Payroll Company Owner Sentenced For Stealing $1.2M In IRS Taxes From Small Businesses And Municipal Water Supply

PROVIDENCE, R.I. – Warren Hebert, 67, of Barrington, R.I., owner of Checkmaster Payroll Services, has been sentenced to 24 months in federal prison and ordered to pay $1.1 million in restitution to seven businesses and the Seekonk, Mass., Water District that he defrauded when he diverted federal payroll taxes he collected from them that were to have been paid to the IRS, announced United States Attorney Peter F. Neronha and William P. Offord, Special Agent in Charge of IRS Criminal Investigation.

At sentencing, U.S. District Court Chief Judge William E. Smith also ordered Hebert to serve two years supervised release and to perform 200 hours of community service upon completion of his prison term.  Hebert pleaded guilty on October 20, 2014, to eight counts of wire fraud and one count of impeding the administration of the Internal Revenue Code.

At the time of his guilty plea, Hebert admitted to the court that beginning in as early as April 2009 and continuing through at least October 2011, he diverted for his own personal use approximately $1,266,680 in funds due to the IRS that he withdrew from at least seven small businesses operating in Rhode Island and Massachusetts, which were to have been used to pay the clients’ federal employment taxes. In some instances Hebert used some of the funds to pay additional tax liabilities, interest and penalties of other clients whose tax returns he had previously failed to accurately prepare, file and pay.

Among the small businesses defrauded by Hebert were a nursery school, a local gym and a family owned moving company. Hebert also admitted to diverting funds from the Seekonk, Mass., Water District, a municipal water agency.

United States Attorney Peter F. Neronha commented, “What makes the defendant’s conduct particularly appalling is that, at bottom, he stole money from several small businesses, as well as a municipality.  Such entities, private and public, often operate near the margin, where every dollar counts.  The defendant violated the trust placed in him and, out of greed, diverted money that these entities had worked so hard to generate and set aside to pay their fair share of taxes.  A meaningful prison sentence is more than appropriate.”

“IRS Criminal Investigation takes employment tax violations very seriously," said William P. Offord, Special Agent in Charge of the Boston field office of IRS Criminal Investigation. “Mr. Hebert’s tax fraud is particularly egregious because his clients entrusted his business, Checkmaster Payroll Services, to collect and timely remit their employees’ payroll taxes.”  Instead, Mr. Hebert diverted over $1.2 million of these taxes for his personal benefit, which may result in the loss of future social security or Medicare benefits for the victims.”

The case was prosecuted by Assistant U.S. Attorney John P. McAdams.

            The matter was investigated by IRS Criminal Investigation, with the assistance of the FBI, Rhode Island FDA Task Force, Barrington Police and Rhode Island State Police.

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