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Employment Tax Fraud

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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

December 23, 2014

US Congressman Michael Grimm pleaded guilty to aiding and assisting the preparation of a false tax return by fraudulently underreporting $900,000 in restaurant gross receipts and lowering payroll taxes through ‘off-the-book’ payments in connection with the Manhattan restaurant he owned called Healthalicious. DOJ

January 20, 2016

A federal court in Rock Hill, South Carolina, ordered T-N-T of York County Inc. and TM Trucking of the Carolinas LLC, to stop violating their employment tax reporting, deposit and payment obligations. The government’s complaint alleged that T-N-T of York County and TM Trucking of the Carolinas together owed more than $2.7 million in federal employment and unemployment taxes for various periods from 2009 through 2014. DOJ