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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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April 21, 2017

Illinois announced charges against the operator of a south suburban home health care business for defrauding the state out of over $200,000 in employee tax withholdings. Reginaldo Sulit, 48, of Chicago, was charged with theft of government funds and income tax fraud in his position as an officer and shareholder of Alliance Home Healthcare in Worth, Ill. Sulit was arraigned this week in Cook County Criminal Court. Madigan alleged that between June 2013 and September 2016, Sulit withheld money designated for employee income taxes from Alliance Home Healthcare employees’ paychecks without remitting the taxes to the Illinois Department of Revenue (IDOR). Madigan alleged Sulit stole over $203,900 through his scheme. IL

March 23, 2017

A federal grand jury sitting in the District of Massachusetts returned an indictment charging two Massachusetts residents who operated a temporary employment agency with conspiring to defraud the government, failing to pay over employment taxes and obstructing the internal revenue laws, announced the Justice Department’s Tax Division. According to the indictment, Huong Le and 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. Le and Chau allegedly used family members and other individuals as nominees to conceal their ownership of the business. The indictment alleges that from 2006 through 2011, Le and Chau conspired to conceal their agency’s total number of employees from the Internal Revenue Service (IRS) to lower their employment tax liabilities. Le and Chau allegedly attempted to hide the size of their workforce from the IRS by paying most of their employees cash under the table and causing the filing of false employment tax returns that both underreported the number of their employees and did not report wages paid in cash. Le and Chau allegedly cashed over $11 million in client checks at a check cashing facility in Worcester and used their staffing agency’s site supervisors, office manager and drivers to pay their employees in cash. DOJ

March 22, 2017

A Houston, Texas business owner pleaded guilty to one count of failing to pay over employment taxes, announced the Justice Department’s Tax Division. According to documents filed with the court, Richard Floyd Tatum Jr., 57, owned Associated Marine & Industrial Staffing Inc. (AMI), an industrial staffing company that provided temporary labor to businesses in Texas and other states. Tatum employed approximately 1,000 people to include internal employees, who worked for AMI, and external employees, who AMI assigned to work on-site at client locations. Tatum was responsible for collecting, accounting for and paying over to the Internal Revenue Service (IRS) the payroll taxes withheld from AMI’s employees’ wages. Tatum exercised significant control over AMI’s finances to include entering into contracts, signing checks, to include payroll, and deciding which creditors to pay. Tatum also signed and filed AMI’s employment tax returns. From March 2008 through December 2009, Tatum filed false and untimely employment tax returns for AMI that did not report AMI’s external employees. In May 2013, Tatum filed untimely returns for the quarters ending in March 2010 through December 2012, reporting AMI’s external employees but failing to make any payments. Tatum withheld approximately $12 million in payroll taxes from March 2008 through December 2012, which he did not pay over to the IRS. Tatum also failed to pay $6 million of AMI’s contributing share of social security and Medicare taxes during the same quarters. Instead, he used the money for his personal benefit, including making payments on his ranch and traveling to Las Vegas, Hawaii and France. Tatum admitted that he caused a tax loss of more than $18 million. DOJ

March 9, 2017

A federal court in Spokane, Washington found Dr. James Hood, a dentist, and his wife, Karen Hood, in contempt for violating the Court’s previous permanent injunction requiring them to timely file payroll tax returns and pay payroll taxes, announced the Justice Department’s Tax Division. The Court ordered the Hoods to close their dental care businesses, cease operating as employers, and barred them from opening any new businesses where the Hoods would serve as employers. On March 8, U.S. District Court Judge Rosanna Malouf Peterson for the Eastern District of Washington found James Hood and Karen Hood in contempt after they demonstrated a consistent pattern of disregarding their tax obligations by making incomplete employment tax payments, making dishonored payments, and missing deadlines. The Court had previously entered a permanent injunction requiring James and Karen Hood, and their entities, to comply with the federal employment tax laws. According to the United States’ supplemental filing in the case, the Hoods had failed to show full compliance with the tax laws and the Court’s injunction by Jan. 31, as the Court had ordered. The court found that, the Hoods had failed to pay their taxes for the Fourth Quarter 2016 by the end of January 2017. The court also found that the Hoods had attempted to make payroll tax payments that were dishonored due to insufficient funds in their accounts. DOJ

