Examples of Employment Tax Fraud Investigations - Fiscal Year 2011
The following examples of employment tax fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
President of Virginia-Based Connection Newspapers Sentenced to Six Months in Prison for Failing to Pay Employment Taxes
On September 27, 2011, in Alexandria, Va., Peter Labovitz was sentenced to six months in prison, one year of supervised release of home confinement and ordered to pay $647,510 in restitution to the IRS as a result of failing to pay employment taxes to the Internal Revenue Service (IRS). Labovitz pleaded guilty on July 19, 2011, to willfully failing to pay over to the IRS the federal income taxes and Federal Insurance Contributions Act (FICA) taxes due and owing to the United States for Connections Newspapers LLC for the quarters ending September 30, 2007, and December 31, 2007. According to court records, Labovitz was the president of Connection Newspapers, a Northern Virginia newspaper publisher that currently publishes approximately 15 community newspapers throughout Northern Virginia and Maryland. Between 2002 and 2008, Labovitz ran Connection Newspapers’ day-to-day operations, directed employees, approved payments and made financial decisions on behalf of the company. Labovitz admitted that between 2002 and 2008, he caused to be deducted and collected from the total taxable wages of his employees’ federal income taxes and FICA taxes. However, Labovitz failed to timely pay over to the IRS more than $940,000 in federal income taxes and FICA taxes withheld and due and owing to the United States, despite the fact that he was required to do so by law.
Oklahoma Businesswoman Jailed for Failure to Pay Employment Taxes
On September 14, 2011, in Muskogee, Okla., Janet Christine Whelan, of Eufaula, Oklahoma, was sentenced to 24 months in prison, two years of supervised release and ordered to pay $1,000,016 to the Internal Revenue Service. According to her plea agreement, between 2002 and 2006 Whelan was owner and operator of a temporary employment agency in McAlester, Oklahoma. The temporary agency would provide businesses needing employees with the employees. The temporary agency had a duty to account for, and a duty to pay, the employees’ employment taxes, including their state and federal withholding taxes. Whelan collected the taxes and willfully failed to remit them to the United States Treasury. She collected taxes due from her clients. Of the total taxes due, Whelan withheld $678,563 from her employee's payroll checks and kept the employee withholdings in the agency's business bank accounts. Her duty as an employer to pay her portion of the payroll taxes was $372,547, which was not paid. Whelan pleaded guilty to the charges in December 2010.
Owner of Temporary Services Employment Agency Sentenced for Not Paying Employee Taxes
On September 13, 2011, in Minneapolis, Minn., Neng Vang, the owner of SPTS, a temporary services employment agency, was sentenced to 12 months in prison on one count of tax evasion. Vang was charged on April 20, 2011, and pleaded guilty on May 9, 2011. In his plea agreement, Vang admitted that between 2004 and 2007, he paid a large group of employees “off the books” in cash without recording or reporting their wages. That action resulted in a tax loss to the Internal Revenue Service of $342,240. In addition, Vang admitted omitting significant gross receipts earned by SPTS from the company’s corporate tax returns for the years 2004 through 2007. The unreported gross receipts resulted in a tax loss of more than $60,000. In entering his plea, Vang admitted the total tax loss resulting from his tax evasion was more than $400,000.
Florida Owner of Construction Business Sentenced for Employment Tax Fraud
On August 26, 2011, in Miami, Fla., Richard Rosaire Routhier, of Lake Worth, Florida, was sentenced to 60 months in prison and ordered to pay $1,243,574 in restitution to the Internal Revenue Service (IRS). On April 25, 2011, Routhier pleaded guilty to a one-count information charging him with conspiring to defraud the IRS. According to the information, Routhier and others conspired to defraud the United States and unlawfully enrich themselves by paying employees in cash and not withholding and paying over employment taxes to the U.S. Treasury. According to court documents, Routhier owned and operated Drymension Inc., a custom drywall installation and framing contracting company in Lake Worth. From 2002 through 2008, the defendant caused Drymension checks to be issued to several shell corporations. These entities, while purporting to be legitimate subcontractors, existed only on paper and did not do any work for Drymension. The checks written to shell corporations totaled approximately $9,132,516. The checks were cashed at local check cashing stores and Routhier used the cash to pay Drymension employees. Routhier neither withheld from the cash wages nor paid over to the IRS the employment and income taxes as required by law.
Ohio Man Sentenced on Tax Charges
On August 10, 2011, in Cleveland, Ohio, Scott E. Carter, owner of Advanced Health Systems, was sentenced to 25 months in prison. Carter pleaded guilty in April 2011 to charges of failure to account for and pay over to the Internal Revenue Service (IRS) withholding taxes for 2004, 2005, 2006, and 2007 for his now defunct company, Advanced Health Systems, Inc., of Hudson, Ohio. According to court documents, Carter failed to account for and pay over to the government more than $800,000 in payroll taxes.. Because other payroll taxes (employer portion) were due from Advance Health, the total amount of taxes owed by Carter and his company was more than $1 million. Carter was also pleaded guilty to two counts of tax evasion regarding the payment of taxes on his personal returns for the years 2003 and 2004.
Owner of Electrical Firms Sentenced to Prison for Employment Tax Fraud
On July 15, 2011, in Seattle, Wash., Deborah Ann Guenthner, of Arlington, Washington, was sentenced to six months in prison to be followed by six months of home electronic monitoring. Guenthner will be placed on 3 years of supervised release following her release from custody and must pay $377,687 in restitution to the Internal Revenue Service (IRS). According to court documents, Guenthner owned and operated two corporations, WRG Electric, Inc. and Electrical Construction, Inc., located in Arlington, Washington. Between October 2004 and December 2008, Guenthner withheld $377,687 from employee wages for Social Security, Medicare and federal income taxes as part of her normal responsibilities. However, she failed to pay that money over to the federal government. Instead, Guenthner used the funds for either her personal benefit or for the benefit of the companies she owned.
