A Taxing Situation

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Businesses often seek employer contract services from staff-leasing firms to decrease administrative burdens. These firms help small and mid-size businesses that don’t have adequate staff to lessen their paperwork load and better manage their resources. But, if due diligence is not performed prior to hiring a professional employer firm to help out, there could be trouble. The San Antonio Business Journal reports on a man who participated in a tax fraud scheme that stole more than $133 million in payroll taxes and insurance premiums from clients.

The story reports that the owner and co-owner of nine professional employer organizations contracted with clients to manage their payroll and insurance programs. From 2002 to 2008, the two fraudsters and four other accomplices diverted the funds for their own use through a complex scheme. (Now, there’s a shocker.) The case is considered to be the largest dollar-loss mail-and tax-fraud case prosecuted in the Western District of Texas.

The 61-year-old man reached a plea deal with federal prosecutors and was the final defendant to be convicted in the case. He faces 20 years in federal prison. The other five fraudsters have already pleaded guilty to a variety of charges and are also awaiting sentencing.

This case is a perfect example of what can go wrong when a business doesn’t do their homework when signing up for an employee leasing company. The potential for damage and liability can be devastating to a smaller business that doesn’t have the staff or the funds needed to recover from the loss. (This type of crime could easily force a business to shut down.) Even though greed got the better of these six men, let’s hope that their sentencing will include restitution for the victims and vindication from any wrongdoing for their businesses.

Source: Today’s ”Fraud of the Day” is based on an article titled, ”Former AccounTex Financial Manager Pleads Guilty in Tax-fraud Case,” written by James Aldridge and published by the San Antonio Business Journal on January 16, 2014.

SAN ANTONIO – San Antonio businessman Larry W. Kimes, the former manager of AccounTex Financial Services LLC, could be facing up to 20 years in federal prison after reaching a plea deal with federal prosecutors in federal court in San Antonio.

Kimes, 61, pled guilty on Thursday to charges that between 2002 and 2008, he and other co-conspirators stole more than $133 million from clients of about nine professional employer organizations operated by him and co-defendant Charles Pircher.

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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.