In October 2000, John T. Eckelberger, Jr., President and owner of Creative Employment Concepts, an employee leasing company located in Dallas, Texas, was sentenced to six months in prison, followed by six months home confinement, placed on probation for 36 months and ordered to pay restitution for his failure to pay more than $3.9 million in employee’s federal income taxes, social security, and Medicare taxes during 1995. Eckelberger directed these funds be spent for other purposes.

In June 2000 Eckelberger plead guilty to a four count information charging him with violating Title 26, United States Code, Section 7202, willfully failing to truthfully account for and pay over "trust fund" taxes during 1995.

On October 31, 2001, in Minneapolis, MN, John Leroy Fischer, owner of Global Communications, a company that installs cable and communications systems, was sentenced to 21 months in prison followed by 24 months supervised release. In addition, the judge ordered Fischer to work with the IRS to pay outstanding tax liabilities.

On June 20, 2001, Fischer pled guilty to two counts of failing to pay over withholding taxes he collected from his employees. During his hearing Fischer admitted that from January 2, 1995 through September 30, 1999, he deducted and collected over $350,000 in Federal income, Social Security, and Medicare taxes and failed to pay these collected monies to the IRS. Fischer was indicted on April 18, 2001, by a federal grand jury on 46 counts of failure to file employer's quarterly tax returns and failure to pay over withheld taxes.

On October 30, 2001, Michael A. Long, president and managing executive officer of Raneri and Long Roofing, Inc., and National Roofing, Inc., pled guilty to tax evasion. In pleading guilty, Long willfully attempted to evade and defeat $194,548 in personal income tax for years 1992 through 1996. In addition, Long admitted that he caused false quarterly Employer's Federal Tax Returns (Forms 941) to be filed for Raneri and Long Roofing, Inc., from June 1993 until April 1996, by not correctly reflecting total wages paid to employees. These returns did not include $950,000 in wages paid to employees, for which in excess of $350,000 tax was due the government. Long also admitted that from June 1994 until January 1997, he caused false Forms 941 to be filed for National Roofing, Inc., which did not reflect total wages paid to employees. Long unreported cash wages paid to employees amounting to $440,015, with more than $155,000 in taxes due the government.

Sentencing is currently scheduled for February 8, 2002.

On October 24, 2001, Shannon Lee Palmer, owner of an employment agency, was sentenced to 57 months in prison after admitting to defrauding the IRS by not paying $1,158,811 in employment taxes and fraudulently discharging that debt in Bankruptcy Courts. According to the Factual Basis filed in this case, Palmer has controlled and operated only one employment agency since the late 1970s. As the IRS pursued Palmer for collection of taxes, she would put the respective agency into bankruptcy, then continue business under a difference agency name. In doing this, Palmer conspired with others to defraud the United States for the purpose of impeding, impairing, obstructing, and defeating the lawful Government functions of the IRS in the collection of payroll taxes. Also, Palmer deceived the bankruptcy courts. Palmer pled guilty in August 2000.

On July 20, 2001, Dr. Joseph DiChiara of Niagara Falls, New York was sentenced to eight months in prison for health care fraud, failing to pay withholding taxes and possession of a controlled substance. Dr.DiChiara defrauded the Medicare system by writing prescriptions in the names of patients and employees and indicating the drugs were obtained for surgical use. The persons for whom the prescriptions had been written did not use the drugs. Dr DiChiara also did not pay employee withholding taxes. In addition to serving his prison sentence DiChiara must repay $40,000 in employment taxes to the IRS and $5, 277 to the Federal Medicare system.

On July 16, 2001, Michael Emmons, general manager and principal officer of Ion Dynamics, Inc., and its successor, Ion Dynamics of Kansas, Inc., pled guilty to one count of willful failure to pay over to the IRS federal income and social security taxes withheld from employees and one count of embezzling funds from an employee benefit pension plan. Ion Dynamics, Inc. and Ion Dynamics of Kansas, Inc., were businesses that sold and installed water filtration systems. Emmons admitted that he deducted and collected approximately $1,284,630 from company employees' paychecks in federal income, social security, and Medicare tax withholdings and failed to pay over these taxes to the IRS. Emmons further admitted that from June 1998 through December 1998 he embezzled and converted to his own use and the use of his company approximately $53,835 from the employee pension benefit plan.

Sentencing has been rescheduled; no fixed date at this time.

