A federal appeals court upheld the conviction and 188-month prison sentence of a tax preparer convicted on 33 counts of preparing false returns, rejecting his challenges to the verdict and to two enhancements that lengthened his term. (United States v. Castro, 2026 WL 1999345, 7/10/2026)
Details of the fraud scheme
The 5th U.S. Circuit Court of Appeals rejected John Anthony Castro’s challenges to his conviction and sentencing enhancements. Castro founded Castro and Company LLC in 2014, marketing it as an international-tax law firm and calling himself an international tax attorney.
He was never licensed to practice law by any state bar, though he held a law degree and an LLM in taxation and was registered with the IRS as an enrolled agent. He employed family members, attorneys, and a CPA, but he alone was permitted to file returns.
Between 2016 and 2024, Castro built a scheme to defraud the government by preparing false returns for unsuspecting clients. He advertised far larger refunds than other firms and took roughly half of each refund as his fee.
He used two strategies to inflate refunds: falsifying Schedule C business expenses to generate net losses and falsifying Schedule A deductions to reduce taxable income. Clients completed a questionnaire and scripted interview and uploaded documents to a portal, an employee entered the data, and Castro did a final review.
He then emailed each client a proposal comparing his projected refund with a rival preparer’s, and once the client agreed, he filed the return without letting them review it. His unresponsiveness prompted many clients to report him, leading to more than 200 audits.
Jurisdiction and the new-trial motion
Before reaching the merits, the court addressed a jurisdictional question. Castro moved for a new trial and noticed his appeal, and the government argued the district court lost authority to rule on the motion once the appeal was filed. According to the government, the motion was untimely in any event.
The 5th Circuit held in its unpublished opinion that the time limits in Rule 33, the new-trial rule, are non-jurisdictional claim-processing rules that the government forfeited by arguing the motion’s merits below rather than its timeliness. The district court therefore kept jurisdiction, and the ruling was properly before the appeals court.
The court lacked jurisdiction, however, over Castro’s separate challenge to the denial of his motion to correct the trial transcripts. Because that was a post-judgment order, it required its own notice of appeal.
Challenges to the conviction rejected
On the merits, Castro argued the district court should have granted a new trial based on alleged violations of Brady v. Maryland, 373 U.S. 83 (1963), which requires prosecutors to disclose favorable evidence. He said the government withheld three items to impeach a testifying former client: her marital status, a lien on her husband’s IRS account for unpaid child support, and a verbal immunity agreement.
The 5th Circuit rejected each. The tax lien was cumulative because the defense had already impeached the witness with evidence that she reported herself as single despite being married. That same questioning showed her marital status was not suppressed, and the claim of an immunity agreement was wholly conclusory.
Castro also argued the trial court violated his Sixth Amendment confrontation clause rights by admitting stipulations without ensuring he knowingly waived them. The court disagreed: Castro had agreed to the stipulations in writing, did not dissent when his attorney affirmed them at trial, and they were part of a legitimate strategy to narrow the case to willfulness.
Sentencing enhancements affirmed
Castro challenged a four-level enhancement for acting as an organizer or leader of criminal activity, arguing his employees were not criminally liable participants. The 5th Circuit did not resolve that point, holding the enhancement was justified because the scheme was “otherwise extensive.”
In that analysis, the court explained, it counts “unknowing participants who contributed to the success of the criminal enterprise.” Family members, attorneys, and a CPA handled intake, interviews, data entry, and return preparation, and the scheme produced an estimated $15.2 million in tax loss. Without their help, the court found, Castro’s activities could not have continued.
The court also affirmed a two-level enhancement for obstruction of justice. After learning of the IRS investigation, Castro filed lawsuits the presentence report called frivolous and sent emails to investigators threatening litigation.
Suing one IRS agent, he wrote: “My offer to settle is this: tell me who ordered you to initiate the unlawful and retaliatory investigation against me and I’ll drop the lawsuit. One and only chance to settle.” Testimony also indicated that Castro routinely threatened lawsuits against anyone who challenged him, leaving several witnesses reluctant to testify.
The 5th Circuit dismissed part of the first appeal for lack of jurisdiction and affirmed in all other respects; it dismissed a separate appeal over the denial of bail as moot.
“In sum,” the court concluded, “Castro’s arguments are without merit.”
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