Former Owner of Health Care Business Sentenced for Tax Evasion
On July 14, 2011, in Hartford, Conn., John Durante, of Hope Valley, Rhode Island, formerly of Old Saybrook, was sentenced to 30 months of prison, followed by two years of supervised release and ordered to pay all of his outstanding tax liabilities. Durante was sentenced for engaging in a multi-year scheme to evade payment of employee withholdings and other payroll taxes to the IRS. According to court documents and statements made in court, between 1994 and 2001, Durante was involved in the operation of several small health care businesses in Connecticut which repeatedly failed to pay corporate income and payroll taxes. Durante was liable, as the responsible person, for outstanding withholding and other tax obligations and additional penalties and interest of approximately $1.121 million. After the IRS provided Durante with notice of his legal obligation, Durante set up additional companies using nominee owners who were unaware of the existence of the companies. Then, while operating the new companies, Durante took significant funds from the companies for his personal use, including funds to support a longstanding gambling habit. For approximately three years, Durante sought to evade payment of the taxes he owed by continuing to hide his interest in the health care businesses, failing to disclose his ownership interest on his personal income tax return and making false representations to the IRS. Durante’s illegal conduct has resulted in a tax loss to the government, including penalties and interest, of more than $1.3 million.
Florida Contractor Sentenced for Employment Tax Fraud
On July 6, 2011, in Miami, Fla., Reynaldo Orozco was sentenced to 18 months in prison and ordered to pay $504,047 in restitution to the United States. Orozco pleaded guilty to one count of filing a false employment tax return on March 22, 2011. According to court documents, from 2004 through 2007, Orozco owned and operated Rock Construction Builders Inc. (RCB), a construction business located in Miami-Dade County. Orozco admitted that he issued RCB corporate checks to various other corporations holding them out to be legitimate subcontractors. In truth, these corporations did not perform work for RCB. Orozco cashed the checks at local check cashing stores and used the bulk of the cash to pay RCB employees. Orozco failed to report the cash wages on quarterly employment tax returns and failed to withhold and pay over employment taxes on the wages. From 2004 through 2007, RCB failed to report approximately $3,294,426 in cash wages to the IRS. Based on the conduct described above, the United States Treasury suffered an employment tax loss of approximately $504,047.
North Carolina Couple Sentenced for Health Care Fraud and Tax Offenses
On June 29, 2011, in Greensboro, N.C., Ruben D. McLain and Michelle Judge McLain, both of Winston-Salem, North Carolina, were each sentenced to 24 months in prison, followed by three years of supervised release. They were also ordered to pay restitution of $1,313,671 jointly and severally to the Internal Revenue Service. The McLains did business in Winston-Salem as Universal Services, Inc., Reynolds Home Care, and Triage Behavioral Health Systems. According to their plea agreement, the McLains admitted they established a bank account for Universal Services, Inc. using a false tax identification number. They also admitted to using business bank accounts to purchase personal items for their home, to pay school tuition for their children, and to purchase jewelry. The McLains also admitted that, from 2004 through 2007, they either failed to file tax returns or filed false tax returns that did not declare their true income. The McLain companies provided personal care and mental health services to qualified recipients, paid for by the Medicaid program. The McLains admitted that they submitted a false enrollment application to the North Carolina Division of Medical Assistance that concealed their involvement in the companies through the use of a nominee and a fictitious person. The McLains also admitted to withholding income, social security, and Medicare taxes from their employees’ wages without paying over those withholdings to the Internal Revenue Service.
Williamsville Couple Sentenced On Money Laundering and Tax Fraud Charges
On June 27, 2011, in Buffalo, N.Y., Ralph S. Guastaferro, Jr. was sentenced to 24 months in prison and fined $100,000 after being convicted of money laundering. Karen Guastaferro, his wife, was sentenced to three years probation, including six months home confinement and ordered to pay $56,670 in restitution to the IRS following her conviction of failing to collect and pay over taxes. Ralph Guastaferro operated a business called Eclipse Processing, Inc. As part of a money laundering scheme, Guastaferro opened accounts with two payment processing companies in California and Ohio. Those accounts were used by certain unscrupulous telemarketers, many of whom were located in Canada, to process alleged sales of some product or service. Many of the victims whose checking accounts were debited had never purchased any product or service. After the victims accounts were debited, the payment processing companies transferred the funds to bank accounts controlled by the defendant in Buffalo, New York. Guastaferro then wire transferred the funds, less a percentage, to the telemarketers in Canada. This was done in an attempt to conceal the nature and source of the funds. The defendant admitted that the total amount of the funds involved in his criminal conduct was $1.2 million. Karen Guastaferro owned and operated Eclipse Glass Tinting, Inc. From 2004 through 2008, Mrs. Guastaferro employed between five and seven people at the business. Although Guastaferro had a duty to collect and truthfully account for and pay over federal employment taxes for each of her employees, she was convicted of lying to the IRS about how many employees she had and how much she paid them, thus intentionally failing to account for and pay over the required federal employment taxes for those employees.
New York Man Sentenced for Failing to Pay Employment Taxes
On June 14, 2011, in Long Island, N.Y., George Dimou was sentenced to 12 months in prison, followed by three years supervised release and ordered to pay $459,119 in restitution after pleading guilty to one count of failure to collect and pay over taxes. According to the Information, Dimou owned and operated GLIG, Inc., Evia One Enterprises, Inc. and Gutters of Long Island Inc.. These companies provided gutter fabrication and installation services to homeowners and building contractors on Long Island. During 2003-2007, GLIG, Evia One and Long Island Inc. did not file Forms 941 Employer's Quarterly Federal Tax Returns for the second quarter 2003 through the fourth quarter 2007. Dimou willfully failed to collect and/or truthfully account for and pay over almost $460,000 in FICA taxes, which he had a duty to pay.
