Operator of Payroll Companies Sentenced in North Carolina for Federal Fraud and Money Laundering Crimes
|U.S. Attorney’s Office January 04, 2013|
GREENSBORO, NC—Arthur S. Weiss, of Winston-Salem, North Carolina, was sentenced yesterday to 185 months in prison for employment tax fraud and other crimes by Judge Thomas D. Schroeder, announced Ripley Rand, U.S. Attorney for the Middle District of North Carolina; Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division; and Richard Weber, Chief of Internal Revenue Service (IRS)—Criminal Investigation. Judge Schroeder ordered Weiss to pay more than $7 million in restitution to numerous victims, including the IRS, the North Carolina Department of Revenue, and former clients.
Weiss pleaded guilty to charges of wire fraud, bank fraud, money laundering, and tax obstruction on October 5, 2012. According to documents filed in the case, Weiss operated professional employer organizations (PEOs), which provided payroll-related services to client companies. For his client companies, Weiss agreed to pay the employees, withhold and remit federal and state taxes, prepare and file the federal and state employment tax returns, and provide workers compensation insurance (WCI). Weiss did pay the employees and withhold the employment taxes, but he failed to remit the employment taxes, keeping them for his personal use. From 2004 to 2012, Weiss failed to file employment tax returns and failed to pay over to the IRS employment taxes in excess of $4 million. In addition, Weiss collected WCI premiums from his clients but failed to obtain adequate WCI protection and diverted WCI premiums for his personal use.
“Fraudsters beware—we will relentlessly pursue anyone who cheats our businesses, our financial institutions, or the treasury,” said U.S. Attorney Rand. “This defendant’s business model and financial activities were based on stealing from innocent people, and his audacious conduct deserves the substantial sentence imposed by the court.”
“Business owners who game the system by evading payment of payroll taxes hurt American taxpayers and law-abiding business owners who are at a competitive disadvantage,” said Assistant Attorney General Keneally. “The sentence handed down today shows that those who willfully violate their employment tax obligations will be prosecuted and risk severe punishment for their crimes. In addition, they will still be held responsible for the taxes due, together with interest and civil penalties.”
“Mr. Weiss used a foundation of fraud and deceit in order to cheat the government and is now being held accountable for his egregious behavior,” said Richard Weber, Chief, IRS-Criminal Investigation. “As the operator of a payroll service company, Weiss had an inescapable obligation to remit withheld employment taxes to the IRS. IRS-Criminal Investigation intends to vigorously pursue anyone who collects taxes and fails to timely remit those taxes.”
According to court documents, Weiss used a portion of his fraud proceeds to purchase expensive jewelry and exotic cars, such as Ferraris, Lamborghinis, and Porsches. During a trip to Europe, Weiss fraudulently reported four pieces of jewelry lost or stolen and received $177,480 from his insurance company. The jewelry was later seized during a search at his former residence in Marion, North Carolina.
Weiss also admitted to committing bank loan fraud. According to publicly filed documents, in order to receive four loans from a bank, Weiss provided numerous personal income tax returns to the bank. Each of the returns Weiss provided to the bank included significantly greater income than the returns actually filed with the IRS.
The case was investigated by IRS-Criminal Investigation, the FBI, the North Carolina Industrial Commission’s Fraud Unit, the North Carolina Department of Insurance-Investigations, and the McDowell County Sheriff’s Office. The case was prosecuted by Assistant U.S. Attorney Clifton Barrett and Trial Attorney Todd Ellinwood of the Tax Division.