Marion County Sheriff via AP
Krystle Marie Reyes, 25, is accused of tax evasion, theft, computer crime and methamphetamine possession.
PORTLAND, Ore. -- An Oregon woman was charged Wednesday with duping the state into giving her a $2.1 million tax refund that allowed her to go on a short-lived spending spree — an alleged scam that has prompted embarrassed state revenue officials to review how they process tax returns.
Krystle Reyes, 25, of Salem, filed an electronic return in January via Turbo Tax, reporting erroneous earnings of $3 million, authorities said. Her request for a $2.1 million refund was initially red-flagged by an automated system, but a subsequent manual review by Oregon revenue department workers OK'd the refund. Turbo Tax then loaded the full amount onto a debit card for Reyes.
Authorities say she spent $150,000 of the funds before reporting the card lost or stolen, at which point the ruse was discovered. The state has recovered roughly $1.9 million of the funds.
Reyes was arrested June 6, and now faces eight felony charges. In addition to tax evasion and theft charges, she is accused of computer crime and methamphetamine possession. She is scheduled to be arraigned on July 5.
Attempts by The Associated Press to reach Reyes, who is no longer in custody, have been unsuccessful and it was not clear if she has an attorney. Officials also have not released the allegedly falsified tax return because of confidentiality laws pertaining to tax matters.
Andrew Campbell, a senior assistant attorney general who filed the charges, has not responded to AP's requests for interviews.
A list of what Reyes purchased during the spending spree has not been provided, but police said video surveillance showed her swiping the debit card at various stores in the Salem area. Despite being a millionaire for a few months, Reyes paid $2,000 cash to buy a 1999 Dodge Caravan, the vehicle she had been seen driving in the month before her arrest.
The Revenue Department, which processes $7 billion in tax returns, is understaffed because of budget cuts and has an old computer system. But agency spokesman Derrick Gasperini said neither of those issues was to blame for what he described as a "human error."
The agency plans to release more details about its apparent blunder in the coming days, and how it plans to prevent a recurrence. There has been no evidence linking Reyes to anyone inside the agency, but officials want to make sure its internal controls limit the possibility of collusion.
"Catching this one, we all are concerned — here at the agency as well as the public — about 'is this part of a larger scheme, and who's involved in that larger scheme and does it involve anyone inside our walls?" Gasperini said.
State Sen. Ginny Burdick, D-Portland, the chairwoman of the Senate Revenue and Finance Committee, has said she plans to hold a hearing on the matter this summer.
"I'm not on a witch hunt, but I'm just very, very concerned that something this flagrant could have gotten through the process," she said. "We need to understand why it happened and what is going to be done differently."
State Rep. Vicki Berger, R-Salem, co-chair of the House Revenue Committee, told the Oregonian when Reyes was arrested that the revenue department "had some explaining to do."
"Is this is an anomaly? If so, let's make sure it never happens again," she said. "Or do we have a systematic problem in the way the Department of Revenue treats this and other transactions?"
Following the arrest, the agency reexamined the returns of 108 people who received a refund of at least $50,000 during the current processing season, and no new instances of fraud were uncovered.
According to the Oregonian, the state reported $559 million in delinquent taxes in 2010, primarily from unpaid personal and corporate income taxes.
The Associated Press contributed to this report.
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