December 7, 2016

A Louisiana criminal defense attorney pleaded guilty to tax evasion, announced the Justice Department’s Tax Division. Michael Thiel, 66, a resident of Baton Rouge, Louisiana, pleaded guilty to one count of evading the payment of federal income and employment taxes for 2003 through 2013. According to documents filed with the court, Thiel operated a criminal defense law practice in Hammond, Louisiana. Despite earning substantial income through his law practice, Thiel did not timely file income tax or employment tax returns, and did not timely pay tax due and owing to the United States. Thiel agreed that as of April 30, he owed federal income tax, penalties and interest totaling $736,527, and employment tax, penalties and interest totaling $261,725. DOJ

December 2, 2016

A medical doctor and entrepreneur pleaded guilty to inducing interstate travel to commit a fraud and failing to account for and pay over employment taxes announced the Justice Department’s Tax Division. According to the plea agreement, statement of facts, and other court documents, in or about September 2000, Sreedhar Potarazu, 51, of Potomac, Maryland, an ophthalmic surgeon licensed in Maryland and Virginia, founded VitalSpring Technologies, Inc. (VitalSpring), a Delaware corporation. From its inception, Potarazu was VitalSpring’s Chief Executive Officer and President, and served on its Board of Directors. As early as 2009, Potarazu provided materially false and misleading information to VitalSpring’s shareholders to induce more than $30 million in capital investments in the company. Potarazu represented on numerous occasions that the sale of VitalSpring was imminent, which would have resulted in profits for shareholders, and concealed that VitalSpring failed to account for and pay over more than $7.5 million in employment taxes to the IRS. For example, in 2014, Potarazu provided shareholders with a written summary of operating results that reflected VitalSpring’s 2013 revenues to be approximately $12.9 million when, in fact, the 2013 revenue was less than $1 million. DOJ

October 18, 2016

Two Wayne County, West Virginia business owners pleaded guilty to federal employment tax charges. Michael Taylor, 48, pleaded guilty to one count of conspiracy to defraud the United States in the ascertainment, computation, assessment and collection of employment tax from mid-2007 through 2010. Jeanette Taylor, 44, pleaded guilty to one count of failing to pay over employment tax for the last quarter of 2009. According to documents filed with the court, from 2000 through 2010, Michael Taylor and Jeanette Taylor owned and operated a construction business in Wayne, West Virginia, that transported steel and sold gravel and concrete throughout West Virginia and Kentucky. The Taylors changed the name of the business several times, though the operations of the business remained the same. From 1999 to 2004, the business operated as Taylor Contracting & Taylor Ready-Mix LLC. In 2004, the name changed again to Taylor Contracting/Taylor Ready-Mix LLC. In 2010, the name changed a third time to Bluegrass Aggregates. DOJ

August 19, 2016

A Germantown, Tennessee, resident and business owner was sentenced to one year in prison and ordered to pay more than $10 million in restitution for failing to pay over employment taxes to the Internal Revenue Service (IRS), announced the Justice Department’s Tax Division and U.S. Attorney Edward L. Stanton III of the Western District of Tennessee. According to court documents, Larry Thornton, 67, was the majority owner, president and chief executive officer (CEO) of Software Earnings, Inc. (SEI), a Memphis company that produced and installed check processing. Thornton was also the 100 percent owner, CEO and president of First Touch Payment Solutions, LLC (First Touch), a Memphis company that provided merchant services for credit card processing. Thornton, as CEO and president of SEI and First Touch, had ultimate and final decision-making authority regarding SEI’s and First Touch’s business activities and had authority to exercise significant control over SEI’s financial affairs. Thornton admitted that he was responsible for collecting, accounting for, and paying over to the IRS federal income taxes and Federal Insurance Contributions Act (FICA) taxes that were withheld from the wages of SEI and First Touch’s employees. DOJ

October 16, 2015

Jonathan Leland Moore, former chief financial officer of Arrow Trucking Company, was sentenced to serve 35 months in prison for conspiring with James Douglas Pielsticker, former CEO and president of Arrow, to defraud the US by failing to account for and pay federal withholding taxes on behalf of Arrow and by making payments to Pielsticker outside the payroll system.  DOJ

July 8, 2015

Maria Elizabeth Townsend, president of Washington-based Townsend Controls Inc., was sentenced to serve more than three years in prison and pay $3,327,124.49 in restitution following her February 2015 conviction of 10 counts of failing to pay federal employment taxes. DOJ

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