Fraudster Scams $2.1 Million Tax Refund, Goes on Spending Spree

Fraud Turbo TaxA Salem, Ore., woman who filed a fraudulent tax return and received a $2.1 million refund has been arrested following a wild spending spree.

Krystle Marie Reyes, 25, falsely claimed $3 million in income when filing her 2011 return using the program TurboTax, according to an affidavit obtained by The Oregonian. TurboTax then issued Reyes a prepaid Visa (V) debit card with the full seven-figure refund sum after the state approved her claim.

Reyes was only caught after she reported the card lost. The total bill for her post-fraud splurges came to more than $200,000, according to The New York Daily News.

The Oregonian reports that Reyes "apparently was caught on surveillance video using the card to make purchases at a number of Marion county businesses." She is said to have signed her own name for several transactions and given her actual address.

Reyes's fraud was finally uncovered on May 7. She was arrested on Wednesday and charged with computer crime and aggravated theft.

This massive swindle calls attention to a state Department of Revenue that was already perceived as troubled. Outside audits and an internal report concluded that "the state could do much more to identity and collect taxes owed," wrote The Oregonian; legislators have demanded that agency executives demonstrate increases in effectiveness and efficiency.

But the department is hobbled by a lack of up-to-date equipment: It currently processes around $7 billion in tax returns annually, using computer systems designed in the 1980s. A planned $100 million upgrade -- which would reportedly have paid for itself by catching tax evaders -- was canceled in January.

According to The Daily Mail, "Revenue officials estimate that, in 2006, Oregon's personal income tax compliance rate was 81.5 percent -- far lower than other states." That figure translates into "$1.2 billion in unreported or uncollected taxes that year."

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