On June 29, 2001, Kenneth David Mitnick and Maxine Phyllis Mitnick, brother and sister, were sentenced for conspiring to defraud the IRS by underreporting employee wages by $1.9 million resulting in a tax loss of $289,922 in federal income taxes to be withheld, FICA taxes withheld, and employer's portion of FICA taxes withheld. Kenneth was sentenced to 21 months in prison and Maxine was sentenced to 4 months home confinement. In addition, each defendant received 3 years supervised release. The Mitnicks who owned Prestige Personnel, an employee leasing company, pled guilty in February 2001. Prestige Personnel is said to have leased almost 1,600 day laborers to various businesses.

According to the indictment, Kenneth and Maxine provided false and misleading information to their accountants and caused the filing of false and fraudulent Forms 941, Employer's Quarterly Federal Tax Returns, and Forms 940-EZ, Employer's Annual Federal Unemployment Tax Returns. The indictment further states that Kenneth and Maxine issued and personally cashed approximately $369,000 in fictitious employee payroll checks.

On June 5, 2001, Mahendra Patel, 42, of Hillsborough, California, pled guilty to willfully failing to account for and pay over payroll taxes in violation of Title 26 United States Code Section 7202. Patel was president of JMB Restaurants, Inc. and Modern Restaurants, corporations and holding companies for the Magic Pan, Frogg Lane, Milano’s and other restaurants in California, Massachusetts, Virginia and other states. The unpaid taxes for JMB and Modern Restaurants totaled $4,118,788.04.

In August 1996, after the IRS made assessments against JMB Restaurants for unpaid payroll taxes for eight quarters of 1992 and 1993, Patel received a notice for payment of those taxes, but did not respond. On April 13, 2000, Patel was indicted on 17 felony counts of failing to account for and pay over payroll taxes.

Sentencing for Patel was originally scheduled for December 18, 2001; however, it has been postponed with no set date.

On May 21, 2001, in Nashville, Tennessee, George David George pled guilty to one count of failing to pay over employment taxes to the IRS and to one count of embezzlement of pension funds. George admitted that he withheld $104,090 in federal taxes from his employees' paychecks for the quarter ending September 30, 1996, but intentionally failed to pay that amount to the IRS. George also admitted that he embezzled $4,947 from an employee benefit plan, causing claims filed by some of his employees to be denied by the insurance provider.

George served as president of Video Home Shopping, Inc. On February 22, 2001, George was indicted and charged originally with five counts of failing to pay over $300,000 in employment taxes for five quarters; however, he entered into an agreement to plead guilty to one count.

George was scheduled to be sentenced on August 13, 2001, but it was postponed with no rescheduled date.

On May 9, 2001, Elliotte Greenberg, of New Smyma Beach, Florida, was sentenced to serve 36 months in prison, fined $15,000 and ordered to pay the IRS $692,536 in restitution. The sentence followed Greenberg’s conviction (after a 20 day trial) of conspiring to impair and impede the IRS from performing its lawful function of computing, collecting, and ascertaining Federal Insurance Contribution Act (FICA) taxes, which are composed of social security and Medicare taxes.

In 1986 Greenberg became involved in the temporary labor business supplying day laborers to various industries and local attractions. Greenberg with the assistance of his accountant began understating the wages and taxes reported on the Forms 941, Employer’s Quarterly Tax Returns filed with the IRS. Greenberg and his accountant underreported the taxes of the temporary labor companies by eliminating employees from payroll records.

In 1990, Greenberg franchised eleven temporary labor companies and recommended his accountants to the managers of these companies. Greenberg then instructed some of the managers to eliminate employees from their payrolls, underreporting their payroll tax liabilities. During the period 1991-1994, Greenberg received approximately $1,000,000 from these activities. The managers of some of these temporary labor companies subsequently pled guilty to charges arising from their involvement in this scheme.

On June 15, 2001, Paul Buonopane and his brother Robert Buonopane, owners of B&B Acoustical Contractors, Inc., were sentenced on their tax fraud convictions. Paul received one year and one day in prison and Robert received one year two months in prison. Both Paul and Robert will each serve two years supervised release and were ordered to pay $583,438 in restitution.

On February 16, 2001, the brothers were convicted of 29 counts including conspiracy to defraud the IRS, conspiracy to commit mail fraud, aiding and assisting in the presentation of false payroll tax returns, and mail fraud directed at the company's workers' compensation insurance carriers and the Massachusetts Carpenters' Union. Evidence at trial indicated there was an under the table wages scheme in which approximately $460,000 in payroll was concealed from the company's payroll service, the IRS, the insurance carriers of workers' compensation, and the Union. The hidden $460,000 resulted in saving substantial amounts of employment taxes, insurance premiums, and contributions to the union fringe benefits funds which B&B owned.

