Examples of Employment Tax Fraud Investigations - Fiscal Year 2014
The following examples of employment tax fraud investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
New York Attorney Sentenced for Tax Violations
On Feb. 19, 2014, in Buffalo, N.Y., Edmund J. Renaud, of Olean, N.Y., was sentenced to 15 months in prison. Renaud was convicted of evading the payment of taxes involving his moving companies. According to court documents, Renaud failed to pay employment taxes for businesses he ran from 2002 through 2008. Renaud ran Southern Tier Moving and Storage, Inc., in Olean until 2002, when the IRS assessed over $48,000 in unpaid federal payroll taxes. Upon shutting down that entity, Renaud opened Southern Tier Moving and Storage, LLC, where from 2002 until 2006, Renaud similarly failed to pay over $86,000 in federal payroll taxes. Renaud provided false information to the IRS about bank accounts and other assets, including a truck he had gotten as a result of accumulating “comp” credits at a casino. Renaud also provided false information to the IRS in connection with filing an Offer in Compromise, including false claims that the company was out of business, failure to identify bank accounts and failure to disclose company assets.
Massachusetts Doctor Sentenced for Multiple Tax-Related Crimes
On Feb. 12, 2014, in Boston, Mass., Richard C. McGinn was sentenced to 30 months in prison and two years of supervised release. In 2013, a jury convicted McGinn, a doctor, of tax evasion, five counts of failing to pay over employment taxes and failure to file a tax return. According to court documents, from 2007 until 2009, McGinn owned and operated a medical practice in Greenfield, Mass. During that time, he evaded the payment of a tax liability of over $1 million which he had accumulated from 1987 to 2003. Among other things, McGinn paid personal expenses with corporate funds, and he used the bank account of a family member to conceal the income from the medical practice. During this time, McGinn also withheld employment taxes from the paychecks of his employees, and he kept the money for himself, rather than paying the money to the IRS as he was required to do. Additionally, McGinn failed to file corporate income tax returns for his medical practice.
New York Business Owner Sentenced for Failing to Pay Payroll Taxes
On January 29, 2014, in Buffalo, NY, John Creighton, of Bemus Point, N.Y., was sentenced to 12 months in prison and ordered to pay $663,627 in restitution for failing to pay payroll taxes. According to court documents, Creighton is the president and owner of Classic Brass Inc. (CBI) in Lakewood, N.Y. In 2010 and 2011, Creighton withheld payroll taxes from CBI employees. However, Creighton failed to make payroll tax payments to the IRS, and failed to file Forms 941.
North Carolina Woman Sentenced for Tax and Mortgage Fraud
On January 14, 2014, in Charlotte, N.C., Tega Burns, aka Tega Foy, was sentenced to 24 months in prison, two years of supervised release and ordered to pay $201,039 in restitution to IRS, $57,450 in restitution to Bank of America, and $48,483 in restitution to CIT Group Consumer Finance. In July 2012, Burns pleaded guilty to one count of failure to account for and pay over employment tax and one count of making a false statement on a loan application. According to court records, Burns was the owner of Family Homecare Services, a Charlotte-based company that provided in-home care services in the area from 2007 through 2011. Burns failed to pay a large part of the employment taxes her company owed for the relevant tax years. Burns had an outstanding employment tax liability of more than $200,000. To hide funds from the IRS and to evade payment of the outstanding taxes, Burns utilized nominees, including her son and her step-father. In addition, in May 2007, Burns obtained mortgage loans using false information, including fake employment documentation from her company, to purchase two homes in the name of another individual. Both of these homes were eventually foreclosed on, with losses to the banks.
Michigan Resident Sentenced for Filing False Tax Return
On November 4, 2013, in Detroit, Mich., Jason Syrek, of Adrian, Mich., was sentenced to 72 months in prison and ordered to pay $17,659,561 in restitution for healthcare fraud and filing false tax returns. According to court documents, from May 2008 to December 2010, Syrek operated a human resource company, CAS Resources of Adrian, Michigan. CAS Resources provided outsourcing of human resource services, such as payroll, taxes and employee benefits administration, including health care coverage. CAS collected $1.75 million in premiums from client companies in November and December 2010, but never paid the premiums to Blue Cross Blue Shield of Michigan. Syrek, as the Director of CAS Resources, filed a form with the IRS stating that CAS Resources paid $1,862,902 in payroll taxes. Syrek knew he had diverted these funds for his own personal use and only paid $633,332 in payroll taxes. In addition to this form for the third quarter of 2010, Syrek filed seven other forms with the IRS reporting payroll taxes that he did not pay. In total, from 2010 through 2011, Syrek’s tax due was $13.4 million. He admitted diverting these funds for personal use to buy beach front properties, several cars, a boat and investment properties.
Iowa Man Sentenced for Failing to Pay Withheld Taxes
On October 22, 2013, in Cedar Rapids, Iowa, Eric Holub, of Clarence, Iowa, was sentenced to 30 months in prison, three years of supervised release and ordered to pay $438,426 in restitution to the IRS. On July 12, 2013, Holub pleaded guilty to one count of failing to pay over to the IRS money he had withheld from his employees’ paychecks. According to court documents, Holub was the owner of Premier Security, a private security business previously located in Cedar Rapids, and had served as the President and Treasurer of the business from 2003 through 2011. Holub admitted that from January 2008 through December 2009, he was responsible for withholding income taxes and Federal Insurance Contributions Act (FICA) taxes from the pay of Premier Security employees and was responsible for forwarding those withholdings to the IRS. However, for six calendar quarters in 2008 and 2009, Holub failed to forward the money he withheld from his employees’ pay to the IRS. In the plea agreement, Holub admitted he also failed to pay to the IRS other taxes owed by Premier Security from 2008 through 2011.
Nebraska Man Sentenced for Employment Tax Fraud
On October 21, 2013, in Lincoln, Neb., John Stanley Clabaugh, Jr. was sentenced to 6 months in prison, three years of supervised release of which 6 months will be served as home confinement, and ordered to pay $135,109 in restitution. Clabaugh was the owner/operator of an insurance agency located in Crete, Nebraska. He and a secretary were the only full time employees, although there have been occasional part time employees. Clabaugh always withheld the federal income taxes and FICA taxes from his and his employees’ paychecks, until 2001 when he stopped paying these withheld funds over to the IRS and stopped filing the required quarterly forms. The total ‘trust fund’ taxes withheld from employee paychecks for the period of time covered by the indictment was $135,330.
Delaware Man Sentenced for Failing to Pay Over Payroll Taxes
On October 4, 2013, in Wilmington, Del., Charles Smith, of Bear, Del., was sentenced to 30 months in prison, three years of supervised release and ordered to pay $300,171 in restitution to the IRS. Smith pleaded guilty to ten counts of failure to truthfully account for and pay over payroll taxes. According to court documents, Smith was the Chief Executive Officer of eShowings, a company which provides online and telephone appointment services for real estate professionals. As the founder and CEO of eShowings, Smith was responsible for ensuring that employees’ payroll tax withholdings were paid over to the government. Instead, Smith took money deducted from employees’ paychecks and spent it personal items for himself and his family.