A federal jury has convicted a Massachusetts man and two New Hampshire residents of tax fraud and conspiracy to defraud the U.S. government. William Scott Dion and Catherine Floyd of Sanbornville, N.H. and Charles Adams of Norwood, Mass were convicted of promoting an “under the table” payroll scheme. Floyd and Dion were also convicted of using an “underground warehouse banking” scheme to conceal its customers’ assets and income from the IRS.
The payroll tax scheme helped employers defraud the government by paying employees “under the table,” meaning that the employers were not withholding and paying required payroll taxes to the IRS. Using three different business names to promote the scheme — Contract America, New Way Enterprises, and Talent Management — the defendants obtained about 150 subscribers, resulting in more than $2.5 million in unreported wages and compensation, according to the Justice Department.
The “underground warehouse banking” targeted a different clientele. This scheme assisted subscribers in fraudulently concealing their assets and income from the IRS. Under three different business names — Your Virtual Office, Calico Management, and Office Services — the defendants held accounts at numerous banks, which they used to deposit and commingle funds and business receipts from subscribers in an effort to hide the true ownership of the monies at issue. Under this scheme, over $28 million was allegedly deposited into the various accounts in furtherance of the “underground warehouse banking” scheme.
The defendants didn’t use their tax fraud skills solely for their clients, however. Dion and Floyd were also convicted of trying to prevent the IRS from being able to determine their own income. And Adams was convicted of tax evasion.
Sentencing is scheduled for June, but in the meantime, Dion and Floyd will be monitored by electronic bracelets and Adams is being monitored by call in/voice recognition technology. Each defendant faces a maximum sentence of five years in prison, as well as a maximum fine of $250,000 or twice the financial gain to the defendant or loss to the IRS — which in this case could be quite substantial. In addition, they will be subject to three years of supervised release once they finish any prison sentence. On charges of obstructing the IRS, the maximum prison sentence is three years, with a maximum fine of $250,000. The defendant would then be subject to one year of supervised release.
Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.