The following examples of Employment Tax Fraud investigations are excerpts from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Colorado Man Sentenced to Prison

On September 23, 2010, in Anchorage, Alaska, Esteban Lane Stubbs, of Kremmling, Colorado, was sentenced to 12 months in prison, three years of supervised release, and ordered to forfeit $336,753. Stubbs pleaded guilty to one count of structuring a financial transaction. According to court documents, Stubbs owned Stubbs Enterprises, doing business as Lobo Drywall, which he operated in the greater Anchorage area. Stubbs employed undocumented aliens for drywall labor who were not lawfully permitted to work in the United States. Stubbs paid them sub-market wages in cash and failed to withhold and pay employment taxes. These low wages and the absence of costs for income taxes, employment taxes, worker’s compensation, unemployment insurance, and other benefits paid by legitimate employers allowed Stubbs to underbid fellow contractors and gain a significant share of the drywall business in Anchorage and the Matanuska-Susitna Valley. The defendant acknowledged that to conceal his activities from the federal government, he obtained large amounts of currency by making multiple withdrawals under $10,000 from different branches of First National Bank Alaska.  Between November 2004 and January 2007 Stubbs structured withdrawals of $336,753 to pay his employees in cash, thereby evading employment taxes due and owing to the Internal Revenue Service.

Vice President of Delaware Demolition Company Sentenced on Tax Charges

On September 23, 2010, in Wilmington, Del., Joseph E. Funk was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay $100,000 in restitution.  Funk was the vice president of Holley Enterprises, Incorporated (HEI), a demolition company.  In March 2010, Funk was convicted after a jury trial of conspiracy to defraud the United States, conspiracy to commit wire fraud, and ERISA fraud.  According to court documents, from 2004 through 2007, Funk and his co-defendant, William Holley, engaged in a number of fraud schemes designed to retain monies that were legally owed to the United States government, to their employees and to union benefit plans.  Funk caused HEI to pay most of its labor employees in cash; therefore, failing to accurately collect and pay over required employment taxes.  In addition, HEI failed to pay its employees the prevailing wage mandated by State law on public works projects and failed to pay monies owed to employee benefit plans on behalf of their union-affiliated employees.  In order to cover up this fraud scheme, Funk falsely certified subcontractor payroll sheets which fraudulently stated HEI workers were paid at the applicable prevailing wage rate.  Funk also submitted fraudulent Forms 5500, Annual Return/Report of Employee Benefit Plan, a report required under ERISA.  He under-reported the number of hours worked by employees.  Holley was sentenced in August 2010 to 48 months in prison.

Owner of Drywall Company Paid Workers in Cash; Evaded Employment Taxes

On September 23, 2010, in Anchorage, Alaska, Esteban Lane Stubbs, of Kremmling, Colorado, was sentenced to 12 months in prison, three years of supervised release, and ordered to forfeit $336,753. Stubbs pleaded guilty to one count of structuring a financial transaction. According to court documents, Stubbs owned Stubbs Enterprises, doing business as Lobo Drywall, which he operated in the greater Anchorage area. Stubbs employed undocumented aliens for drywall labor who were not lawfully permitted to work in the United States. Stubbs paid them sub-market wages in cash and failed to withhold and pay employment taxes.  These low wages and the absence of costs for income taxes, employment taxes, worker’s compensation, unemployment insurance, and other benefits paid by legitimate employers allowed Stubbs to underbid fellow contractors and gain a significant share of the drywall business in Anchorage and the Matanuska-Susitna Valley.  Between November 2004 and January 2007 Stubbs structured withdrawals of $336,753 to pay his employees in cash, thereby evading employment taxes due and owing to the Internal Revenue Service.

Idaho Businessman Sentenced for Failure to Pay Employment Taxes

On September 22, 2010, in Boise, Idaho, Roberto Trevizo Corral, a resident of Nampa, Idaho, was sentenced to 12 months and one day in prison and ordered to pay $771,252 in restitution for failing to collect and pay over employment taxes. According to court documents, Corral was the President of AG Services, Inc., also known as Corral Agriculture, Inc., which is an agricultural employer in Idaho that provides laborers to area farmers.  During 2004 through January 31, 2005, Corral willfully failed to truthfully account for and pay over withheld income taxes and Federal Insurance Contributions Act tax owed on behalf of Corral Agriculture and its employees. Corral admitted that he was responsible for paying over to the Internal Revenue Service all of the payroll taxes for his corporation, including the matching share of FICA tax, for calendar years 2002, 2003, 2004 and 2005. He admitted that he failed to pay over more than $700,000 in employment taxes.