Wisconsin Businessman Sentenced To Federal Prison
On June 14, 2011, in Madison, Wis., Donald Penniston, of Brodhead, Wisconsin, was sentenced to 24 months in prison for failing to pay employment taxes and stealing funds from an employee retirement plan. Penniston was also ordered to pay restitution to the retirement plan. According to court documents, Penniston was the President of Canton Promotions, LTD, a graphic design and screen printing business in Monroe, Wis. At his plea hearing in February, Penniston admitted he withheld employment taxes from his employees' payroll checks, but willfully failed to pay over those taxes to the IRS. Penniston also admitted he stole approximately $11,000 in funds belonging to Canton Promotion's employee retirement plan, which was a simple IRA fund. Penniston further admitted he withheld employee contributions for the IRA fund from his employees' payroll checks, but then willfully failed to pay that money over to the fund. The money withheld from Penniston's employees that was not paid over to the IRS or to the IRA fund remained in the company's bank accounts, where it was used by Penniston to pay for, among other things, his own personal living expenses.
North Carolina Dermatologist Sentenced on Tax Charges
On June 13, 2011, in Greensboro, N.C., Clyde Nolan was sentenced to 24 months in prison, followed by two years of supervised release and ordered to pay $585,835 in restitution to the Internal Revenue Service. Nolan operated a dermatology practice as a sole proprietorship in Greensboro, North Carolina. Nolan employed a staff in this office and withheld taxes from his employees’ paychecks. According to his plea agreement, Nolan admitted that he failed to account for and pay over $42,596 he withheld in taxes from his employees’ paychecks from 2003 and 2006. Nolan used that money for his own personal use. Nolan also willfully failed to file a personal income tax return for calendar year 2004, a year in which he was required to file a return.
Wisconsin Family Sentenced in Income Tax Fraud
On June 1, 2011, in Milwaukee, Wis., James Wierzbicki, of Kenosha, and two of his children, Eric Wierzbicki and Erin Morton, were sentenced for federal tax violations. James Wierzbicki was sentenced to 32 months in prison, to be followed by three years of supervised release, and ordered to pay $418,522 in restitution to the Internal Revenue Service (IRS). Eric Wierzbicki was sentenced to four months in jail, five years probation, and ordered to pay $300,922 in restitution to the IRS. Erin Morton was sentenced to 60 days in jail, five years probation, and ordered to pay $96,000 in restitution. James Wierzbicki pleaded guilty to conspiring to defraud the United States for the purpose of impeding the IRS. Eric pleaded guilty to two counts of failing to pay payroll taxes. Erin Morton pleaded guilty to conspiring with her family to fail to pay payroll taxes. According to court documents, the Wierzbickis were involved in one or more of a series of commercial painting and dry walling businesses operated in the Kenosha area, including Southport Remodeling and Construction, SRC Painting, and PBN, LLC. The Wierzbickis failed to file quarterly payroll tax returns, filed false payroll tax returns, and paid employees in cash to avoid payroll taxes. In addition, after accumulating substantial payroll tax liabilities, the Wierzbickis would abandon one business, transfer the business operation to a successor business, and recruit someone to act as the nominee owner for the new business. The Wierzbickis also deposited business receipts from one business into their personal accounts, as well as to accounts for successor businesses. In addition, James Wierzbicki’s other son, Edmund Wierzbicki, previously pleaded guilty to failing to file a federal income tax return for the year 2003, when he was being paid by his family’s painting businesses. Edmund was sentenced on April 27, 2011, to 14 days in jail, four years probation, and ordered to pay a $3,275 fine.
Former State Delegate Sentenced to Two Years in Prison on Racketeering Charge
On June 1, 2011, in Charleston, W. Va., Joseph Cleveland Ferrell, a Logan, West Virginia business owner and former state delegate, was sentenced to two years in prison after pleading guilty in October 2010 to racketeering and failure to pay employment taxes. Ferrell was also fined $250,000, ordered to forfeit $527,540 and pay the Internal Revenue Service $75,000 in unpaid employment taxes. At his plea hearing in October, Ferrell admitted his association with Southern Amusement and White Amusement, corporations which conducted legal and illegal gambling operations in Logan County and other locations in West Virginia and Kentucky. To protect his gambling operations, Ferrell admitted he gave cash bribes to an inspector with the West Virginia Lottery Commission from approximately the summer of 2004 until the summer of 2007. Ferrell admitted his motive for the payments was to insure that she continue to be immediately available to him when he needed access to the sealed areas of his video lottery machines and to insure her continuing favorable treatment during her inspections. Ferrell also admitted that from approximately the fall of 2003 until April of 2008, Ferrell conducted, financed and managed an illegal gambling business in Kentucky. This operation consisted in large part of several video poker machines owned by White Amusement. These machines paid cash jackpots to winning players and were operating in violation of Kentucky state law. White Amusement then shared the proceeds from the operation of these machines with the owner/operator of the establishment. Ferrell traveled or had others to travel to Kentucky from West Virginia to collect White Amusement's share of the proceeds, to disburse money from the operation of the machines, and to perform repairs and maintenance on the machines. The gambling operation Ferrell led involved five or more persons who conducted, managed, and supervised the gambling business.
