VA manager stole disabled vet data to create fraudulent tax returns

A federal jury in Wilmington, N.C., on Tuesday convicted Michael Ray Woods, a former Veterans Affairs Department employee, of stealing the identities of disabled veterans to create fraudulent tax returns.

Woods, a data warehouse manager for VA, was charged in a January 2010 indictment with using the names and Social Security numbers of several individuals, including patients in VA hospitals, to create fake tax returns from 2003 to 2006 through a company he owned, M&R Computer Consulting and Tax, in Fayetteville, N.C.

George E.B. Holding, U.S. attorney for the Eastern District of North Carolina in Raleigh, said Woods worked for Veterans Affairs as a telecommuter from his home in Fayetteville and transferred large amounts of patient data from VA hospitals in North Carolina and Virginia to a data warehouse computer in Richmond, Va.

Woods prepared as many as 800 tax returns a year for his clients and boosted the value of refunds by having clients claim disabled veterans as fake dependents. He obtained the veterans' names, Social Security numbers and dates of birth through his job with VA.

Holding said Woods chose the identities of disabled veterans for his scheme because they were less likely to have taxable income.

VA did not respond to queries from Nextgov regarding the number of telecommuters with access to the kind of data Woods had, or what steps the agency has taken to prevent identity theft by VA employees, particularly those working remotely.

Woods profited from the scam by taking fees out of the fraudulent refunds, and also by demanding $500 cash payments from clients for the use of fake dependents, Holding said.

Woods also increased the amount of refunds for his clients by including false claims for education credits and business expenses. Holding estimated Woods was taking in as much as $150,000 a year in fees he charged clients.

Woods "committed a shocking abuse of trust," Holding said. He could face more than 250 years in prison at his sentencing in May, based on a formula Holding provided.