Paying Debts

25538181 - close-up of a businessman filling blank cheque

Debt can be crushing. Mortgage owners can easily get behind on monthly payments when an anticipated job promotion doesn’t come through or a surprise company-wide layoff occurs. Graduates trying to pay back their school loans can also get behind just trying to navigate the real world of paying bills and surviving on an entry-level salary. Then there are those people who run up debt on purpose, just so they can live a lavish lifestyle, usually at the expense of others. An article published in the New Haven Register tells about a man who lied about his company’s tax payments to the Internal Revenue Service (IRS) and instead, spent the money on foreign travel and a new house.

The man, who ran a temporary staffing agency, filed for Chapter 11 bankruptcy and then claimed that another company was being paid to process the company’s payroll checks, tax returns and tax payments. He also reported to the Internal Revenue Service (IRS) that the same company was making tax deposits under the bankrupt company’s taxpayer identification number. (In reality, he had employed the reported company to provide those services at another time, but not during the time that he falsely claimed. Fortunately, the government realized that he was pointing the finger at the wrong folks.)

Over a two-year period, the bankrupt company failed to pay more than $2.5 million in employment taxes and approximately $1.4 million in employer payroll taxes to the IRS. (He also paid his wife $354,000 for work that she did not perform. Gee, I wonder where that money went.)

The 41-year-old company owner pleaded guilty to one count of willful failure to collect, account for and pay tax; one count of embezzlement from a bankruptcy estate; and, one count of making a false declaration statement under penalty of perjury in a bankruptcy case. His 36-year-old wife pleaded guilty to one count of conspiracy to commit bank fraud. (She falsely stated on the mortgage application for the new home purchased solely in her name that she was employed by the temporary staffing company and made $16,000 a month. Wow, who wouldn’t like to make that much money per month.)

The husband received a sentence of three years and one month in federal prison to be followed by three years of supervised release. The wife received a sentence of one year for participating in the connected mortgage fraud scheme.

Instead of helping his temporary staffing company to recover from bankruptcy, the man embezzled funds that were not his to take and stole millions of dollars from taxpayers to fund a lavish lifestyle. His illegal actions cost many hardworking employees their jobs and forced them to deal with unexpected debt. (This fraudster and his wife are now in the same boat and now have to deal with the weight of the crushing debt from their company’s demise. They can no longer evade the repercussions of their illegal activities.)

Source: Today’s ”Fraud of the Day” is based on an article titled, ”New Haven Couple Sentenced in Federal Bankruptcy, Tax Fraud Case,” published by the New Haven Register on August 3, 2015.

NEW HAVEN – A city couple was sentenced Monday for their roles in a fraud scheme, according to a release by U.S. State’s Attorney Diedre M. Daly.

U.S. District Judge Alvin W. Thompson sentenced Jason Sheehan, 41, to 37 months of federal imprisonment, followed by three years of supervised release, for taking part in an extensive bankruptcy and tax fraud scheme. His wife, Glorvina Constant, 36, was sentenced to one year of probation for participating in a related mortgage fraud scheme.

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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.