PaySource IRS Fraud, Wow!

Dayton Daily News reporter, Lou Greico has the story on the massive fraud by officers of PaySource payroll services which is located in Dayton--with the arrest of Paysource's owner, Robert Sacco, upon his return to the United States from Costa Rica.   Greico's account is excerpted below:

The former owner and chairman of PaySource Inc. who was indicted on 67 federal counts was released on $50,000 bond Tuesday, one day after his arrest on 67 federal felony counts.   He was charged with defrauding the Internal Revenue Service of $26.7 million by filing false reports.   Robert R. Sacco, 59, formerly lived in Huber Heights and now lives in Orlando, Fla. IRS and customs agents arrested him Monday at Orlando International Airport as he returned from a vacation in Costa Rica.

'The amount is enough to be staggering,' said Cincinnati attorney Howard L. Richshafer, a former IRS agent. A federal grand jury indicted Sacco on Oct. 26, but the indictment remained under seal until late last week. According to the indictment, Sacco defrauded the government by withholding money to pay federal employment taxes from employees’ paychecks, then keeping the money.

The company’s CEO, Charles C. Painter, pleaded guilty in February to one count of aiding the preparation of a false federal employment tax return. He is to be sentenced Dec. 16 and faces a maximum of three years in prison. Federal authorities said he avoided paying $7 million in taxes during the second half of 2007. Painter is identified as an 'unindicted co-conspirator' in Sacco’s indictment as is 'T.G., a person whose identity is known to the Grand Jury,' and who 'previously served as PaySource’s Chief Financial Officer.'

Directing his co-conspirators to file false IRS documents, Sacco was able to avoid paying federal employment taxes owed by PaySource between October 2007 and April 2009, the indictment states.
Howard L. Richshafer, an attorney and former IRS agent, said that the IRS often files civil proceedings — not criminal — with the goal of getting the money paid. But with allegations of false documents and a huge amount of money, it probably made the government go a different way, he said. Richshafer said it has been his experience that companies themselves, rather than payroll service operators like PaySource Inc., fall behind in forwarding employee withholding funds to the IRS. But, if the company gives the payroll service operator control over the payroll accounts, there could be a temptation to keep money that legally should be sent to the IRS, he said.

'As the economy has gotten poorer, since 2008, I’ve seen more and more companies having this sort of problem,' he said."

It’s potentially a double-whammy problem for the government, because employees will use their W-2 forms to get refunds on amounts that were never paid in the first place, he said."
_____________________________
When you are a paycheck employee of a company that utilizes a payroll service, you assume everything is on the up and up.  This is the second of two stories like this I've come across in the last couple of weeks.  The second story out of Sacramento was far too complicated and involved too many plot points to talk about. 

But this should tell you something about how difficult it is trying to run an office.  People utilize companies like this because it is too complicated and too involved for the ordinary lawyer, or other professional.  You think you are buying peace of mind, now you can think again.  The question is, for those companies and for those offices who used this service--are they off the hook?  Are the employees who obtained refunds based on fraudulent W-2s off the hook?  There are a lot of ripples left in the wake of this sinking criminal enterprise.