Florida Contractors Sentenced for Hiring Illegal Workers; Tax Fraud

On September 3, 2010, in West Palm Beach, Fla., John M. David and Juan A. Gonzalez were sentenced to 16 months and 10 months in prison, respectively. In addition, each defendant will serve two years of supervised release and were ordered to pay $479, 906 in restitution, which David paid in full prior to today’s sentencing.  On June 16, 2010, David and Gonzalez pleaded guilty to conspiracy charges related to their participation in a scheme to employ illegal aliens and avoid the payment of employment taxes and workers’ compensation premiums for these workers.  David was the president of Sun Deck Concrete, Inc. located in Palm Beach County; Gonzalez was a supervisor at the business.  According to court documents, in the early 2000s, Sun Deck began hiring undocumented workers, many of whom were Honduran and Mexican nationals who were living in the United States illegally as laborers.  In order to conceal the fact that Sun Deck was hiring and paying illegal aliens, David and Gonzalez set-up shell companies for the purpose of funneling wages from the construction companies to the illegal workers.  To make the shell companies appear legitimate, other co-conspirators opened corporate bank accounts, obtained federal tax identification numbers, and purchased fraudulent workers’ compensation insurance policies for the companies.  During 2005 and 2006, David caused Sun Deck to pay more than $2 million in cash wages through the shell companies  in order to conceal the fact that Sun Deck was employing illegal workers and to avoid  the payment of employment taxes and workers’ compensation premiums for these workers. As a result of this scheme, David defrauded the Internal Revenue Service out of $316,254 in employment taxes.  In addition, Sun Deck failed to disclose in its monthly audit reports to Bridgefield Employers Insurance Company, Sun Deck’s insurance carrier, that it had paid approximately $2 million in wages to the illegal aliens. Consequently, Sun Deck avoided the payment of approximately $163,652 in workers’ compensation premiums.

Owner of New Jersey Interior Contracting Companies Sentenced for Emloyment Tax Evasion

On August 30, 2010, in Newark, N.J., Edward Albanese was sentenced to 24 months in prison, three years of supervised release and ordered to pay $1.8 million to the Internal Revenue Service (IRS).  According to court documents, Albanese owned and operated two interior contracting companies: DDB Interior Contracting Inc. (DDB) and Regency Interior LLC (Regency).  Albanese was responsible for collecting, accounting for, and paying employment taxes for the companies. During the fourth quarter of calendar year 2008, Albanese paid more than $164,000 in “under the table” cash wages to employees of Regency without withholding, reporting, and paying over the corresponding employment taxes to the IRS. On January 31, 2009, Albanese caused Regency to file a false Employer’s Quarterly Federal Tax Return (Form 941) in order to evade nearly $50,000 in employment taxes.  During the second quarter of calendar year 2005, Albanese paid more than $78,000 in “under the table” cash wages to employees of DDB without withholding, reporting, and paying over the corresponding employment taxes to the IRS. On July 31, 2005, Albanese caused DDB to file a false Form 941 in order to evade nearly $24,000 in employment taxes.  Albanese admitted he paid a total of approximately $2.4 million in cash wages to employees of DDB and Regency from 2005 through 2008. The total employment tax due and owing on those unreported wages is approximately $712,000.  Albanese is also subject to civil penalties.

President of Delaware Business Sentenced on Tax Fraud and Other Charges

On August 26, 2010, in Wilmington, Del., William C. Holley, of Middletown, was sentenced to 48 months in prison, to be followed by three years of supervised release. Holley was convicted in March 2010 by a trial jury on charges of conspiracy to defraud the United States, conspiracy to commit wire fraud, tax evasion, and willful failure to account for and pay over taxes.  Holley and his co-defendant Joseph Funk, were the President and Vice President, respectively, of a Wilmington-based demolition company, Holley Enterprises, Inc. (HEI).  According to court documents, from 2004 through May 2007, Holley engaged in a number of fraud schemes designed to retain monies that were legally owed to the United States government, to his employees and to union benefit plans.  During that time frame, HEI employed over 50 workers, but paid federal payroll taxes on the wages of only three or four workers.  In addition, HEI failed to pay its employees the prevailing wage mandated by State law on public works projects and failed to pay monies owed to employee benefit plans on behalf of their union-affiliated employees.  In order to cover up these various fraud schemes, Holley made various false statements to government regulators and directed that HEI create and send to government officials falsified checks, false payroll sheets, false tax documents, false insurance certificates, and false address information for their employees.  The combined financial loss to the victims was in excess of $1 million. Funk’s sentencing hearing was scheduled for August 24, 2010; however, he did not appear and is currently a fugitive.

Wisconsin Man Sentenced on Federal Tax Charges

On August 19, 2010, in Milwaukee, Wis., Roger Schlomann, former president and co-owner of Schlomann Brothers Construction, Inc., was sentenced to 25 months in prison and ordered to pay a $5,000 fine for failing to pay withheld payroll taxes.  According to court documents, from 1998 through 2007, Schlomann failed to pay almost $900,000 in payroll taxes that were withheld from the wages of the employees of Schlomann Brothers Construction.  Schlomann also failed to file quarterly payroll tax returns during this period. Despite failing to pay these payroll taxes, Schlomann paid himself and his business partner substantial wages and used business receipts to pay for personal expenses.

Woman Sentenced for Stealing Over $230,000 in Employment Taxes

On August 4, 2010, in Buffalo, N.Y., Lachandra Martin-Davis was sentenced to 12 months and a day in prison, followed by three years of supervised release, and ordered to pay $230,605 in restitution to the Internal Revenue Service (IRS).  Martin-Davis pleaded guilty in December 2009 to tax charges.  According to court documents, Martin-Davis was the owner of Kiddieland Child Care Center, which later became Kiddieland Educational Center.  She collected income, social security and Medicare taxes from her employees; however, she never paid the taxes over to the IRS.  Martin-Davis used the money to pay for personal items which included living in a $335,000 house, purchasing a $48,000 Yukon Denali and a Mercedes-Benz, purchasing a time share in Hawaii, and other assets.

