Indictment Names 4 in Electronic Tax Fraud : Crime: It is the largest case so far involving 1991 returns. The claims cost the government about $500,000.

Three San Fernando Valley residents and a Crenshaw man were indicted Friday in the largest case of electronic tax fraud prosecuted this tax season, the U.S. attorney’s office said.

Named in the 42-count indictment were Lorence Hammond, 22, of Panorama City; Randy Slone, 32, of Van Nuys; Khamil Burkley, 20, of Pacoima, and Dwayne Donaldson, 27, of Crenshaw, Special Assistant U.S. Atty. Eric Lisann said.

Each was charged with conspiracy and varying counts of assisting in the filing of false tax claims.

The four are suspected of recruiting and helping as many as 200 people file for false 1991 income tax refunds that cost the federal government an estimated $500,000, according to a federal indictment.

Many of the 200 participants, who provided their names and Social Security numbers, were recruited from the San Fernando Valley and the downtown Los Angeles area, he said. The false returns typically claimed refunds of $2,000 to $3,000, and the 200 filers received a cut of the return.

Begun in 1988 for the 1987 tax year, electronic filing has been aggressively promoted by the Internal Revenue Service because it can process the returns quickly, but criminals also like the speedier returns, which can be processed in two or three days. IRS officials have said that filing bogus electronic tax returns is rapidly becoming the tax crime of the 1990s.

“Being a very large metropolitan city, Los Angeles appears to be a fertile ground for this kind of crime,” Lisann said. “There seems to be a history of it happening here.”

The indictment alleges that Hammond and Slone used names and Social Security numbers to create W-2 forms that contained false gross wages and tax withholding amounts, but listed real employers and their IRS-assigned employer identification numbers.

The businesses, ranging from small retail shops to large international manufacturers, were unaware of the scheme, Lisann said.

Burkley and Donaldson helped recruit people for the scheme, the indictment alleges.

Each count of conspiracy to obtain a false claim carries a maximum penalty of 10 years in prison and a $250,000 fine. The maximum penalty for each count of making a false claim is five years in prison and a fine of $250,000.

Whether each of the 200 filers will be individually prosecuted is up to IRS officials, the U.S. attorney’s office and U.S. Department of Justice, Lisann said.

Friday’s indictment stems from an investigation launched in January by the IRS criminal investigation unit, Lisann said. The investigation is ongoing and could lead to future indictments, he said.

The case in many ways mirrors a scenario played out last summer when eight people, including a Valley tax preparer, were indicted in a scam involving hundreds of people that defrauded the government out of more than $1 million.

Jerome Hearne, accused of masterminding the scheme, was sentenced in April to 15 years in prison and ordered to pay $300,000 in restitution fines. Seven other defendants were sentenced to shorter terms.