Florida Man Sentenced on Tax Charges
On June 1, 2011, in Tampa, Fla., Stuart M. Register, of Brandon, Florida, was sentenced to 27 months in prison. In February 2011, Register pleaded guilty to 13 counts of failure to pay over federal income tax and four counts of filing false income tax returns. According to court documents, from 2003 through 2007, Register owned and operated Criminal Research Bureau Inc., in Brandon, Florida. He employed individuals and had a duty to withhold and pay over federal employment taxes from those employees to the Internal Revenue Service (IRS). From the first quarter of 2003, through the fourth quarter of 2007, Register withheld federal employment taxes from his employees totaling $316,220, but failed to pay it over to the IRS. In addition, for the tax years 2003 to 2006, Register failed to pay personal income tax, filed false individual income tax returns with the IRS, and collected federal income tax refunds to which he was not entitled. Register's failure to pay over taxes he withheld from his employees, together with his filing of false income tax returns resulting in undue refunds, resulted in a total tax loss to the IRS of $345,612.
Illinois Contractor Sentenced to Prison on Fraud and Tax Charges
On May 9, 2011, in Rockford, Ill., John M. Volpentesta, formerly of Marengo, Illinois, was sentenced to 133 months in prison, five years of supervised release, and was ordered to pay $1,378,127 in restitution to the victims of his fraud scheme. Volpentesta was convicted in July 2010 of various charges, including failure to pay over to the IRS taxes he withheld from the wages of his employees, failure to file unemployment tax returns, and failure to file personal income tax returns. According to the indictment, Volpentesta operated a residential construction business, known as Volpentesta Construction, Inc. (VCI). He defrauded his construction company customers and investors out of more than $1 million. In addition, from the second quarter of 2003 through the fourth quarter of 2005, Volpentesta collected federal income tax, Medicare, and Social Security taxes from the wages of VCI's employees but failed to pay those monies to the IRS. He also failed to file Form 940, Federal Unemployment Tax returns, on behalf of VCI for the years 2003, 2004, and 2005; and, he failed to file personal income tax returns on behalf of himself and his wife for the same years.
California Payroll Company CEO Sentenced in $20 Million Tax Fraud Scheme
On May 6, 2011, in Sacramento, Calif., Albert Cipoletti, of Northport, N.Y., was sentenced to 78 months in prison, three years of supervised release, and ordered to pay $19,141,618 in restitution. Cipoletti was sentenced in connection with a scheme to divert more than $20 million from Sacramento County as well as two other businesses: SanDisk Corporation (SanDisk) and The Stanley Works and Stanley Solutions Inc. (Stanley). According to court documents, Cipoletti was the Chief Executive Officer (CEO) of Ingentra HR Services Inc., a payroll services corporation in Hauppauge, N.Y. As part of the payroll services, Ingentra calculated the tax payments for the clients and the clients’ employees and then transmitted the payments to the state and federal tax authorities. As stated in Cipoletti’s plea agreement, from 2005 until April 2010, he and co-defendant Kerry Seaman, comptroller for Ingentra, devised a scheme to defraud the County of Sacramento, SanDisk, and Stanley of the tax withholdings intended to be paid to the Internal Revenue Service (IRS) by collecting the correct amount from the clients but under-reporting to the IRS the amount owed. They diverted the difference to Ingentra’s operating account for Ingentra’s use. Cipoletti and Seaman sent funding letters to the clients that correctly calculated payroll and federal tax withholdings for the clients’ employees, and these clients wire transferred funds to Ingentra for the purposes of paying both the payroll and taxes. Cipoletti and Seaman then filed false Forms 941, Employer’s Quarterly Federal Tax Form, to the IRS, understating the true employee tax withholdings for these clients. Cipoletti and Seaman wrongfully diverted in excess of $20 million in tax withholdings from clients Stanley, SanDisk, and Sacramento County that should have been remitted to the IRS on behalf of these clients and these clients’ employees. Seaman is awaiting sentencing.
Owner of Community Support Service Corporation Sentenced
On April 26, 2011, in Raleigh, N.C., Shirlene Reese Boone, of Murfreesboro, North Carolina, was sentenced to 144 months in prison, followed by three years of supervised release, and was ordered to pay restitution of $3,550,840 to the Medicaid Investigations Unit, $1,061,820 to the Internal Revenue Service, and $46,059 to the North Carolina Employment Security Commission. Boone previously pleaded guilty to multiple charges including conspiracy to commit health care fraud, aggravated identity theft, and failure to collect and pay over payroll taxes. Boone was the principal owner, manager, and registered agent for Metropolitan Counseling Services, Inc. (MCS), a registered non-profit North Carolina corporation that provided community support services and HIV case management. From 1997 to May 2010, Boone, through MCS, routinely submitted claims for reimbursement to the Medicaid program for community support services and HIV case management. Community support and HIV case management services were designed to assist the state’s disabled and economically disadvantaged individuals diagnosed with certain medical conditions. Many of the claims Boone submitted to Medicaid were false in that they demanded payment for services that never happened. As the president of the corporation, Boone held back federal withholding taxes and FICA taxes from employee wages. While Boone filed quarterly payroll tax reports for all of the quarters during the period July 1, 2005, through September 30, 2006, she did not pay any of these taxes.
Final Defendant Sentenced In Illegal Worker Scheme
On April 25, 2011, in Pittsburgh, Pa, Alexander Litt, the sixth and final defendant of an illegal worker scheme was sentenced to 56 months in prison, followed by three years supervised release, on his conviction of conspiracy to harbor illegal aliens for commercial gain and money laundering conspiracy. The court also ordered the forfeiture of cash and property to the United States. According to information presented to the court, Litt, through his company, ARRA Corporation, of Cincinnati, Ohio, conspired to furnish out-of-status alien employees to various hotels in the Cincinnati, Cleveland, Columbus, and Pittsburgh areas as housekeeping personnel between 1998 and 2006. Litt, along with a co-conspirator, received a kickback of $1.50 per hour per employee for hours worked. Agents estimate that over 100 such out-of-status aliens were employed in the Pittsburgh area alone by the Pittsburgh franchise of the company, Citiwide Management Group (CMG) and that, during peak season, the aliens worked up to 20 hours per day. While working for CMG, the aliens, typically from former Soviet countries, were forced to live together in rented housing chosen by CMG, for which they were required to pay the rent. The aliens were transported to and from the hotels in a company van, for which they paid a transportation fee. Five other defendants pleaded guilty to their roles in the conspiracy and have received prison terms ranging from 33 to 56 months.
