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$2.1 million tax refund? It's bogus. Scammer gets prison.

$2.1 million tax refund from Oregon was flagged by auditors but got processed anyway. Woman who received the $2.1 million tax refund gets 5-1/2 year prison sentence.

By Associated Press / July 26, 2012

This July file photo shows Krystle Marie Reyes, the woman charged with defrauding the state and getting a $2.1 million tax refund, appearing in Marion County court, in Salem, Ore. Ms. Reyes was sentenced to 5-1/2 years of prison Tuesday.

Randy L. Rasmussen/The Oregonian/Pool/AP/File

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SALEM, Ore.

A 25-year-old woman who duped the state of Oregon into giving her a $2.1 million tax refund pleaded guilty Tuesday and was sentenced to 5 1/2 years in prison.

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Krystle Marie Reyes, of Salem, entered guilty pleas to one felony count of tax evasion and three counts of felony fraud. She had faced eight felony charges.

Reyes' court-appointed lawyer, Gale Rieder, said her client faced "overwhelming" evidence, The Oregonian reported.

Rieder said her client "wanted to take responsibility for what she'd done."

"She's remorseful and saddened by the impact on her family," the lawyer said. "She has no criminal history."

The woman received the refund on a debit card and spent about $150,000 before twice reporting the card lost or stolen. At that point the ruse was discovered. The state has recovered about $1.9 million of the money.

An Oregon Department of Revenue spokesman said Tuesday that the findings of an internal agency audit would be released Wednesday.

Reyes filed an electronic tax return in late January via Turbo Tax, erroneously reporting earnings of more than $3 million, authorities have said. Her request for a $2.1 million refund was initially red-flagged by an automated system.

The Oregonian quoted from a 24-page search warrant affidavit regarding what happened next.

The return was set aside for review by processing staff and managers for potential fraud. But "some time later," the affidavit said, a Revenue employee overrode the flagged payment and the refund was issued.

By policy, three agency employees are required to verify the override, the newspaper said. However, according to the affidavit, no one responsible for reviewing the return opened the file to look at it or looked at the W-2 form Reyes filed.

Reyes previously worked at retirement facilities or senior care homes and reported income of less than $15,000 per year in 2009 and 2010, records show.

Before her June 6 arrest, Reyes' spending spree included about $1,800 in cash to buy a 1999 Dodge Caravan and spending $851 on tires and wheels.

The affidavit says other purchases included a queen-sized air mattress, a deep fryer, an air conditioner and a cream and gray floral rug. She bought a sofa and recliner with brown leather trim.

Andrew Campbell, a senior assistant state attorney general who filed the charges against Reyes, declined to comment on Tuesday's plea deal.

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