Palm Springs Man Scammed Federal Government Out Of $3 Million: USAO

RIVERSIDE, CA — A Riverside County man is facing up to 23 years in federal prison after he scammed the U.S. government out of over $3 million.

William Mandel Musgrow, 48, of Palm Springs pleaded guilty Thursday in federal court to one count of wire fraud and one count of aiding and assisting in the preparation of a false tax return.

The IRS investigation amid the COVID-19 pandemic. According to an announcement from the U.S. Attorney's Office, Musgrow used one of his business entities to issue fraudulent W-2 forms. The forms falsely represented to the IRS that those named on them were employed by Musgrove’s various businesses, had received wages, and had federal tax withheld from their paychecks.

The W-2s either overstated income "or were wholly fraudulent as the recipient either did not work for the business at all or had no federal income tax withheld from their paychecks," the U.S. Attorney's Office said.

In total, Musgrow issued at least 87 fraudulent W-2s and assisted in the filing of at least 87 false income tax returns. The scheme represented $2,769,600 in tax refunds, and the IRS paid out $2,136,630 of the requested refunds, according to the U.S. Attorney's Office.

Separately, during the spring of 2020, Congress created federal programs to provide financial assistance to Americans suffering economic harm amid the COVID-19 pandemic. From March 2020 to August 2020, Musgrow submitted 14 false and fraudulent applications to the U.S. Small Business Administration and to banks for funding via the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans.

In his applications, Musgrow made false statements, including the number of employees to whom he paid wages, falsely certifying that the loan proceeds would be used for permissible business purposes, and in some cases, that the businesses were legitimate when, in fact, they were not operating in any fashion and had no employees whatsoever, according to the U.S. Attorney's Office.

In his COVID-19 relief applications, Musgrow requested more than $1.9 million. Relying on Musgrow’s false information, the SBA and lenders approved and funded many of the loans, totaling approximately $970,000.

U.S. District Judge Kenly Kiya Kato scheduled a January 16 sentencing hearing, at which time Musgrow will face a statutory maximum sentence of 20 years in federal prison for the wire fraud count and three years in federal prison for the tax fraud count.