Accounting majors try their hand at investigating tax fraud

“Special tax agents” Jose Garcia and Demetrios Psarofagis – whose day jobs are studying accounting at UConn’s School of Business – recently found themselves across a table from Chris Shots, owner of Cheaters Bar, who was trying to sell them his business for $3.2 million.

Shots was detailing how he pocketed $1,000 a night from his cash-only bar and was still able to file annual tax returns showing gross profits in excess of $1.1 million.

What the bar owner didn’t know was that an hour earlier, an informant ratted on his defrauding ways to his would-be buyers, the two students playing the role of undercover tax agents.

As the conversation progressed, Garcia and Psarofagis deftly teased out of Shots that he owed taxes, that he had failed to report all his income, and that his plan to defraud the government was intentional – all elements the “agents” would need in order to take the case to trial.

Cracking crimes with accounting? Not everyone at the Internal Revenue Service (IRS) has a desk job.

Some special agents from the Criminal Investigation Division of the IRS have more in common with famous FBI agent Elliot Ness than with regular accountants.

Just as Agent Ness caught the notorious mobster Al Capone on tax evasion charges, the special IRS agents – known as certified forensic examiners – use a combination of high-tech resources and old-fashioned sleuthing to investigate tax fraud in order to catch cheats, drug dealers, money launderers, and terrorist financiers.

That’s what the IRS was trying to demonstrate to 25 UConn accounting students last week, by hosting a mock fraud investigation of several crime scene scenarios using teams of accounting students to try and solve the crimes.

The program, known as the Adrian Project, teaches accounting students the investigative techniques of an agent, said JoAnn Zuniga, head of the IRS Criminal Investigation Boston Field Office.

The agency’s Criminal Investigation Division has more than 100 special agents located in the Northeast investigating not only tax crimes, but also money laundering and financial reporting crimes, she said.

“Today[’s event] gives these students the opportunity to begin to think like a special agent,” Zuniga said.

“They need to be creative in asking questions that will make an investigation progress, and creative in deciding what needs to be done to complete an investigation.”

This is the first time the IRS has hosted the event in Connecticut, said Cliff Nelson, assistant professor of accounting.

Since the scenarios were designed to draw on the students’ accounting knowledge, training, and logic to solve the cases, all the participants were accounting majors in their junior or senior year.

“The program gives students a great opportunity to learn what a fraud investigator does,” Nelson said.

“It also gives them a chance to take charge in a simulated situation.”