Former Illinois City Councilman Sentenced for Tax Evasion, Failure to File Income Tax Returns, and Election Fraud
On April 13, 2011, in Fairview Heights, Ill., Michael V. Collins, of Swansea, Illinois, was sentenced to 50 months in prison, followed by three years supervised release, and ordered to pay $342,375 in restitution to the Internal Revenue Service (IRS). Collins was convicted by a trial jury of tax evasion, failure to file federal income tax returns, and election fraud. According to evidence submitted at trial, Collins had not filed a federal tax return in 13 years at the time he became aware of the federal investigation. He attempted to conceal his income by commingling business and personal assets. Collins also failed to provide his correct social security number, operated a business under an invalid Employer’s Identification Number, and submitted false certified payrolls which falsely reflected that his employees’ federal income tax withholdings and FICA taxes were withheld and paid. He operated through the receipt and expenditure of cash, without record keeping, and failed to maintain accurate books and records. At trial, evidence showed that Collins knowingly and willfully gave false information as to his address for the purpose of establishing his eligibility to vote in a voting district in East St. Louis and during that same period of time, he was elected to be a precinct committeeman in East St. Louis when he was living in Swansea.
Owner of Superior Protection Inc., Sentenced to Prison for Conspiracy, Tax Fraud, Bankruptcy Fraud, Bribery and Other Charges
On April, 8, 2011, in Houston, Texas, John Heard, Jr., was sentenced to 151 months in prison and ordered to pay more than $8.7 million in restitution. According to court documents, Heard, the owner of Superior Protection, Inc (SPI), was convicted of conspiring to defraud the United States of millions in employment taxes as well as income tax evasion in 2001 and 2003, willfully making and subscribing to a false income tax return in 2007, bribery and corrupt interference with the tax laws. Heard operated and controlled several security companies, including SPI since 1987 and failed to pay employment taxes totaling more than $5.7 million. In the scheme, Heard opened and closed numerous corporations and used fictitious names for numerous documents, including tax returns, corporate documents, bank documents and payroll checks. He also named lower-level employees as company officials in corporate documents in an effort to impede the Internal Revenue Service (IRS) by concealing the true individuals who operated and controlled the security guard companies. Heard failed to file numerous IRS Forms 941, and when he did, they were often false. He did not report funds on his personal income tax returns in 2001 and 2003 that he pulled out of SPI for his personal use. He also did not report any of the income that he earned in 2007 on his personal income tax return. He also provided airline tickets, lodging and access to two celebrity golf tournaments to a government contracting official who oversaw a federal security guard contract in exchange for a favorable reference, on behalf of SPI, to a contracting official and for pre-signed security-guard forms from the General Services Administration.
Owner of Arizona Auto Body Repair Shop Sentenced for Employment Tax Fraud
On April 4, 2011, in Tucson, Ariz., Daniel Enrique Paz, Jr., was sentenced to 27 months in prison, followed by three years of supervised release, and ordered to pay a $100 special assessment. In addition, Paz was ordered to cooperate with the Internal Revenue Service (IRS) in filing correct income tax returns for tax years 2003 through 2009 and pay all taxes, interest and penalties. Paz must also pay all federal income and FICA taxes owed by his business and its employees for tax years 2003 through 2005. Paz pleaded guilty in February 2011 to failure to account for and pay over to the IRS federal income taxes and FICA taxes. According to court documents, Paz was the owner of Spectrum Auto Collision an auto body repair shop. Paz willfully failed to pay over approximately $340,724 in employment taxes for three tax years.
Owner of Drywall Business Sentenced for Failure to Remit More Than $1 Million in Taxes
On March 29, 2011, in Sacramento, Calif., William Roseberry was sentenced to 28 months in prison for evading and failing to remit over $1 million in taxes to the Internal Revenue Service (IRS). In addition, Roseberry was ordered to pay $1,040,500 in restitution to the IRS. Roseberry pleaded guilty in September 2009 to willfully attempting to evade or defeat taxes. According to court documents, between October 2003 and September 2006, Roseberry owned and operated a drywall business in Rocklin as a sole proprietorship under the name of Western Wallboard and/or Bustos Drywall. During this time period, Roseberry evaded or failed to remit more than $1 million in employment and income taxes owed to the IRS in connection with the 350-plus employees of the drywall business. Roseberry falsely reported to the IRS that the total wages paid to employees by the drywall business were approximately $229,972 and that the total amount of Social Security taxes and Medicare taxes due thereon were approximately $35,185 when, in fact, the total wages subject to taxation were approximately $5,638,917, and the corresponding taxes owed were $862,754. In addition, Roseberry collected income taxes from employees in the approximate amount of $236,379, but did not remit the same to the Internal Revenue Service.
California Trucking Company Owners Sentenced for Tax and Bribery Conspiracy
On March 21, 2011, in Fresno, Calif., Kulwant and Tarlochan Lasher, owners of Lasher Brothers Trucking Company Inc., based in Los Banos, were sentenced to 57 months and 12 months in prison, respectively. The brothers were each sentenced to three years of supervised release following their prison terms and ordered to pay no less than $739,767 in restitution, with the final amount to be determined by the IRS. Kulwant and Tarlochan pleaded guilty in October 2010 to conspiring to failing to account for and pay employee withholding and FICA taxes for tax years 2003 through 2007. Kulwant Lasher also admitted that he had offered to pay an undercover IRS Revenue Officer $600,000 in cash to eliminate the Lasher Brothers Trucking Company’s $2.4 million tax liability. In meetings at a restaurant and gas station, Kulwant Lasher gave the Revenue Officer $56,500 in cash, handed over his 2003 BMW 745L, and gave him a quitclaim deed for his residence in Los Banos. Immediately, after delivering his BMW to the Revenue Officer, Kulwant Lasher called a BMW dealership in Fresno and asked to be picked up, because he wanted to buy a new BMW. When the dealership asked about a $747,000 tax lien on his credit record, Kulwant Lasher, knowing of his tax liability to the IRS, told the salesman that he had already paid it. Kulwant Lasher then purchased a new 745 BMW for approximately $95,000.
