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BABETTE'S FEAST, BABETTE'S FELONY

April 03, 2006

Like a great meal, Babette Davis's tax-fraud scheme was wonderful while it lasted. But like a cheesecake and cocktail dessert buffet, it had unfortunate consequences.

Ms. Davis was convicted of dummying-up W-2 forms and using them to file for fraudulent tax refunds for her Milwaukee-area friends:

At first, the participants provided Davis with their W-2 Forms, which Davis then altered. As the fraud progressed over time, Davis began to use blank W-2 Forms. She supplied the participants with wage and withholding amounts as well as personal information for made-up dependants. Davis suggested to participants that they file their tax returns at particular H&R Block locations. The participants usually filed their returns electronically and then applied for refund anticipation loans from H&R Block. While awaiting the loan disbursements, Davis maintained a watchful eye, sometimes calling H&R Block to learn the loans' status, and also accompanying participants to pick up the loan checks and cash them.

As the mastermind, Davis took a portion of the funds as a fee for her "services," ranging from $500 up to half the value of the refund. Davis was also a participant in the fraud, having filed false claims on her own tax returns for 1997 and 1998.

The IRS started sniffing around, as could be expected. They learned that the ringleader was known as "Miss T." When they asked Ms. Davis about Ms. T, she tried to throw the dogs off the trail by pointing the finger at one "Michael Wimpy." This worked for awhile, as the agents spent some time figuring out that there really was a Michael Wimpy, but he was dying of AIDS in Minnesota while the fraud took place. So they came back after Ms. Davis, and eventually she was convicted and sentenced to 41 months behind bars.

Ms. Davis didn't much care for the sentence, so she appealed it to the 7th Circuit Court of Appeals. She said not only should she not have gotten extra time added for obstructing justice, but in fact should have her sentence reduced for "accepting responsibility." The appeals court ruled that blaming a dead man was a funny way of accepting responsibility.

Cite: United States v. Babette Davis, No. 05-2489 (3-30-2005, CA-7)

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