Los Angeles Area Man Pleads Guilty to Fraudulently Seeking Millions of Dollars in COVID Related Tax Credits for Nonexistent Business

LOS ANGELES - A Los Angeles-area man pleaded guilty today a federal felony charge and admitted to seeking more than $65 million from the IRS by falsely claiming on tax returns that his nonexistent farming business was entitled to COVID-19-related tax credits.

Kevin J. Gregory, 57, pleaded guilty to one count of making false claims to the IRS. Gregory has been in federal custody since May 2023.

In response to the COVID-19 pandemic and its economic impact, Congress authorized an employee retention tax credit that a small business could use to reduce the employment tax it owed to the IRS, also known as the "employee retention credit."

To qualify, the business had to have been in operation in 2020 and to have experienced at least a partial suspension of its operations because of a government order related to COVID-19 (for example, an order limiting commerce, group meetings or travel) or a significant decline in profits. The credit was an amount equal to a set percentage of the wages that the business paid to its employees during the relevant time period, subject to a maximum amount.

Congress also authorized the IRS to give a credit against employment taxes to reimburse businesses for the wages paid to employees who were on sick or family leave and could not work because of COVID-19. This "paid sick and family leave credit" was equal to the wages the business paid the employees during the sick or family leave, also subject to a maximum amount.

According to his plea agreement, from November 2020 to April 2022, Gregory made false claims to the IRS for the payment of nearly $65.4 million in tax refunds for a purported Beverly Hills-based farming-and-transportation company named Elijah USA Farm Holdings.

The IRS issued a portion of the refunds Gregory claimed, and Gregory used that portion - more than $2.7 million - for personal expenses.

Specifically, in January 2022, Gregory made a false claim to the IRS for the payment of a tax refund in the amount of $23,877,620, which he submitted as part of Elijah Farm's quarterly federal tax return. Gregory claimed Elijah Farm employed 33 people, paid nearly $1.6 million in quarterly wages, had deposited nearly $18 million in federal taxes, and was entitled to nearly $6.5 million in COVID-relief tax credits.

In fact, Gregory knew that Elijah Farm employed nobody and paid wages to no one and had not made federal tax deposits to the IRS in the amounts stated on his tax return.

United States District Judge Josephine L. Staton scheduled a May 16 sentencing hearing, at which time Gregory will face a statutory maximum sentence of five years in federal prison.

IRS Criminal Investigation investigated this matter.

Assistant United States Attorney Valerie L. Makarewicz of the Major Frauds Section is prosecuting this case.

On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Department of Justice in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The Task Force bolsters efforts to investigate and prosecute the most culpable domestic and international criminal actors and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. More information on the Justice Department's response to the pandemic may be found here.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it to the Department of Justice's National Center for Disaster Fraud (NCDF) Hotline at (866) 720-5721 or via the NCDF online complaint form.

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