Brooklyn Man Sentenced to Prison for Harboring Aliens, Money Laundering and Tax Evasion
On March 3, 2011, in Pittsburgh, Pa., Yaroslav Rochniak was sentenced to 51 months in prison, followed by three years supervised release on his conviction of conspiracy to harbor aliens, money laundering, and tax evasion. According to information presented to the court, Rochniak was the President of Citiwide Management Group (Citiwide), the Pittsburgh subsidiary of a company which supplied housekeeping staff to Pittsburgh-area hotels. Over 100 of the employees provided were out-of-status aliens who had initially entered the United States legally, but had either overstayed the term limits of their visas or were not authorized to work in the United States under the terms of their visas. Thus, they had illegally remained in the United States. Most of the aliens were citizens of former Soviet bloc countries. Rochniak and his co-conspirators made kickbacks of $1.50 per hour per employee to ARRA Corporation, the parent company in Cincinnati. Citiwide housed the employees in company-leased apartments. They also transported the employees to and from the hotels, charging them both rent and transportation fees. The employees’ first two weeks’ wages were retained by the company as a security deposit, which the company kept as a penalty if the employees did not work at least six months. Citiwide paid no overtime or benefits and failed to pay taxes on the employees' wages, resulting in a tax loss of $1.5 million. In addition, the parent company maintained offices in Cleveland and Columbus, Ohio. Rochniak was also in charge of the Cleveland branch of the company during part of the conspiracy.
Health Services Entrepreneur Sentenced for Not Paying Taxes
On March 3, 2011, in Kansas City, Kan., Jeffrey Phillips was sentenced to 42 months in prison and ordered to pay $5.8 million in restitution. According to court documents, Phillips pleaded guilty to one count of failure to pay employment taxes. In his plea, Phillips admitted that from 2001 to 2005 his companies withheld tax payments from employee's paychecks including federal income taxes, Medicare, and Social Security taxes totaling about $4 million, but failed to make payments to the IRS.
Brothers Sentenced for Conspiring to Evade Employment Taxes
On February 17, 2011, in Minneapolis, Minn., brothers Joseph and John Riley were each sentenced to 42 months in prison and each received a $250,000 fine and were ordered to pay all taxes and penalties owed to the Internal Revenue Service (IRS) for a tax evasion scheme that involved concealing income they and many of their employees received from their road construction business. According to court documents, the brothers own Riley Bros. Companies, Inc., a holding company that owns 100 percent of Riley Bros. Construction as well as a number of other companies in whole or in part. Between 1984 and 2003, the Riley’s conspired to defraud the U.S. by concealing income earned by Riley Bros. Companies, Inc. and evaded paying income taxes, social security taxes, Medicare taxes, and unemployment taxes. The Riley’s also used unreported company income to pay for their personal expenses.
Colorado Man Sentenced on Charges of Tax Evasion and Harboring Illegal Aliens
On February 10, 2011, in Denver, Colo., Opas Sinprasong was sentenced to 12 months and a day in prison and ordered to pay a $4,000 fine and $754,975 in restitution. In addition, Sinprasong was ordered to forfeit $766,000 and two residential properties in Boulder. As part of his plea agreement, following his incarceration, Sinprasong, a Thai national, will be deported. According to court documents, Sinprasong, while in the United States on an E2 Non-Immigrant Principal Investor status Visa, ran Thai and Japanese restaurants in Boulder, Louisville, and Broomfield. From 2001 through 2008, Sinprasong sponsored Thai nationals’ admission to the United States as specialty workers for his restaurants. He claimed these workers possessed specialized skills that were essential to the efficient operation of his businesses. Sinprasong required all Thai employees to enter into a two-year employment contract. The terms of employment per the contract included that employees pay Sinprasong a “bond” of approximately $1,500; a payment of approximately $18,000 if the employee violated a term of the contract or caused damage to Sinprasong; and a payment of $3,000 for a “visa preparation fee." Sinprasong paid employees “under-the-table” while deducting portions of the $3,000 “visa preparation fee” and other fees from their paycheck. Once these fees had been fully paid, which typically took between three and four months, the defendant helped the Thai employees obtain Social Security numbers and then started to report a portion of their wages and placed them on the official payroll of the restaurants. Court documents showed that Sinprasong used a dual payroll system whereby he concealed from his payroll records the substantial overtime hours he directed the Thai employees to work, which was typically between 26 and 32 hours of overtime each week. As a result, Sinprasong failed to report all of the wages paid to the Thai employees and failed to pay the Thai employees the overtime wages required by federal law. He filed employer’s quarterly federal tax returns with the Internal Revenue Service (IRS) as required, but the returns were materially false in that they failed to report the total wages paid to the Thai employees. By failing to report all of the wages paid to the Thai employees, Sinprasong evaded paying the employer’s portion of the Social Security and Medicare taxes due and owing on the unreported wages.
