Alleged embezzlement leaves some victims paying huge bills
September 4, 2003
Nearly four years after an alleged embezzlement case was discovered that cost a dozen businesses hundreds of thousands of dollars, no charges have been filed against the suspect.
One alleged victim who lost about $20,000 said he has nearly lost hope that justice will prevail in the case. Floyd Watkins, owner of Beaver Run Ranch, said neither the Snowmass Village police nor the Internal Revenue Service have indicated they will pursue charges in the case.
Watkins and other business owners found themselves shortchanged in the fall of 1999 when the finances of a Snowmass Village-based payroll services firm came crashing down. The businesses paid the firm a lump sum periodically for payroll and all taxes associated with the paychecks.
The payroll management company cut payroll checks to its clients’ employees and was supposed to forward taxes withheld to the IRS. However, the payroll services firm’s owner allegedly started missing payments to the IRS.
When penalties and interest were assessed against some of her clients, the firm’s owner would apply funds collected from other clients. Eventually, their taxes also became delinquent and they were assessed penalties and interest.
The pyramid scheme came tumbling down when the payroll services firm owner no longer had enough funds to draw from, according to Watkins and other alleged victims.
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The Aspen Times has not named the owner of the payroll services firm because she hasn’t been charged with any crimes.
The last businesses affected were hit with the biggest debts because they had delinquent taxes plus they had unpaid penalties and interest.
Michael Shore, owner of the Tower Restaurant in Snowmass Village, was initially told by the IRS that he owed $104,000 in delinquent payroll taxes, penalties and interest. Like the other businesses, the taxes were paid by him, but not forwarded by the payroll services firm.
Shore said an accountant that he and other affected businesses hired to represent them eventually got the IRS to waive the penalties and interest.
“When it all shook out, I wound up owing them $55,000,” he said.
Shore had to take out a loan to pay the IRS. He said the additional debt contributed to his decision to close the Tower next April after 28 years in business. His lease is expiring. The restaurant on the Snowmass Village Mall is famous for its wonderful magic bar as well as its food.
Unlike Watkins, Shore isn’t pushing for prosecution of the payroll services firm owner, who is now out of business. He said he has known the woman and done business with her for 20 years.
“It’s not going to do any good to put a woman that age in prison,” he said.
He labeled her actions “stupid” but not necessarily criminal. Shore said the investigating agent from the IRS criminal investigation division, Richard Ptak, told him charges were unlikely against the payroll manager because the cost of prosecution would be prohibitive. In addition, the IRS was satisfied because it got its money back – although from the businesses that were alleged victims of the case.
Law enforcement officials initially estimated that between nine and 15 businesses were affected and the dollar amount could be as much as $400,000. Shore said that estimate was lowered after penalties and interest were eliminated against some of the businesses affected.
Neither Shore not Watkins view civil litigation as an option to recover their money. “Even if we got a judgment, we’d never see a dime,” Shore said.
IRS special agent and public information officer John Harrison said he would not comment on a pending investigation. In general, he said, tax cases subject to criminal investigations are investigated by the IRS and the reports are given to the U.S. Department of Justice Tax Division in Washington, D.C., for review. If they recommend prosecution, the case is handled by the U.S. Attorney General’s office in Denver.
Watkins, who wasn’t represented by an accountant in negotiations with the IRS, said he has been assessed penalties and interest in the case. He is still trying to get those charges eliminated.
Meanwhile he also wants criminal charges pursued. “If somebody stole $100,000 from you, wouldn’t you like to see that person go to jail?” Watkins asked.
[Scott Condon’s e-mail address is email@example.com]