A federal judge in Worcester, Massachusetts, sentenced William Scott Dion to eighty-four months in prison for conspiring to defraud the United States and for obstructing the IRS, the Justice Department and IRS announced. Dion was also ordered to pay restitution in the amount of $3 million.
On April 2, 2012, a federal jury convicted Dion and Catherine Floyd, both of New Hampshire, and Charles Adams of Massachusetts, for conspiracies to defraud the United States through the promotion and use of multiple tax fraud schemes. The jury convicted all three of conspiracy to defraud the IRS by promoting an "under the table" payroll scheme. Dion and Floyd were also convicted for conspiracy to defraud the IRS through the use of an "underground warehouse banking" scheme designed to conceal customer income and assets from the IRS. Floyd and Dion were also convicted separately for corruptly endeavoring to obstruct the IRS's ability to determine their own income. Adams was separately convicted of tax evasion.
According to the evidence presented at trial, Dion, Floyd, and Adams ran a payroll tax scheme in order to pay employees "under the table" without properly accounting for, withholding, and paying over to the IRS the payroll taxes required by law. The three promoted the payroll scheme to employers and individuals who wanted to avoid payment of employer payroll taxes and individual payroll taxes. The three ran the payroll scheme under three different names: Contract America, Talent Management, and New Way Enterprises. Approximately 150 individuals subscribed to the payroll scheme and in excess of $2.5 million in unreported wages and compensation were paid through the system.
The evidence at trial also established that Dion and Floyd conspired to defraud the United States by promoting and operating an "underground warehouse banking" scheme which helped subscribers conceal income and assets from the IRS. According to the evidence, the warehouse scheme operated under three different names: Your Virtual Office, Office Services, and Calico Management. As part of the scheme, the defendants maintained accounts at several banks and used the accounts to deposit and commingle business receipts and other funds received from subscribers in order to mask the true ownership of the funds. According to evidence presented at trial, more than $28 million in deposits were made into the various bank accounts used in the scheme.
In August 2009, the three defendants were indicted with four other individuals relating to the promotion and use of these schemes. On December 9, 2011, prior to trial, Gail and Myron Thorick of Rhode Island, pleaded guilty to conspiring to defraud the United States by helping operate the "warehouse banking" scheme and for filing false tax returns. On that same date, Gary Alcock pleaded guilty to conspiracy by using the payroll scheme as well as to tax evasion and willful failure to file tax returns. On January 24, 2012, Kenneth Scott Alcock pleaded guilty to conspiracy relating to the payroll scheme and to one count of tax evasion. All four defendants are awaiting sentencing.
- U.S. Attorney Charges Five with $30M 'Under-the-Table' Payroll Fraud
- Federal Court Shuts Down Multi-State 'Warehouse Banking' Tax Scheme
Source: US Department of Justice