Bogus Financial Consultant Is Sentenced to 6 Years in Prison for Defrauding IRS

A Hawthorne man who made a living defrauding the IRS was sentenced to six years in federal prison Monday.

Posing as a tax preparer and financial assistance consultant, John Shelby Watts, 41, targeted single, low-income women living in cities including Compton and South Gate, prosecutors said.

Watts filed about 90 fraudulent tax returns to the IRS in 1998. He sought more than $156,000 in refunds and received more than $56,000 before being caught.

“There were numerous returns going to either one particular address or P.O. box,” said Gary Tang, an IRS spokesman. “That’s how . . . we generally uncover them.”

To recruit clients, Watts would stand outside grocery stores or find them through friends. He also founded a now-defunct agency called A Better Child Foundation, in the guise of distributing uniforms to needy children, authorities said.

In 1997, he approached the Los Angeles Unified School District and asked to distribute applications. Parents who returned the forms, which sought Social Security numbers and information about dependents, were contacted by Watts and offered financial assistance.

For those who accepted his offer, Watts filed returns that claimed Earned Income Tax Credits. Assistant U.S. Atty. Tracy Wilkison said Watts arranged for the returns to be sent to one of three addresses. The parents would cash the checks and give him either half or more than half of the amount received. No one else is being investigated in this case, she said.