Two sentenced in Knox County tax-fraud case

A federal judge has handed down prison sentences for two women who took part in a tax-fraud conspiracy that operated from a Knox County pawn shop.

Patsy Carnes was sentenced to one year and 10 months in prison on Tuesday and Dianna Hill to one year and four months, according to a release from the U.S. Department of Justice.

U.S. District Judge Amul R. Thapar also ordered the two to be jointly liable for $222,652 in restitution to the Internal Revenue Service.

Carnes and Hill and brothers Brian and Billy Ray Hamilton were charged in a conspiracy to file fraudulent tax returns in 2011 and 2012. The four worked at the Bailey Switch Pawn Shop.

The Hamilton brothers filed the returns using personal information from pawn-shop customers and others, according to court documents.

They have pleaded guilty but have not been sentenced. The most serious charge against them carries a top sentence of 20 years.

Carnes obtained identifying information from people to use in the returns and gave it to the Hamiltons. She also opened bank accounts to receive refunds and took money from the accounts to give to people taking part in the scheme, according to court records.

Prosecutors said in a sentencing memorandum that Carnes demanded personal information from customers, debtors, drug addicts and others to advance the conspiracy.

“Carnes preyed on weak members of her community, and used their personal identifying information to manipulate the honor code of the United States tax system in order to collect a significant amount of money,” Assistant U.S. Attorneys Neeraj K. Gupta and Abigail Burger Chingos said in the memo.

As to Hill, she obtained information such as Social Security numbers from a contact at the local food-stamp office and sold the information to others in the conspiracy for $230 per individual, according to a sentencing memo.

Some people did not know fake returns would be filed using their information, but some did. Some witnesses said they took part because of drug addiction, according to court records.