Massachusetts Attorney Sentenced on Tax Charges

On July 28, 2010, in Boston, Mass., Christopher M. Uhl, an attorney, was sentenced to 33 months in prison, to be followed by two years of supervised release, and ordered to pay a $7,500 fine and $615,796 in restitution.  Uhl was convicted by a trial jury in April 2010 of tax evasion for failing to pay over $233,000 in employment taxes.  Between 2000 and 2005, he intentionally failed to pay the FICA and income taxes withheld from his employees’ paychecks, as well as his matching FICA contributions and unemployment tax.  Uhl made numerous false statements to Internal Revenue Service (IRS) officials in order to further his goal of evading employment taxes.  In addition, Uhl obstructed justice by intentionally lying and making false statements in affidavits filed in support of his pre-trial motions to dismiss and suppress statements.  The Court also noted that Uhl sentence was based, in part, upon several instances of pre and post trial misconduct.  Specifically, Uhl submitted false tax returns in order to qualify for two separate personal loan applications.  He also filed 17 new bankruptcy cases for clients after his April tax fraud conviction – despite knowing that he would be losing his license to practice law and thus would be unable to complete work for those clients.

CEO for San Diego Medical Billing Sentenced for Employment Tax Fraud

On July 23, 2010, in San Diego, Calif., Anthony S. Vacchi Jr. was sentenced to 30 months in prison, three years of supervised release, and ordered to pay $2,502,916 in restitution. Vacchi served as managing general partner and the tax matters partner for Healthcare Reimbursement Associates (HRA) in San Diego.  He pleaded guilty on April 14, 2010 to failing to collect and pay over employment taxes to the IRS.  According to his plea agreement, Vacchi also served as President and Chief Executive Officer for HRA Medical Management Inc (HRA Management). Both companies were created to provide medical billing services. Beginning about September 15, 1993, and continuing through at least December 2006, both companies withheld federal taxes and FICA taxes from their employees’ pay checks; however, Vacchi admitted that he willfully and knowingly failed to pay over any of the federal taxes withheld by HRA and HRA Management resulting in a total tax loss of over $2 million. 

Texas Businessman Sentenced to Five Years in for Not Paying Over $5 Million in Payroll Taxes

On July 15, 2010, in San Antonio, Texas, Joe Albert Smith was sentenced to 60 months in prison, three years of supervised release and ordered to pay nearly $28 million in restitution for tax evasion.  According to court documents, Smith admitted that for calendar years 1998 through 2002, he failed to pay over $5 million in payroll taxes. Smith admitted that instead of paying the taxes owed, he transferred the money to several other “nominee” accounts he controlled in an effort to conceal the funds from the Internal Revenue Service (IRS). He then used the money to purchase residences, vehicles and watercraft.  Smith implemented a “pyramiding” scheme which refers to the willful withholding of taxes from employee paychecks, followed by a failure to pay over those withheld taxes to the IRS as required. When a sizeable tax liability is created in this manner, the business closes down and re-opens in a different corporate form, but the tax liability remains. In 2002, Smith closed Pro-Emp Solutions, Inc. and Gaddis Employment Solutions leaving a combined tax liability of approximately $5,057,119. 

Minnesota Man Sentenced to Over Seven Years in $2.4 Million Real Estate Fraud Scheme

On July 19, 2010, in Minneapolis, Minn., Timothy Beliveau was sentenced to 87 months in prison. According to court documents, Beliveau pleaded guilty in March 2010 to failing to pay more than $900,000 in federal employment taxes and engaging in a monetary transaction involving criminally derived property in connection to a real estate fraud scheme through which he induced investors to purchase distressed real estate from vulnerable homeowners at inflated prices. The scheme resulted in estimated losses to investors and financial lenders of approximately $2.4 million.  Between 2004 and July 2007, Beliveau used his business, U.S. Housing & Financial Services, to encourage homeowners in or near foreclosure to sell their homes to investors he recruited. The investors then immediately sold the homes back to the distressed homeowners pursuant to contracts for deed. Instead of allowing the homeowners to receive the proceeds from the sales of their homes, however, Beliveau caused the homeowners to assign those proceeds to him or his companies for the purported purpose of helping the homeowners make their monthly contract-for-deed payments to the investors. By doing so, the homeowners could supposedly buy back their homes after a period of time; and, in the meantime, they were allowed to continue to live in them.  Ultimately, most of the distressed homeowners were unable to make their monthly contract-for-deed payments or otherwise buy back their homes. In addition, many of the loans taken out by investors to purchase the homes went into default because the money supposedly in the escrow account to pay the mortgages had been used by Beliveau for his personal benefit. Beliveau admitted writing a check from the account of one of his companies for more than $184,000 to complete the purchase of a Wellcraft Excalibur boat. Beliveau also admitted failing to pay the IRS nearly $902,000 in employee withholding taxes, which he had collected through another company he owned.

