Switcheroo

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Fraudsters use many tactics to avoid getting caught by government authorities. One of those methods involves changing business names, so investigators are thrown off the trail. A husband and wife who owned and operated a construction business near Huntington, West Virginia pulled a switcheroo on the Internal Revenue Service (IRS) by changing their company name three times in hopes that they could avoid paying employment taxes.

The couple’s company transported steel and sold gravel and concrete throughout the states of West Virginia and Kentucky for 10 years. Over that period of time, the company name changed three times and they avoided paying $1.4 million in taxes to the IRS.

The two fraudsters withheld more than $850,000 in taxes from their employees’ paychecks, but they neglected to pay federal income, social security and Medicare taxes as required by the Federal Insurance Contribution Act and IRS Code. (It appears they also forgot to pay $490,000 in employment taxes for a prior business. I guess if they figured it worked once, they’d try it again, and again, and again.)

So what did they do with the $1.4 million they did not submit to the IRS over a decade? (They went on a spending spree. Does this surprise you?) They bought personal items worth $147,000 including a horse farm and a houseboat.

The husband, 48, pleaded guilty in federal court to one count of conspiracy to defraud the U.S. in the ascertainment, computation, assessment and collection of employment tax. He will serve 21 months in prison. His wife, 44, pleaded guilty to one count of failing to pay employment tax for the last quarter of one year. She got a 27-month sentence. (I’m guessing she may have controlled the books.)

It looks like the government also pulled an unexpected switcheroo on the dynamic duo. While their fraudulent construction business has been deconstructed, but they’ll still be around a lot of concrete and steel while serving time behind bars.

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Wayne business owners plead guilty to tax fraud,” published by The Herald-Dispatch on October 18, 2016.

Two Wayne county business owners face five years in prison after they pleaded guilty in federal court to failing to pay $1.4 million in employment taxes.

According to the U.S. Department of Justice, from 2000 to 2010, Michael and Jeanette Taylor owned and operated a construction business in Wayne, which transported steel and sold gravel and concrete throughout West Virginia and Kentucky, without paying various taxes. Although the business name changed several times, the operators remained the same.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.