Calif. tax preparer accused of ordering hit on 2

SAN DIEGO (AP) -- A former Internal Revenue Service agent whose tax preparation business catered to a wealthy clientele is accused of ordering at least two former customers killed as they prepared to testify against him on fraud charges.

Federal prosecutors say the assassination targets were key witnesses against Steven Martinez, 50, who was charged last year with stealing $11 million by reporting bogus tax returns for customers below their actual incomes and pocketing money from the discrepancies.

Martinez' limousine driver — Norman Russell Thellman, 64 — was charged Monday with conspiracy to tamper with witnesses. Prosecutors allege Martinez ordered him to deliver money to a hitman who was promised $100,000 for the two killings.

Martinez, an IRS agent from 1988 to 1992, did not enter a plea during his initial court appearance Monday on a charge of witness tampering. A federal magistrate judge ordered him held without bail.

"I find it almost impossible to believe," said David Demergian, his attorney.

Martinez faces a pretrial hearing March 19 on the fraud charges and was free on bail until his arrest last week. An FBI agent's affidavit says Martinez gave a former employee documents on four targets about two weeks ago, including photos of two key witnesses and of one target's condominium in the upscale La Jolla area of San Diego.

Martinez told the former employee to use two different pistols for the killings and suggested he get a silencer, according to the affidavit. The former employee contacted the FBI, which recorded a meeting Thursday in which Martinez allegedly gave additional instructions.

The targets were identified as Monique Siegel of La Jolla and Marianne Harmon, 86, of the wealthy suburb of Rancho Santa Fe.

The fraud complaint identifies victims only by their initials. One "M.H." had an income of $20.7 million in 2006 but Martinez filed a tax return for 42.1 million. One "M.S." earned $602,766 in 2005 but Martinez's return said the customer made $119,944.

Martinez allegedly told customers to deposit their taxes into one of his bank accounts, promising to forward the money to state and federal authorities. He stated lower income on his customers' tax returns without telling them, allowing him to pocket $11 million.

Demergian, his attorney, said the fraud case was "certainly very defensible."

Martinez, an IRS agent from 1988 to 1992, ran a small tax preparation in San Diego after getting his accounting license in 1994.

"He had a very dedicated loyal clientele," Demergian said. "He was very successful and very good at what he did apparently."

The fraud complaint lists several other customers. One had income of $10.9 million in 2007, which Martinez allegedly reported at $1.8 million. Another earned $1.1 million in 2007, reported to tax authorities as $286,148.

Thellman, who was arrested Friday night, told the FBI that Martinez sold him a limousine about three years ago and hired him to chauffer him. He told investigators that Martinez told him to give $40,000 to a person who would call him with code.

Thellman denied that he knew the money was to pay a hitman. FBI agents found $42,400 cash in a cereal box at his home.

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