Virginia Beach Business Owners Sentenced for Failure to Pay Taxes

On June 30, 2010, in Norfolk, Va., Constance Vernell Wiseman and Ross Allan Rogers were sentenced to 60 and 37 months in prison, respectively, for failure to pay taxes owed to the Internal Revenue Service (IRS).  They were also ordered to pay $983,324 in restitution. On March 29, 2010, both Wiseman and Rogers, who are married, pleaded guilty to willful failure to pay taxes.  According to court documents, Wiseman and Rogers were the owners and operators of Douglas Enterprises, Inc., doing business as Dow Personnel, Career Services of Virginia, Inc., and Virginia Professional Employers, Inc., businesses located in Virginia Beach, that provided companies with temporary employees.  From April 2004 through July 2006, they failed to pay $983,324 in federal payroll taxes to the IRS.  Wiseman and Rogers diverted these funds to their own personal use, including the payment of credit card bills, home improvements and the purchase of a pickup truck, recreational boat and antiques.

Owner of Eight Restaurants Sentenced on Immigration and Tax Charges

On June 28, 2010, in Cleveland, Ohio, Ramon J. Ornelas, owner of eight Casa Fiesta Mexican restaurants, was sentenced to 12 months and a day in prison, followed by two years of supervised release, and ordered to pay a $1,800 special assessment.  Ornelas pleaded guilty to eight counts of harboring and concealing illegal aliens, three counts of mail fraud, and seven counts of subscribing to a false tax return. According to court documents, the restaurants regularly employed undocumented workers, routinely paid workers in cash without withholding of FICA and Medicare taxes for the Internal Revenue Service (IRS), and submitted false documents to the Ohio Department of Job and Family Services which did not report the names of undocumented workers. Ornelas filed false Forms 941, Employer’s Quarterly Federal Tax Return, which did not claim the undocumented workers and underreported the tax due and owing the IRS

Former CEO of Publicly Traded Company in Over $31 Million Employment Tax Scheme

On June 25, 2010, in Louisville, Kentucky, Danny L. Pixler, of Ft. Lauderdale, Florida, pleaded guilty to a one-count Information charging him with failing to pay employment taxes to the Internal Revenue Service (IRS).  He was immediately sentenced to 60 months in prison.  According to court records and statements made in court, from 2004 through 2005, Pixler was the President and Chief Executive Officer (CEO) of Certified Services Inc., a publicly traded company.  Certified Services Inc. acted as a holding company for a number of other entities, including the Cura Group, Inc., Certified Staffing Services Corp., I, American Staff Resources, Inc., ABP Group Inc. and other subsidiaries.  These companies operated as Professional Employment Organizations (PEOs) which performed employer-related services to other companies, such as payroll services and procuring worker’s compensation coverage for the employees of its clients.  The subsidiaries collected from its clients the costs and fees associated with the payroll of employees.  In this regard, the subsidiaries undertook the responsibility for collecting and paying to the IRS the quarterly payroll taxes.  This included the funds withheld from employees’ checks as well as the employers’ contributions.  Funds which were collected for the benefit of IRS were considered to be held in trust for the IRS.  Pixler controlled day-to-day operations of the subsidiaries of Certified Services which routinely failed to pay over the taxes owed in a timely fashion.  These companies collectively accumulated a debt to the IRS of approximately $31,104,000.

Minnesota Woman Sentenced for Failing to Pay More Than $900,000 in Employment Taxes

On June 23, 2010 in Minneapolis, Minn., Shelley Milless was sentenced to 24 months in prison, to be followed by three years of supervised release and ordered to pay nearly $902,000 in restitution for failing to pay employment taxes.  According to court documents, Milless, along with her then-husband Timothy Beliveau, impeded the IRS from collecting income tax, Federal Insurance Contributions Act (FICA) tax, and Medicare tax collected from employees of American Alliance Mortgage (AAM) Group between October 1, 2002, and September 30, 2005. Instead, Milless used those funds for her personal benefit.  To prevent the IRS from collecting the taxes, Milless incorporated a shell company, American Alliance Mortgage Realty & Title (AMM R&T) and had the assets of AAM Group transferred to AAM R&T, depleting all of AAM Group’s assets and ability to pay the taxes.

Cincinnati Business Owner Sentenced for Failing to Withhold Employment Taxes

On June 22, 2010, in Cincinnati, Ohio, John P. Hart II was sentenced to 18 months in prison, three years of supervised release, and ordered to pay $679,663 in restitution to the Internal Revenue Service (IRS).  Hart pleaded guilty on March 3, 2010, to failing to collect and pay over employment taxes to the IRS. According to court documents, Hart was the controlling shareholder and owner of Selection Management Systems, Inc. (SMS), a corporation he formed in 1997.  SMS was in the business of conducting employee background checks and providing proprietary software to employers for background checks of prospective employees. SMS employed approximately 40 employees.  From 2004 through 2006, Hart was responsible for SMS’s day-to-day accounting and payroll functions. He was required to withhold payroll taxes from SMS employees’ paychecks, including Medicare and Social Security taxes.  SMS was required to make deposits of the payroll taxes to the IRS on a periodic basis, and was required to file, on a quarterly basis, an Employer’s Quarterly Federal Income Tax Return (Form 941). Beginning at least as early as January 2004, Hart willfully failed to withhold and pay over payroll tax payments from SMS employees’ paychecks, failed to file Forms 941 with the IRS, and made no payments of payroll taxes to the IRS. From 2004 through 2006, Hart failed to withhold and pay over to the IRS approximately $678,644 in Medicare and Social Security taxes from his employees’ paychecks.  Hart used SMS corporate funds for expenditures including, but not limited to, funding his skydiving team’s attendance at skydiving competitions, funding other skydiving organizations, and paying for his annual membership and expenses at a local country club.

