Date: January 30, 2020
Jonathan D. Larsen, Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division ("IRS-CI"), announced federal tax charges against William R. Grogg for knowingly and willfully failing to pay over payroll taxes for his company and for corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws. Grogg was presented in White Plains federal court yesterday before U.S. Magistrate Judge Judith C. McCarthy.
IRS-CI Special Agent in Charge Jonathan D. Larsen said: "As the indictment against Mr. Grogg demonstrates, using employment taxes for personal and business expenses is illegal, and therefore subject to criminal enforcement. Employment tax enforcement is among the IRS's highest priorities and our Special Agents will continue to vigorously investigate these criminal allegations."
U.S. Attorney Geoffrey S. Berman said: "As alleged, William R. Grogg failed to pay over payroll taxes for his company for years, and then lied to the IRS about it. This cost the government hundreds of thousands of dollars in tax revenue. Grogg now faces 18 counts of criminal tax charges, and the possibility of time behind bars."
According to the allegations in the Indictment:
Since at least the late 1980s, Grogg has worked in the printing and publishing industry in and around Poughkeepsie, New York. Over his more than three decades in the industry, Grogg has owned, managed, and/or otherwise had significant control over the financial affairs of a number of printing and publishing companies, including: Hamilton Reproductions, Inc. ("Hamilton Reproductions"), Hamco, which was later called Netpub Corporation (together, "Hamco/Netpub"), Netpublications Inc. ("Netpublications"), and MCA-Netpub ("MCA"). In or around 1994, the IRS assessed a civil penalty of approximately $368,639.93 against GROGG, as a responsible person, for willfully failing to collect, account for, and pay over to the IRS payroll taxes owed by Hamilton Reproductions.
From at least the fourth quarter of 2013 through the fourth quarter of 2017, Grogg was the sole owner, president, and/or controlling officer of Netpublications and MCA, which, at any given time, had approximately 20 to 50 paid employees. As the owner and operator of Netpublications and MCA, Grogg was a responsible person under federal law for collecting, truthfully accounting for, and paying over payroll taxes to the IRS.
Grogg caused Netpublications and, later, MCA to employ a third-party payroll service (the "Payroll Service"), which, among other things, prepared Netpublications' and MCA's quarterly payroll tax returns. Those returns were provided to GROGG. Although Netpublications and MCA withheld payroll taxes from employees' paychecks as directed by the Payroll Service, GROGG failed to pay over the withheld payroll taxes, as well as Netpublications' and MCA's matching Social Security and Medicare contributions, to the IRS. Instead, GROGG spent the withheld payroll taxes, which GROGG was required to hold in trust for the United States Government, on personal and business expenses.
In addition, when Grogg was contacted by the IRS in connection with his payroll tax compliance, he made a series of materially false statements to the IRS in writing and during interviews with IRS-CI. These statements included that Netpublications and MCA were originally owned by a deceased Canadian businessman, and that a deceased associate of the Canadian businessman kept certain of Netpublications' records in a garage until they were destroyed in a flood. These and other false statements that GROGG made were intended to obstruct and impede the IRS.
Grogg of Millbrook, New York, is charged with 17 counts of knowingly and willfully failing to pay over Netpublications' and MCA's payroll taxes, each of which carries a maximum sentence of five years in prison, and one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, which carries a maximum sentence of three years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.