On April 23, 2001, C. David Morrison was sentenced to 8 years and one month in prison, five years supervised release, and ordered to pay $374,000 in restitution to the hospital. On November 29, 2000, a federal jury convicted Morrison on 23 counts of financial related crimes including tax evasion, money laundering, and embezzlement. Morrison, administrator of Logan General Hospital, in Logan, West Virginia, failed to pay more than $4.5 million withheld from Logan General Hospital employees' paychecks for federal taxes in late 1997.

In addition to the failing to pay $4.5 million in employment taxes, the jury found Morrison guilty of diverting tax and bond money toward the building of a mall project. Morrison used hospital money to pay for his share in the purchase of a $1.3 million private airplane. The payments used to fund Morrison's ownership and upkeep of the aircraft were structured in such as manner as to conceal the fact the hospital was making the payments on Morrison's behalf. Hospital funds were also used by Morrison and a business partner to keep afloat their joint business, American Development Corporation, and to renovate and pay off loans on a motel and several rental properties.

On the opening day of the trial the judge rejected Morrison's proposed plea agreement when Morrison refused to say that he "intentionally" violated the law with his failure to hand over the tax money withheld from employees' paychecks. The financial crimes against Logan General Hospital and its employees forced the hospital into Chapter 11 bankruptcy.

On March 1, 2001, Albert Lawrence, former owner of the now-defunct Lawrence Group, Inc., was sentenced to 37 months in prison, 36 months probation, and ordered to pay $37 million in restitution. The Lawrence Group, Inc. was a holding company that controlled several other insurance companies, including United Community Insurance Company, Inc. (a New York domiciled insurance company) and United Republic Reinsurance Company, Inc. (a Texas domiciled insurance company).

In June 2000, a jury found Lawrence guilty on 20 federal charges including embezzlement of insurance assets and pension benefit funds, tax evasion, and wire and mail fraud. According to court records, Lawrence withheld more than $720,000 in taxes and $74,700 in pension contributions from employee paychecks that he failed to pay to the IRS or pension administrator.

In October 2000, Jeffrey l. Huff was sentenced to 15 months in prison followed by three years of supervised release after he pled guilty to seven felony counts of failing to withhold and pay over employment taxes in violation of Title 26, United States Code, Section 7202. Huff also pled guilty to knowingly and unlawfully engaging in the practice of hiring illegal aliens.

During July 1996 to March 1998, Huff was doing business as Huff Construction Inc. in Sebree, Kentucky (the principal place of business for Huff Construction is Mississippi.) Huff Construction was under contract to construct a large number of poultry houses at various locations in Western Kentucky. Huff employed a large number of workers from Mexico knowing they were illegally in the United States

Criminal Investigation initiated an investigation after reviewing Currency Transaction Reports (CTRs) prepared by a bank in Sebree which revealed that large currency withdrawals were being made from the Huff Construction account every Friday. The investigation subsequently disclosed these withdrawals were made to pay workers in cash. Huff failed to withhold or pay over federal income taxes, social security, and Medicare taxes.

During the seven quarters in question, Huff reported total wages of $449,455.97 on which the taxes due were $68,766.66. However, an analysis of business records seized during the execution of search warrant in June 1998 disclosed that Huff actually paid $2,582,110.20 in wages during this period on which total taxes of $395,062.36 were owed. Huff failed to withhold or pay over a total of $326,296.20 in taxes. It was disclosed during the investigation that Huff’s CPA had advised him that his workers did not meet the criteria for independent contractors but Huff disregarded this advice because he did not want to pay employment taxes.

On August 25, 2000, Terry L. Harrison of Westmoreland, Tennessee was sentenced to thirty consecutive weekends in jail, plus 120 days home confinement after pleading guilty to seven counts of filing false Employer’s Quarterly Income Tax Returns, three counts of aiding and abetting the filing of those returns, and one count of filing a false Individual Income Tax Return. Harrison operates a mobile home transporting company, D&T Transport, that employs drivers who operate company trucks. From 1993-1995 Harrison split his drivers’ pay between wages and contract labor to evade paying the employer’s share of Social Security and Medicare taxes. Harrison also failed to withhold income taxes on the portion of the wages he misclassified as contract labor.