Owner of Exclusive Temporaries Inc. Sentenced for Evading Employment Taxes

On June 21, 2010, in Houston, Texas, Pricilla Clues, owner of Exclusive Temporaries Inc., was sentenced to 37 months in prison and ordered to pay more than $1.4 million in restitution.  According to court documents, Clues pleaded guilty to tax evasion for failing to pay employment taxes for year 1999 though 2002 and 2004.  During the civil audit and the criminal investigation, Clues gave Internal Revenue Service (IRS) agents copies of all of the quarterly IRS employment tax returns purportedly filed for all quarters in years 1999, 2000, 2001, 2002 and 2004 and untruthfully claimed that all these returns were timely filed.  Clues also gave IRS agents copies of the front sides of several checks drawn on the corporation’s bank account to the order of the IRS and untruthfully claimed that she had sent these checks to the IRS to pay the employment taxes owed for several of the quarters listed in the indictment. The checks in question were never received by the IRS and were never paid by the corporation’s bank. Clues also wire-transferred approximately $1.3 million of the corporation’s funds out of the United States in order to avoid paying the employment taxes owed.

Security Guard Company Owners Sentenced for Employment Tax Fraud

On May 25, 2010 , in Washington, D.C., Ronson Britt, of McLean, Virginia, and Willie Borden, of Silver Spring, Maryland, were sentenced for failure to pay employment taxes.  Britt was sentenced to 18 months in prison and Borden was sentenced to 12 months and one day in prison. In addition, each defendant will serve three years of supervised release and were ordered to pay $2,117,840 in restitution to the Internal Revenue Service (IRS).  According to evidence presented during the plea hearing, Britt and Borden were the owners of B&B Security Consultants, Inc., which was in the business of providing security guards to various organizations and events throughout the D.C. Metropolitan area. Between January 1, 2002 and December 31, 2006, B&B Security Consultants, Inc. withheld over $2 million in payroll taxes from employees' paychecks, but Britt and Borden purposefully failed to remit the money to the IRS. The defendants used the funds to pay themselves substantial salaries, purchase discretionary business items and divert business assets for personal expenditures.

Massachusetts Man Sentenced on Tax Evasion Charges

On May 17, 2010, in Boston, Mass., Albert M. Todesca was sentenced to 12 months and a day in prison, to be followed by two years of supervised release, and ordered to pay a $7,500 fine.  Todesca pleaded guilty in November 2009 to one count of tax evasion.  According to court documents, Todesca operated four construction related companies and caused them to issue over $4 million in corporate checks to employees in payment of either all or a portion of their wages. These payments were not classified as wages and were not reported to the Internal Revenue Service (IRS). During the years 2002 through 2006 Todesca caused these payments to be falsely classified on the company’s books as reimbursements for machine parts in an effort to conceal the payroll scheme from the government. The companies involved were Todesca Equipment Co., Inc, R & A Excavating Co., Inc., Angelo Todesca Corp., and Rochester Bituminous Products, Inc. The scheme occurred over a five year period and resulted in the evasion of over $1 million in payroll taxes.

West Virginia Attorney Sentenced for Failing to Pay Over $405,000 in Taxes

On April 14, 2010, in Charleston, W.Va., Richard A. Hayhurst, of Parkersburg, was sentenced to 21 months in prison and ordered to pay over $400,000 in restitution for failure to pay employment taxes for employees.  According to court documents, Hayhurst practiced law in Parkersburg and operated his firm as a sole proprietorship. From early 2000 through late 2006, Hayhurst withheld federal income and FICA taxes from his four employees’ paychecks in the amount of $216,767. However, Hayhurst failed to pay over taxes as reflected on the IRS Form 941. Further, Hayhurst failed to pay the employer portion of his employees’ Social Security and Medicare taxes totaling $44,557 from the second quarter of 2003 through the third quarter of 2006. Finally, Hayhurst failed to pay his own personal income taxes for the years 2003, 2004, and 2005 totaling $134,965 in unpaid tax liability. In total, the charged tax liability and relevant conduct attributed to Hayhurst is $405,082.

President of California Agribusiness Sentenced to 18 Months for Tax Fraud

On May 13, 2010, in San Jose, Calif., Curtis Leigh Parry was sentenced to 18 months in prison, to be followed by three years of supervised release, and ordered to pay $221,641 in restitution.  Parry, formerly of Salinas, California and currently of Lodi, California, pleaded guilty on February 3, 2010, to three counts of tax evasion and three counts of filing false corporate income tax returns.  In pleading guilty, Parry admitted that from 1977 to 2003 he was the sole shareholder and owner of Salinas Valley Engineering & Manufacturing, Inc., (SVEM), a corporation in the business of manufacturing, selling and repairing agricultural equipment. In his plea agreement, Parry admitted that from 1999 to 2002 he knowingly diverted money from SVEM to himself through various fraudulent schemes. Parry failed to report any of the diverted funds as income on his personal income tax returns. In his plea agreement, Parry agreed that the total tax loss on his personal income tax returns for 2000, 2001 and 2002 was $128,206. The diversion of SVEM funds also resulted in Parry filing false corporate income tax returns for SVEM for 2000, 2001 and 2002, resulting in a tax loss of $93,435.  Parry admitted that as sole owner of SVEM, he was required to collect, account for and pay over to the Internal Revenue Service (IRS) all federal payroll and social security taxes for his employees. During this period Parry knowingly and intentionally withheld federal payroll and social security taxes from paychecks of his employees but willfully failed to pay over those taxes due to the IRS.

