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Employment Tax Fraud

This archive displays posts tagged as relevant to employment tax fraud. You may also be interested in the following pages:

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November 21, 2018

Wagdy Guirguis of Honolulu, the owner of several engineering businesses, and Michael Higa, a CPA and the controller for those businesses, were convicted on multiple counts arising from a tax evasion scheme that diverted funds from Guirguis's business entities.  The entities failed to pay the IRS withheld employment taxes, failed to report all income received, and failed to file required returns.  Guirguis was also found to have impeded the IRS investigation and made false statements to revenue officers.  DOJ

November 16, 2018

The owner of Virginia-based Family Discount Pharmacy, Jerry R. Harper, Jr., was sentenced to 41 months in prison for failing to account for and pay more than $5 million in employment tax liabilities, despite withholding such taxes from employee wages.  Between 1998 and 2014, Harper filed only one quarterly employment tax return for the pharmacy.  DOJ

July 12, 2018

A Collinsville, Virginia pharmacist pleaded guilty to failing to account for and pay over employment taxes, announced the Justice Department’s Tax Division. According to court documents, Jerry R. Harper, Jr., 61, owned and operated Family Discount Pharmacy, Inc. (FDP) in Stanleytown, Virginia, with multiple locations in Stuart, Rocky Mount, Chatham, and Brosville, Virginia. As owner of FDP, Harper was responsible for collecting and paying over FDP’s employment taxes. From 1998 through 2014, FDP accrued employment tax liabilities of more than $5 million. Harper withheld these taxes from FDP employees’ wages, but did not pay the taxes to the Internal Revenue Service (IRS). In over 15 years, Harper only filed one employment tax return with the IRS. DOJ

June 29, 2018

A former CEO of a software company in Sterling, Virginia, was sentenced to 21 months in prison for conspiring to defraud the government by failing to pay over employment taxes announced the Justice Department’s Tax Division. According to court documents, Robert Lewis was the CEO of Enterworks, Inc., a software company in Sterling, Virginia. From January 2011 to February 2013, Lewis conspired with Kristie McDonald, Enterworks’ Vice President of Finance and Administration, to defraud the United States by failing to pay over to the IRS more than $1.8 million in payroll taxes withheld from employee paychecks. As part of their scheme, Lewis and McDonald circumvented the company’s normal payroll and accounting procedures by paying some employees with manual paychecks. The employees still received the correct pay after withholdings, but by bypassing the accounting system, Lewis and McDonald were able to hide the fact that the withholdings were not being paid over to the IRS. DOJ

February 15, 2018

A Massachusetts temporary employment agency operator pleaded guilty in Boston federal district court to an indictment charging him with conspiring to defraud the government, failing to pay over employment taxes and obstructing the internal revenue laws. According to the indictment and statements provided in Court, Tien Chau ran an employment agency that provided temporary labor to businesses in Massachusetts and New Hampshire. The agency operated under at least four different names: Central Boston Staffing Services, Metro Boston Staffing Services, General Staffing Inc. and Kim’s Staffing Inc. Chau and others used nominees to conceal their ownership of the business. From 2006 through 2011, Chau and others conspired to conceal the agency’s total number of employees from the Internal Revenue Service (IRS) to lower the staffing agencies’ employment tax liabilities. Chau attempted to hide the size of their workforce from the IRS by paying most of the employees cash under the table and filing false employment tax returns that both underreported the number of employees and omitted wages paid in cash. Chau and others in the conspiracy allegedly cashed over $11 million in client checks at a check cashing facility in Worcester and used the staffing agency’s site supervisors, office manager and drivers to pay the employees in cash. DOJ