In addition, Harrison filed a false 1993 Individual Income Tax Return failing to report over $54,000 of gross receipts and claimed a false deduction of more than $30,000 to a drug dealer who never provided services to his company. This scheme was designed to provide Harrison with extra cash, substantiation for illegal business deductions, and establish a "legitimate" source of income for the drug dealer. In fact, Harrison wrote the checks to the drug dealer, cashed them and kept the money. As part of his sentence, Harrison was ordered to pay $155, 667 in restitution to the IRS, was fined $20,000 and ordered to pay $1,368 per month toward the cost of his incarceration.

In August 2000, Albert Snow, the owner of two holistic food stores and a bookstore located in Medway, Massachusetts and North Smithfield, Rhode Island was sentenced to 3 years and 7 months in prison for evading and failing to pay over $500,000 in income taxes and payroll taxes, conspiring with others to defraud the United States, making false statements to banks, and paying unlawful gratuities to a public official.

Albert Snow doing business as Holistic Health Products, operated two health food stores and a bookstore that sold holistic supplements, foods, vitamins, and books. During tax years 1993 through1998, he failed to file tax returns or pay any income tax. To conceal his income, Snow required all employees to accept their wages in cash, failed to withhold payroll taxes, commingled his personal and business expenses, and destroyed business records.

In addition to the term of imprisonment Snow was fined $100,000 ordered to be placed on supervised release for a period of 5 years and ordered to assist the IRS in determining his outstanding tax liability.

In August 2000 Joann A. Reynolds, Vice President of D. Reynolds Machine Co., located in Dover Ohio, was sentenced to a year and a day in prison, and fined $3000 after pleading guilty to two counts of failing to account for and pay over federal employment taxes owing on the wages of Reynolds Machine Co. employees and one count of filing a false federal income tax return.

Reynolds was charged in a 28 count criminal information with failing to account for and pay over $62,360.36 of withheld income taxes and employees’ share of social security taxes for the twelve calendar quarters during the period

1994 to 1996. The indictment also charged she failed to pay the employer’s share of social security taxes totaling approximately $ 21,876.81 for the same period and filed false income tax returns that understated her and husband’s joint total income for years 1993-1996 by approximately $44,604.

In the plea agreement Reynolds admitted responsibility for all criminal conduct alleged in the indictment that resulted in total unpaid employment and income taxes of $119,568. Restitution for all unpaid taxes has been made.

On May 21, 2000, Kenneth and JoAnn Kontny were convicted of conspiring to file false IRS payroll tax returns and fraudulent IRS payroll tax returns. Kenneth Kontny was sentenced to 32 months in prison and ordered to pay a fine of $60,000. JoAnn Kontny was sentenced to 27 months in prison and ordered to pay a fine of $50,000.

Kenneth and JoAnn Kontny (husband and wife) owned Tri-State Mechanical Contractors Inc. (TSM) located in Ashland, Wisconsin. Tri-State Mechanical Inc. performed plumping, heating, ventilation, and air conditioning work on local government buildings and schools. The Kontnys devised a scheme to evade the payment of employment taxes on the overtime wages of their employees. Employees were instructed to record their regular hours (40 hours per week) on time cards and record their overtime hours on a separate piece of scratch paper. Tri-State Mechanical employees were paid straight time rate for overtime and no payroll taxes were withheld.

The regular wages were input into the payroll system and reported on their payroll tax returns (Forms 941.) The employees were paid their regular hourly wages with a computer generated payroll check. Overtime wages were paid using a manually generated check. The manually generated checks were falsely coded in the general ledger as "material expense" so that a deduction could be claimed for the overtime wages. From the last quarter of 1993 through the end of 1994, the defendants failed to report approximately $113,000 in overtime wages. The tax loss was approximately $57,535.

In 1998, Richard Dvorak, former President of Persona Management Corporation, an employee leasing firm headquartered in Rhode Island, was sentenced to 41 months in prison for filing seven fraudulent quarterly payroll tax returns understating his firm’s employment tax liability by more than $13 million.

During 1992 and 1993, Persona Management Corporation "leased" almost 6000 employees to over 100 businesses. These businesses entered into arrangements with Persona Management Corp. to turn their employees over to Persona and then lease them back to realize savings on health and workman’s insurance, pension plan costs, and payroll services.

Instead of paying employment taxes on these employees, Dvorak used the money to support a lavish lifestyle purchasing a $1.2 million yacht, a $1 million mansion, and a horse farm in Connecticut. Dvorak spent $4 million renovating these properties in addition to purchasing several luxury vehicles and wiring over $1 million to Bermuda to invest in an offshore insurance company.