Tax Preparer Sentenced on Federal Tax Charges

On March 12, 2010, in St. Louis, Mo., Robert Futch was sentenced to 37 months in prison and ordered to pay $204,000 in restitution for failure to pay federal income tax and stealing tax refunds from his clients.  According to court documents, Futch worked as a bookkeeper and tax preparer for his own company called Archtax.  Futch collected approximately $180,000 in payroll taxes for employees of Archtax, but never paid them to the government.  He also did not pay more than $100,000 in federal income tax refunds that he collected for his clients.  Additionally, while preparing taxes and escrowing business withholding taxes, Futch failed to file his own tax returns.

Owner of Defunct Payroll Services Company Sentenced for Embezzlement of $2.65 Million in FICA Taxes

March 12, 2010, in Trenton, N.J., Joshua Schechter, owner of a defunct payroll services company in San Antonio, Texas, was sentenced to 30 months in prison for embezzling $2.65 million in FICA taxes that client companies owed to the Internal Revenue Service (IRS). Schechter pleaded guilty in October 2008, to a two-count Information charging him with filing false tax returns. Robert Stockton, Schechter’s business partner, was previously sentenced to 18 months in prison for his role. Stockton pleaded guilty in November 2008, to a one-count Information charging him with theft of government property. At his plea hearing, Stockton stated that in 1985 he established a business called The Business Office to provide payroll services to client businesses. In August 2003, Stockton reached an agreement to sell his business to Online Business Services (OBS) based in San Antonio, Texas. OBS was owned and operated by Joshua Schechter and was also in the payroll services business. According to court document, from 2003 through 2005, the two firms contracted with business clients to provide payrolls services, which purportedly would included the payment of all federal and state payroll taxes and the preparation and filing of quarterly payroll tax returns; and preparation all IRS forms W-2, W-3, and 1099. Schechter, along with Stockton and others, intentionally filed and cause to be filed numerous false IRS Form 941s which indicated that the victim clients were responsible for paying only a fraction of the tax actually due. Both defendants admitted that they did not forward to the IRS the actual amount of payroll tax for each victim and instead kept the money in OBS accounts to be used for illegal purposes. Stockton agreed that the total amount of money improperly withheld by him from payment to the IRS was $1.8 million.  

Minnesota Man Sentenced for Failing to Pay Employment Taxes

On March 12, 2010, in Duluth, Minn., Mark Allan Fitzgerald, co-owner of Alliance Services, Inc., was sentenced to 24 months in prison for failing to pay $367,640 in employment taxes.  Fitzgerald pleaded guilty on December 11, 2009 to one count of willful failure to pay taxes.  In his plea agreement, Fitzgerald admitted he failed to report and pay to the Internal Revenue Service (IRS) the federal employment taxes he withheld from his employees’ earnings. Instead, he used that money to pay company expenses. In entering his plea, Fitzgerald also admitted he failed to pay the IRS the employer’s share of employment taxes, which resulted in an additional tax loss for the IRS in the amount of $113,324. Alliance Services performs landscaping, snow-plowing, handyman, and home remodeling services. Fitzgerald, who owned the business with his wife from 2002 to 2006, was solely responsible for its bookkeeping, payroll, and tax filings.

Rhode Island Businessman Sentenced for Tax Evasion and Bankruptcy Fraud; Failed to Pay More Than $2 Million in Taxes

On February 24, 2010, in Providence, R.I., Steven Allard, of Scituate, Rhode Island, was sentenced to 30 months in prison, to be followed by three years of supervised release. Allard pleaded guilty in July 2009 to one count each of tax evasion and bankruptcy fraud.  At the time of his guilty plea, Allard admitted that between March 2005 and July 2006, he failed to pay $2,139,739 in employment taxes to the Internal Revenue Service for two of his companies, Builders Resources Delaware (BRI-DE) and Quad.  He also owned two other businesses: Builders Resources, Inc. Massachusetts (BRI-MA) and Eaglewood Realty, LLC.  In addition, at the plea hearing, Allard admitted that in October and November 2005, he made false statements in a personal bankruptcy petition and during the bankruptcy creditor’s hearing where he failed to disclose his ownership of property in Warwick, Rhode Island. According to court documents, at the direction of Allard, income generated from BRI-MA was transferred to other companies controlled by Allard. The payroll for construction jobs was paid by BRI-DE and Quad. BRI-DE and Quad were required to pay employment taxes to the IRS on the amount of wages that they paid to their employees. In addition, these companies were required to report employment taxes on an Employer's Quarterly Federal Tax Return, Form 941.  Records show Forms 941 were filed on behalf of BRI-DE reflecting $806,149 in employment taxes due and owed to the IRS for the last quarter of 2005 and the first two quarters of 2006. In addition, Forms 941 were filed on behalf of Quad reflecting $1,333,590 in employment taxes due and owed to the IRS for the four quarters of 2005. At the direction of Allard the taxes were not paid. Instead, the defendant used the funds from BRI-MA for the benefit of creditors of BRI-MA other than the IRS, and for the benefit of himself and his family. He diverted funds from BRI-MA to Eaglewood Realty for the purchase of luxury automobiles.