January 24, 2018

A Las Vegas, Nevada, business owner was sentenced to 12 months and one day in prison for evading payment of employment taxes and penalties. Maria Larkin, 55, was convicted of tax evasion by a federal jury in Las Vegas in June. According to the evidence presented at trial, Larkin owned and operated Five Star Home Health Care Inc. (Five Star). Larkin was responsible for collecting and paying over income, social security, and Medicare tax withheld from her employees’ wages. From 2004 through 2009, Larkin did not pay over to the Internal Revenue Service the employment taxes she withheld. As a result, the IRS assessed trust fund recovery penalties (TFRPs) against Larkin for these years, which made her personally liable for the unpaid employment taxes. Larkin concealed her assets and income to evade paying the TFRPs and to obstruct the IRS’s efforts to collect the outstanding taxes. She lied to the IRS regarding her ability to pay, changed the name of her business, placed her business in the name of a nominee, had her employees cash checks for her, and bought a home in the name of a nominee. In total, Larkin evaded more than $1.6 million in taxes. DOJ

January 17, 2018

California announced that Jeong Kim, the owner and operator of Fashion Q and Q retail clothing stores throughout Southern California, was sentenced to two years in prison for sales tax evasion, false income tax returns, failure to pay taxes and workers’ compensation fraud. Attorney General Becerra filed a felony complaint against Kim in the Los Angeles Superior Court on June 19, 2017. Jeong Kim owned and operated more than fifty retail clothing stores in Los Angeles, Orange, San Diego, San Bernardino and Ventura counties. From 2010 through 2016, Kim failed to report more than $29 million in taxable sales to the Department of Tax and Fee Administration, more than $39 million in taxable income to the Franchise Tax Board, more than $8 million in wages to the Employment Development Department, and evaded payment of $5.6 million in sales, income and payroll tax. Kim also failed to report more than $7 million in wages to his insurance carriers and evaded payment of $353,792 in workers’ compensation insurance. CA

December 8, 2017

A Tennessee temporary staffing company officer was convicted by a federal jury in Memphis of conspiring to defraud the United States, failing to pay over employment taxes, filing fraudulent employment tax returns, theft of government funds and aggravated identity theft. According to the evidence presented at trial, from 2005 through 2015, Mark Stinson and his wife, Jayton Stinson, operated a temporary staffing company in Memphis that provided services to businesses in Tennessee and elsewhere. The staffing company’s standard contract with its customers provided that the staffing company was responsible for withholding employment tax from its employees’ wages and paying over the amounts withheld to the Internal Revenue Service (IRS). The Stinsons failed to pay over $2.8 million in withholdings and other employment taxes due to IRS, failed to timely file employment tax returns and filed false employment tax returns. In an effort to avoid making payments to the IRS the Stinsons changed the name and structure of the company multiple times after accumulating employment tax liabilities, operating as Jayton Stinson Connex Staffing & Janitorial Service, Connexx Staffing Services LLC, Connexx Staffing Services Inc., and Complete Employment Agency. DOJ

November 9, 2017

A business owner was charged by a federal grand jury in Boston, Massachusetts, with attempting to obstruct the internal revenue laws, aiding and assisting in the filing of fraudulent corporate, personal, and employment tax returns, tax evasion, and structuring financial transactions, announced the Justice Department’s Tax Division. According to the indictment, Nicholas Boulas, of North Reading, owned and operated Nick’s Painting Service Inc. (NPS), which provided painting services to residential and commercial customers in the Boston area. From 2009 through 2014, Boulas allegedly concealed approximately $4 million in business receipts by cashing approximately $2.7 million in checks and directing a substantial number of customers to write checks to him personally, which he cashed and deposited using multiple personal bank accounts. According to the indictment, he structured cash transactions to involve less than $10,000 in currency in order to evade the banks’ reporting requirements – banks are required to file reports with the U.S. Treasury for transactions involving more than $10,000 of currency, conducted by or on behalf of the same person on the same day. DOJ

July 19, 2017

Sreedhar Potarazu, an ophthalmic surgeon and founder of VitalSpring Technologies Inc., was sentenced to 10 years in prison for defrauding his former company’s shareholders and for failing to pay employment taxes.  He was also ordered to pay roughly $50 million in restitution to the shareholders and $7.7 million to the IRS, and forfeiture of several homes, vehicles, and bank accounts.  From at least 2008, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $49 million in capital investments in the company.  DOJ
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