resigned after authorities began investigating a scheme that involved cashing more than $25,000 in bogus tax refund checks sent to dead people, officials said Thursday.
Authorities believe the former Internal Revenue Service employees may have obtained the money by filing bogus tax returns in the names of deceased taxpayers and then collecting and cashing the refund checks.
No charges have been filed, but the allegations are under investigation by the IRS Inspection Service and the U.S. attorney's office. Authorities said the probe prompted the employees to leave their jobs as customer service representatives at the IRS office in AppleTree Business Park in Cheektowaga.
"The employees resigned in August. They are aware of the investigation, and it is my understanding they hired a lawyer," one law enforcement official said. "The investigation is continuing."
News of the probe comes a week after the nation was shocked by a series of horror stories during Senate hearings on misconduct by some IRS employees.
Charles W. Peterson, Buffalo district director of the IRS, would confirm only that the two employees -- a man and a woman -- have left the agency.
"They have resigned, and it isn't a closed issue at this time," Peterson said Thursday. "We would need release forms from them in order to discuss it (publicly) any further."
Assistant U.S. Attorney Kathleen Mehltretter, chief of criminal prosecutions in Buffalo, also declined to comment on the case. An IRS labor representative, Joseph Dagonese, steward for Chapter 58 of the National Treasury Employees Union, said he was aware of the resignations but could not speculate on what prompted them.
"I can't say anything," Dagonese said.
Other sources, however, confirmed that the IRS Inspection Service, which investigates allegations of misconduct by agency employees, has been examining the case for weeks. More recently, a federal prosecutor began looking for possible criminal violations.
During a brief interview, the woman who resigned declined to discuss the allegations. She said she left her job because she recently had a baby. She declined to comment further. The man who resigned could not be reached to comment.
Sources said the scheme was uncovered during an in-house investigation by the IRS, but they declined to be more specific.
Law enforcement officials said criminal investigations of IRS workers are rare in Western New York. But Laurie Ruffino, IRS spokesman, said the agency has let two workers go and disciplined 16 others this year for unauthorized "snooping" into tax records. The two who were let go were not the two who resigned in August.
According to Peterson, the widely reported misconduct horror stories that surfaced in Washington last week are not representative of IRS employees, particularly the 1,400 who work in the Buffalo district.
"In this business, I wouldn't expect to get a lot of complimentary letters about the work of our employees," Peterson said. "But in this district, I actually get more complimentary letters than complaints about our employees."
Peterson, however, added that the Washington hearings have prompted him and other directors to take a close look at how the agency conducts business.
"I would never say we have no problems. We have isolated problems, some of which have lingered on for too long," he said. "I think we do a good job in the Buffalo area. One thing we are doing is to go back and review all the correspondence we've received over the last three months, including complaint letters, to see if there are any trends, any problems that need to be addressed."