Florida Contractor Sentenced for Employment Tax Fraud
On January 13, 2011, in Miami, Fla., Axel Rafael Mercado, owner of Mercado Enterprises, Inc., was sentenced to 24 months in prison and ordered to pay $352,605 in restitution to the United States. According to court documents, from 2005 through 2007, Mercado attempted to evade a large part of his company’s federal employment taxes. Mercado caused the company’s checks to be written to shell companies, which were supposedly legitimate subcontractors, but did not work for Mercado Enterprises. Mercado would then direct those checks to be cashed at a local check-cashing store, which was aware of the scheme, and use the cash to pay his workers. Mercado never reported the existence of the employees, never reported the cash wages of the employees, never filed employment tax returns and never paid the required employment tax.
Former Owner of Illinois Payroll Processing Company Sentenced for Employment Tax Evasion
On December 22, 2010, in Urbana, Ill., Gary A. Gerberding, former owner of Premier Data Solutions, was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to pay $1,585,009 in restitution. Gerberding pleaded guilty in June 2010 to defrauding former clients of his payroll processing company. According to court documents, Gerberding, of Kankakee, Illinois, admitted that from January 2007 to April 2008, he failed to pay payroll taxes due to the Internal Revenue Service (IRS) and the Illinois Department of Revenue on behalf of clients who had contracted with Premier Data Solutions to process weekly and bi-weekly payrolls. As part of their arrangement, clients provided Premier Data Solutions with the funds necessary to cover both the payroll and payroll taxes. Premier Data Solutions then provided clients with a payroll package consisting of several reports and payroll checks. Gerberding admitted that he manipulated the payment of clients’ payroll tax liabilities using one client’s payroll tax monies to pay another client’s outstanding payroll tax liabilities. Gerberding further admitted that he provided false check reconciliation journals to clients to cover the fraud. The journals falsely indicated that Premier Data Solutions was remitting payroll taxes to the IRS and the Illinois Department of Revenue, when in fact, it was not.
Ohio Woman Sentenced on Conspiracy and Taxes Charges
On December 17, 2010, in Columbus, Ohio, Maria Terechina, a national of the Russian Federation, was sentenced to 12 months in prison, followed by three years of supervised release, and ordered to pay nearly $250,000 in restitution to her victims. During her guilty plea hearing in April 2010, Terechina admitted that she engaged in the harboring and transporting of dozens of illegal aliens from Russia, Estonia, Belarus, Ukraine, and other Eastern European nations. The illegal aliens worked for Terechina in various hotels in and around Columbus. Terechina admitted that she agreed to hold some of the workers’ passports and immigration documents in order to prevent them from leaving their employment. Terechina also defrauded the United States of approximately $185,000 in employment taxes.
Texas Restaurant Owner Sentenced for Filing False Income Tax Returns
On December 13, 2010, in Houston, Texas, Maria F. Argueta, the owner of Taqueria Arandas No. 13 Inc., was sentenced to 12 months and one day in prison, one year of supervised release, and ordered to pay $237,561 in restitution to the IRS. According to court documents, Argueta owned Taqueria Arandas No. 13 Inc., through which she operated a restaurant in Houston. In a plea agreement executed on May 17, 2010, Argueta admitted she had helped file Corporate Income Tax Returns for Taqueria Arandas No. 13 Inc., for tax years 2000 through 2004 that under-reported sales by approximately $1,432,236 and taxable wages to employees by approximately $343,782. She further admitted that because of the false filings, the corporation underpaid income taxes by approximately $184,962 and underpaid employment taxes by approximately $52,599. Argueta is one of 13 local Taqueria Arandas Restaurant owners charged with filing false federal income and employment tax returns for their restaurants. To date, these defendants have paid the IRS almost $5.5 million in delinquent taxes, penalties and interest and all remain subject to audit and further assessment of taxes, penalties and interest.
Texas Man Sentenced for Failure to Pay More Than $2 Million in Employment Taxes
On December 9, 2010, in Houston, Texas, Gary Quintinsky was sentenced to 42 months in prison and ordered to pay nearly $2.28 million in restitution for failing to pay federal income taxes, Social Security taxes, and Medicare taxes withheld from employees. According to court documents, Quintinsky admitted that he operated a group of related crane corporations, including United Crane and United Payroll Services. He ran the financial affairs of the corporations even though Ellynn Ogilvie appeared as the sole shareholder and president of the corporations and the sole signatory on all corporate bank accounts. Quintinsky admitted that he signed numerous letters as president of United Crane and signed title documents as president of the corporation in the related group owning the cranes. Quintinsky further admitted that he signed Ogilvie’s name on numerous other important corporate documents, including signing her name on the false employer’s federal quarterly tax return, IRS Form 941, for United Crane’s third quarter of 2003. Quintinsky also admitted to using Ogilvie’s signature stamp to disburse funds from corporate bank accounts.
Owner of Payroll and Tax Services Company Sentenced on Tax Evasion and Embezzlement Charges
On November 23, 2010, in Memphis, Tenn., Venetia Smith was sentenced to 14 months in prison, to be followed by three years of supervised release and ordered to pay $61,291.97 to the Internal Revenue Service (IRS) and $24,948 in restitution to The Regional Medical Center at Memphis (The MED). Smith pleaded guilty in June 2010 to willful failure to collect or pay over tax and embezzlement charges. According to court documents, Smith owned VS Payroll and Tax Service, which was contracted by The MED to handle payroll services for the Health Loop, including the preparation and filing of federal employment tax returns and payment of employment taxes to the IRS on a regular basis. As part of this contract, Smith was responsible for preparing employee payroll checks and withholding federal income tax, as well as Federal Insurance Contribution Act (FICA) taxes. Smith was also supposed to pay to the IRS the amount of federal income tax withheld and the total FICA taxes owed, file quarterly Forms 941 with the IRS for The Health Loop, and issue annual Forms W-2 to the employees of The Health Loop. Additionally, Smith admitted that she embezzled more than $84,000 belonging to The MED.
