Obstructing Fraud

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24914276 - man putting money in suit jacket pocket concept for corruption, bribing, paying or business wealth

Employment tax fraud can occur when an employer fails to pay the federal government employment taxes, which include federal income tax withholding, Social Security taxes, Medicare taxes and unemployment taxes. There are multiple ways to commit employment tax fraud, but NBCnews.com reports on one corporation that presented false documentation to a jury in hopes of covering up approximately $1.1 million in unpaid taxes. (As you can guess, the cover up didn’t work.)

The story details that a defendant controlled the business affairs and bank accounts for a corporation based in Columbus. He was responsible for collecting, accounting for and paying the corporation’s payroll taxes to the federal government. Court documents state that payroll taxes were withheld from the employee’s paychecks; however, only one small payment was made over a three-year period of time. Normally, these payments would be made on a quarterly basis. In fact, the 57-year-old man failed to pay $1,136,292.34 in taxes on behalf of the company. (Wonder where the cash went?)

To cover up the scheme, the fraudster made a false entry in the company’s employment records in an effort to throw investigators off the trail. He went as far as to provide false documents to the grand jury to explain several payments made to another associate. The fraudster claimed that he was paying the associate for employing the corporation’s clients, when none of the clients were ever employed by the associate. This effort was made to conceal the fact that the man had assisted the associate in withdrawing funds from a charitable trust for personal use.

The man pleaded guilty to obstructing a federal investigation and failing to account for and pay employment taxes to the federal government. He was sentenced to one year and one day in prison for employment tax fraud and obstruction and also was ordered to pay full restitution to the federal government.

Source: This criminal’s attempt to prevent the truth from being known was definitely thwarted. Obstructing justice is never a good idea. On the bright side, it looks like this fraudster will be obstructed from living a selfish life, at least for a year.

Today’s “Fraud of the Day” is based on an article titled, “Business Owner Sentence in Employment Tax Fraud, Obstruction Case,” published by NBCnews.com on December 12, 2013.

COLUMBUS – A Reynoldsburg man was sentenced Thursday to one year and one day in prison for employment tax fraud and obstruction.

John H. Gregory, 57, of Reynoldsburg, was also sentenced to three years of supervised release, and ordered to pay $1,136,292.34 in restitution to the Internal Revenue Service.

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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.