Carnell Ragan, a 59-year-old resident of Philadelphia, has been sentenced to three years in federal prison for his involvement in filing false tax forms related to the Employee Retention Credit (ERC). The sentence was handed down by Chief U.S. District Judge Colm F. Connolly. In addition to the prison term, Ragan is required to pay more than $1.6 million in restitution to the Internal Revenue Service.
The ERC was established by Congress as a financial relief measure during the COVID-19 pandemic, aimed at encouraging businesses to retain employees despite economic hardships. Initially, it offered a 50% credit on up to $10,000 in wages per employee for eligible businesses impacted by government shutdowns or significant revenue losses. By 2021, this credit increased to 70% per employee each quarter.
Court documents indicate that Ragan recruited over 20 individuals who owned business entities that did not qualify for the ERC because they were either non-operational or had no paid employees during the pandemic. Despite knowing these facts, Ragan used their information to file fraudulent IRS Forms 941, seeking over $20 million in credits. As a result of these filings, the IRS issued checks totaling more than $1.6 million—including over $800,000 to a Delaware-based business—that were not entitled to receive them.
U.S. Attorney Julianne E. Murray stated: “Ragan took advantage of pandemic relief funds that were intended to help those harmed most by the pandemic. He shamelessly enriched himself and his friends at the expense of the American taxpayer. My office and our law enforcement partners will continue to investigate and hold responsible all those who stole COVID-19 pandemic relief funds that were intended to help hard working Americans cope with the financial fallout from the pandemic.”
Yury Kruty, Special Agent in Charge of IRS Criminal Investigation’s Philadelphia Field Office, commented: “Today’s sentencing is a strong reminder that those who find ways to fraudulently benefit from government programs meant to help struggling businesses will be brought to justice,” said Yury Kruty, Special Agent in Charge, Philadelphia Field office, IRS Criminal Investigation. “Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable.”
The investigation was conducted by IRS-Criminal Investigation and prosecuted by Assistant U.S. Attorney Jesse S. Wenger.
Further details about this case can be found on the website of the U.S. Attorney’s Office for the District of Delaware and through public records on PACER under Case No. 25-CR-0009-CFC.