Uptown Chicago Bar Owner Sentenced for Cheating on Income and Payroll Taxes

On February 24, 2010, in Chicago, Ill, Timothy Juliusson was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay more than $153,000 in restitution for failing to report income tax and failure to collect payroll taxes.  According to court documents, Juliusson, the owner of the Holiday Club, failed to report all of his income for over five years, as well as to collect and pay his employees’ payroll taxes.  Juliusson admitted that he maintained two sets of books, one of which recorded the Holiday Club’s true income and loss, and one which did not report all income. Between 2002 and 2006, he provided the false set of records and bank statements to his accountants, who used them to prepare tax returns for Juliusson and his business.

Roofer Sentenced to Prison for Employment Tax Evasion

On February 3, 2010, in Portland, Ore., Philip G. Brill, of Lake Oswego, was sentenced to 12 months and a day in prison, to be followed by three years of supervised release and ordered to pay $314,128 in restitution to the Internal Revenue Service (IRS).  Brill pleaded guilty in July 2009 to a one-count Information charging him with tax evasion. According to court documents, Brill cheated on his employment taxes for his Oregon and SW Washington roofing businesses and lied to the IRS for more than 16 years. Brill used numerous ways to evade the IRS and payment of taxes, including using multiple nominee trust entities through which he hid business income and assets. He also failed to file federal income tax returns for those nominee entities, and extensively used cash in his business operations so there were no bank records tracking his business dealings. In February 2005, IRS special agents executed a search warrant on the offices of trust promoter David Carroll Stephenson in Western Washington, and seized a variety of material pertaining to Brill and his businesses. Files seized during the search warrant showed that Brill joined an abusive trust scheme in 2000, for which he paid nearly $20,000 in start-up fees and consultation fees in order to attempt to evade the payment of his taxes. Stephenson is currently serving a 96-month sentence. After joining the trust scheme, Brill also began disregarding payroll procedures and began paying his employees and himself in cash. Brill conducted all of his other business dealings in cash as well.

Owner of Virginia Contracting Business Sentenced for Failing to Pay More $500,000 in Employment Taxes

On January 22, 2010, in Alexandria, Va., Ricky Lee Pence was sentenced to 15 months in prison, to be followed by three years of supervised release, and ordered to pay $588,820 in restitution.  Pence pleaded guilty on October 28, 2009 to willfully failing to collect and pay over more than $580,000 in employment taxes.  According to the statement of facts filed with his plea agreement, Pence was the owner and president of PENELEC, Inc., located in Manassas, Va. PENELEC is a general contracting business that performs carpentry and electrical work and employed between 8 and 15 employees. Despite preparing the company’s weekly payroll and withholding federal taxes, Social Security taxes, and Medicare taxes from his employees, Pence failed to report and pay these taxes to the Internal Revenue Service (IRS) for every fiscal quarter between September 2004 and December 2007.

Washington State Woman Sentenced for Failing to Pay Employment Taxes

On December 18, 2009, in Seattle, Wash., Michelle L. Bielaski, of Bellevue, Washington, was sentenced to 15 months in prison, two years of supervised release, and ordered to pay $2,478,002 in restitution.  Bielaski pleaded guilty in June 2009, admitting that as secretary and treasurer of Falcon Construction, Inc., she was responsible for failing to send to the Internal Revenue Service taxes that the company withheld from employee paychecks.  The failure to pay over the taxes occurred over a ten year period from 1997 to 2007.  In her plea agreement, Bielaski admitted that the construction company had the ability to pay the withheld taxes over the years and in fact had paid salaries totaling approximately $3.9 million from 1998 to 2007.

Detroit Area Businessman Goes to Jail for Tax Evasion

On November 25, 2009, in Detroit, Mich., Marc Bruce was sentenced to 16 months imprisonment, followed by three years of supervised release, and ordered to pay $328,085 in restitution to the Internal Revenue Service (IRS) and to file accurate back tax returns.  According to court records, during the 2001 through 2004 tax years, Bruce received over $890,000 in taxable income from his business M&C Trucking, Inc., and willfully failed to file tax returns with the IRS.  Bruce also attempted to conceal his true and correct income from the IRS and failed to pay over $244,000 in tax due and owing.  During this time period, Bruce obstructed and impeded the IRS by not paying the quarterly payroll taxes due and owing by MDB1, Inc., when he transferred the business operations to M&C Trucking, Inc., and by conducting business in cash, along with transferring his assets to nominees.