New York Man Sentenced on Charges of Tax Evasion, Money Laundering and Harboring Aliens
On November 18, 2010, in Pittsburgh, Pa., Gregory Kucher, a resident of Brooklyn, New York, was sentenced to 51 months in prison to be followed by two years of supervised release. Kucher pleaded guilty in February 2010 to charges of alien harboring, money laundering conspiracy, and tax evasion. According to court documents, Kucher employed and contracted out to client businesses in Western Pennsylvania more than 100 "out of status aliens" between approximately 2002 and 2006. The term "out of status aliens" refers to individuals who may have lawfully entered the United States, but have either overstayed the terms of their visas or were not permitted to be employed while in the United States under the terms of their visas. Kucher failed to declare and pay taxes on the wages earned by the out of status workers contracted to various businesses in the Greater Pittsburgh area. The total tax loss was approximately $1.5 million. He also laundered the profits generated through the wages of these out of status workers.
South Dakota Business Owner Sentenced for Failing to Pay Employment Taxes
On November 15, 2010, in Sioux Falls, S.D., Michael Hoppe was sentenced to 21 months in prison, three years of supervised release and ordered to pay more than $670,000 in restitution to the Internal Revenue Service (IRS). According to court documents, from July 2005 through January 2009, he owned and operated ABM Manufacturing and Mad Dog Haulers in Brookings, S.D. During those years, he collected federal withholding income taxes and FICA taxes from his employees’ paychecks. However, he failed to report and remit the taxes withheld from employees’ wages, and he failed to pay the employer’s share of FICA taxes. Over a period of approximately four and a half years, Hoppe failed to remit and pay more than $670,000.
Northern Virginia Business Owner Sentenced for Failing to Pay Over $200,000 in Employment Taxes
On November 12, 2010, in Alexandria, Va., Eric Jon Eisenhower, a resident of Fairfax Station, Va., was sentenced to 19 months in prison and ordered to pay $88,826 in restitution to the Internal Revenue Service (IRS). According to court documents, Eisenhower was the president of CoManage Inc., a computer software development company. From December 2004 through June 2008, Eisenhower failed to pay over to the IRS more than $200,000 in withholding taxes from employees’ paychecks. The monies included withholdings for Social Security, Medicare and federal income taxes.
Dallas Realtor Sentenced for Failing to Pay Federal Income Taxes
On November 5, 2010, in Dallas, Texas, Eleanor Sheets was sentenced to 12 months in prison which will be served in strict home confinement to include electronic monitoring. In addition, Sheets was sentenced to three years of supervised release and ordered to pay more than $1.37 million in back taxes. She pleaded guilty in July 2010 to four counts of failure to pay income taxes. According to the plea documents, Sheets admitted that she willfully failed to pay both individual income and corporate taxes during tax years 2003 through 2007. Since 1996, Eleanor and her husband, John Nicholas “Nicky” Sheets successfully worked as real estate agents and established multiple closely-held corporations, including, EMS, Inc., E-Residential, LLC and Dallas EMS, LLC. In court hearings, Eleanor Sheets stipulated that they failed to pay personal and/or employments taxes for tax years 1997 through 1999 and 2003 through 2007 which totaled approximately $1.3 million. Nicky Sheets was sentenced to 40 months for tax evasion in August 2010.
Florida Contractor Sentenced for Employment Tax Fraud
On November 3, 2010, in Miami, Fla., Victor Manuel Amaya, owner of Amaya Contracting and Stucco Inc. (ACS), was sentenced to 24 months in prison and ordered to pay $319,585 in restitution to the Internal Revenue Service (IRS). According to court documents, from 2004 through 2007, Amaya filed fraudulent employment tax returns with the IRS and caused his company to underpay its federal employment taxes. To avoid having to report all of ACS's employment tax obligations, Amaya regularly cashed checks made out to ACS at a local check cashing store instead of depositing them into the company's account. Additionally, Amaya wrote ACS checks to fictitious companies and cashed them at local check cashing stores. Amaya then used the cash to pay his workers, which allowed him to report lower wages and lower employment taxes due on ACS's employment tax returns. Amaya also used the cash for materials and personal expenses. Amaya failed to report to the IRS approximately $2,130,568 in wages, which resulted in a tax loss of approximately $319,585.
Father and Son Sentenced for Employment Tax Fraud; Ordered to Pay Over $500,000 in Restitution
On November 2, 2010, in Columbus, Ga., Edward Griffin, Sr. and Edward Griffin, Jr., were sentenced for their roles in an employment tax fraud investigation. Edward Griffin, Sr. was sentenced to 18 months in prison, three years of supervised release, and ordered to pay $367,526 in restitution to the Internal Revenue Service (IRS). Edward Griffin, Jr. was sentenced to 12 months and one day in prison, three years of supervised release, and ordered to pay $148,705 in restitution to the IRS. On July 28, 2010, both Edward Griffin, Sr. and his son, Edward Griffin, Jr., pleaded guilty to failure to pay over withholding and F.I.C.A. taxes.
Owner of Rhode Island Temporary Employment Agency Sentenced for Failing to Pay Millions of Dollars in Withholding Taxes
On October 7, 2010, in Providence, R.I., Cheang Chea, owner of S&P Temporary Help Service, Inc., was sentenced to 24 months in prison and ordered to pay the government $14 million in workers’ taxes. According to court documents, since 2003, Chea operated S&P Temporary Help Service, a Providence based company which has supplied hundreds of workers to approximately 30 Rhode Island companies. Chea’s workforce is made up of primarily East Asian, non-English speaking immigrants. S&P Temporary Help Service agreed to be responsible for all payroll and employment tax withholdings and carry workers compensation insurance coverage for its employees. Chea underreported substantial amounts of wages and failed to pay millions of dollars in federal withholding, social security and Medicare taxes.