Tax Preparation Scam Targeting Veterans and Active Duty Members Steals $4.8M

A Tax Service company has reportedly been scamming Navy veterans.

Located just outside the gates of the San Diego Naval Base, the “Go Navy Tax Services” had been reaching out to veterans for the past year with the promise of helping them with their finances and taxes. No catches…everything is free!

Many have seen sailors and veterans come into the office filled with Navy flags and memorabilia, so most would leave any suspicions they had at the door. They were then invited to their “free tax preparation” seminar, where they would get to meet their “certified accountants.” Okay, so that sounds legit too, what happens is the accountants would push (most of the time, forcefully) for retirees to open accounts with them. During the process, veterans were also asked for personal information via their forms and would even ask them to sign paperwork (that was not fully explained to them).

This is the scam that Paul Flanagan and his associates run at this establishment.

Nearly 5,000 veteran applications from on-duty sailors and Marines were reported, but some of them didn’t open the so-called “retirement account.” Instead, they were sold life insurance policies without their knowledge. The paperwork also included a fine line that allowed Go Navy Tax Services to withdraw from sailors’ bank accounts.

“The victims of this scam were Navy sailors serving our country and were tricked into signing up for something they didn’t need and couldn’t afford,” said San Diego County District Attorney Summer Stephan.

This gave Flanagan and his “co-conspirators” access to more than $2 million in “commissions” for over a decade in their scam. Overall, veterans reportedly lost about $4.8 million.

“Service members have given so much to our country,” Xavier Becerra, then the California attorney general, said in a statement after Flanagan and his associates were indicted on 69 counts of conspiracy to commit fraud, forgery, identity theft, and grand theft, among other things, in 2019. “They should not have to worry about being targeted and taken advantage of by malicious scammers.”

Thankfully, law enforcement finally shut down Flanagan’s scheme, and he is now sentenced to 357 days of house arrest following his plea to the felony charges.

California Attorney General Rob Bonta said, “Our military service members and their families contribute so much to our nation — yet there are people without honor who want to cheat our American heroes. We hope that today’s announcement helps right the wrongs that were committed by the malicious scammers of Go Navy Tax.”

Vulnerability in the Veteran Community

According to a research by AARP, veterans have to be extra wary of fraudulent invitations, especially ones that promise tax “heaven,” financial management, and life insurances. There are also other types of cons like bogus travel deals, lottery, special discounts and more where con-people would ask for sensitive personal information that would give them access to veterans’ bank accounts.

Because of this, veterans are more likely to lose their money to scams than civilians.

“Thirty-five percent of service members and veterans lost money to a scam, compared to 25 percent of civilians surveyed. The largest number of military respondents fell victim to grandparent impostor scams, followed by tech support fraud, IRS impostors, fake offers to fix a low credit rating, credit card fraud and phishing emails seeking personal information.”

Veterans are reportedly “easier” to target because of that innate camaraderie with fellow retirees, making them more vulnerable to impostors claiming to have served in the military.

“Veterans can be viewed as easy targets by scammers due to the veterans’ sense of giving back to other fellow veterans,” says Troy Broussard, a Desert Storm veteran and senior adviser of AARP’s Veterans & Military Families Initiative. “This has led to fake veteran charities or causes being [among] the highest scams reported by veteran victims.”

These con artists would reportedly study veterans at large and create personas that would easily relate to them. According to the US Postal Inspection Service, con artists would use emotional manipulations specifically targeted at veterans as well. Some tell-tale signs would be someone using military jargon (like, “Please sign this DD Form 214”) or citing where they were stationed and what year. They would be really specific.

“Scammers know that veterans share a special bond of service,” says Daniel Brubaker, the Postal Inspection Service’s inspector in charge and a Marine Corps veteran. “They also know that veterans and military families get special benefits, and thus, they know how to craft a scam to be as effective as possible to get veterans to let their guard down and open their wallets.”

To avoid these types of heinous scams, AARP recommends signing up for the National Do Not Call Registry and using a call-blocking service. When in doubt, veterans can also reach out to AARP via email [email protected].

Veterans can also read AARP’s latest Watchdog Alert Handbook: Veteran’s Edition here.

Active Duty members needing tax help should go to the Department of Defence website with its own section about service members paying their taxes. You can access MilitaryOneSource here.