Couple Sentenced for Evading Over $200,000 in Employment Taxes

On November 23, 2009, in Denver, Colo. David and Paula Yost, of Osage Beach, Missouri, were sentenced to prison for tax evasion.  David and Paula Yost were both sentenced to 18 months in prison, followed by three years on supervised release.  They were also ordered to each pay a $200 special assessment to a general court victims of crime fund.  According to court documents, between 1988 and 2001, the Yosts operated plumbing businesses through various entities including: Dave’s Plumbing; Dave’s Plumbing and Heating; Payday Plumbing and Heating Services, Inc.; and Dave’s Plumbing and Heating Specialists, Inc. (DPHS). The entities controlled by the Yosts employed individuals who were paid wages. Between April 30, 1988 and January 31, 1991, the Yosts filed or caused to be filed twelve Employer's Quarterly Federal Tax Returns (Form 941) on behalf of Dave's Plumbing. For nine of these twelve quarters, the Yosts made no payments toward employment tax liabilities.  For the remaining three quarters, the Yosts paid only a small portion of the amount owed.  The Yosts did willfully attempt to evade the payment of approximately $99,488 of the federal employment tax due and owing. Then from approximately July 31, 1999 through at least October 31, 2001, the Yosts did willfully attempt to evade the payment of approximately $87,847 of the federal employment tax due and owing by DPHS.  Additionally, on or about March 14, 2003, the Yosts filed a joint Individual Income Tax Return (Form 1040) for tax year 2001 reporting only W-2 income from DPHS in the total amount of $4,600. The defendants did not list as income on this 2001 Form 1040 any of the money from the sale of DPHS that they spent on personal expenses.

Las Vegas Business Owner Sentenced to 15 Years for Employment Tax Fraud Scheme

On November 16, 2009, in Las Vegas, Nev., Robert Kahre and his sister, Lori Kahre, were sentenced to 190 months and 72 months in prison, respectively.  Both were found guilty in August 2009 of conspiring to defraud the federal government for the purpose of impeding the Internal Revenue Service (IRS) in its collection of income and employment taxes. According to information presented in court, between 1997 and 2003, Robert Kahre owned and operated six construction-related businesses in Las Vegas and paid employees over $100 million in cash wages. Additionally, Kahre provided a payroll service to approximately 35 other construction contractors who employed thousands of employees. Robert and Lori Kahre devised and used a payroll scheme that concealed and disguised the true amount of income received by his employees and the employees of the companies for which he provided payroll services. Robert Kahre claimed to pay employees in gold or silver coins, but which were actually immediately exchanged for pre-determined envelopes of cash. The face amount of the coins was one-eighth the amount of pay that the employee actually earned and received in the cash envelope. The defendants told the employees that the income was either not taxable or that they should falsely report their income to the IRS at the face amount of the gold and silver coins. During the course of the scheme, cash wage payments of at least $25 million were paid to Robert Kahre’s employees and cash payments of approximately $95 million were paid to the employees of the other contractors. No federal tax withholdings were made from the paychecks, and the wages were not reported to the IRS. The defendants took steps to hide the correct amount of income paid to the employees by using false invoices, keeping two sets of books, using false names on payroll records, making false statements on mortgage applications, and using nominees to conceal assets. In addition to the payroll scheme, Robert Kahre was convicted of evading personal income tax on approximately $12 million in income for the years 1999 through 2002; Lori Kahre was convicted of evading personal income tax on approximately $242,882 in income for the years 1998 and 2000 through 2005.

Pennsylvania Man Sentenced to 18 Months on Tax Fraud and Other Charges

On October 21, 2009, in Philadelphia, Pa., Sean O’Neill was sentenced to 18 months in prison on charges of conspiracy to commit tax fraud, immigration fraud, and other federal charges.  O’Neill was ordered to pay nearly $393,000 in restitution to the Internal Revenue Service (IRS), a $60,000 fine, and a $500 special assessment fee. According to court documents, O’Neill obtained a “green card” by lying about his criminal record, his marriage, and his membership in a prohibited organization.  Additionally, O’Neill admitted that he engaged in a more than 10-year conspiracy to defraud the IRS.  O’Neill, who owns a construction company, a restaurant and bar, and a property development business, paid some of his restaurant and bar employees in cash wages in order to avoid paying the required federal payroll taxes to the IRS.  As a result of the conviction, O’Neill also faces a removal proceeding in immigration court.

California Hair Salon Owners Sentenced to Prison for Payroll Tax Fraud

On October 1, 2009, in Los Angeles, Calif., John Pham, of Laguna Nigel, Calif., was sentenced to 37 months in prison, three years supervised release and ordered to pay more than $629,000 in restitution.  Pham previously pleaded guilty to a charge that he had willfully failed to account for and pay income and social security taxes withheld from the wages of the employees of one of the corporations involved in the scheme.  He admitted that he and his wife, Annya A. Nguyen, had incorporated 10 companies, all of which had failed to pay payroll taxes for tax periods beginning in 1996 and extending through 2004.  Pham and  Nguyen operated hair salons under the Fantastic Sams name at various times since 1985 in the cities of Orange, Laguna Niguel, Aliso Viejo, and Rancho Santa Margarita.  On September 4, 2009, Nguyen was sentenced to serve five months in prison and three years supervised release.  Nguyen previously pleaded guilty in United States District Court to a charge that she had conspired with Pham to defraud the United States by impeding the Internal Revenue Service in the collection of taxes.  She admitted that the conspiracy spanned a period of at least eight years and involved a loss to the government of over $770,000 of payroll taxes. Nguyen also admitted that she failed to pay more than $80,000 of her federal income tax liabilities during the same time period. Knowing that that taxes were owed to the IRS, Nguyen and Pham diverted assets from some of the corporations they controlled to their own personal benefit.  Both Pham and Nguyen were ordered to jointly pay restitution to the IRS in the amount of $629,105..

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