Thursday, June 28, 2012

Operator of Payroll Companies Charged in North Carolina with Federal Fraud and Money Laundering Crimes

Arthur S. Weiss was indicted by a grand jury for tax fraud, wire fraud, mail fraud, bank loan fraud, money laundering and bankruptcy fraud, the Justice Department and Internal Revenue Service (IRS) announced today. The indictment was returned yesterday in the Middle District of North Carolina.

According to the indictment, 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 2011, Weiss failed to file employment tax returns and failed to pay over to the IRS employment taxes of over $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.

The indictment also alleges that Weiss used a portion of his fraud proceeds to purchase expensive jewelry. 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, N.C.

According to the indictment, Weiss also committed bank loan fraud. 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 indictment also alleges that Weiss filed two false personal income tax returns, and lied under oath in his bankruptcy proceeding.

Each of the 13 wire fraud, 10 mail fraud and four bank loan fraud counts against Weiss carries a maximum of 30 years in prison upon conviction. Weiss faces a maximum potential prison sentence of 10 years upon conviction for each of the two money-laundering counts. The bankruptcy fraud count carries a maximum sentence of five years. As to the tax charges, the count of corrupt interference with the Internal Revenue laws and each count of filing a false tax return carry a maximum of three years’ imprisonment upon conviction. Each of the 33 charges alleged in the indictment also carries a maximum $250,000 fine upon conviction.

The case was investigated by IRS-Criminal Investigation, the FBI and the North Carolina Industrial Commission’s Fraud Unit. The case is being prosecuted by Assistant U.S. Attorney Clifton Barrett and Trial Attorney Todd Ellinwood of the Justice Department’s Tax Division.

An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless convicted through due process of law.

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