Bel Air payroll firm sued for allegedly keeping clients' tax payments

Company has hundreds of clients, lawyers say; ripple impact feared

March 01, 2013|By Jamie Smith Hopkins and Lorraine Mirabella, The Baltimore Sun

A Bel Air company that handled payrolls for many employers in the area is being sued by clients for allegedly stealing years of tax payments rather than sending them on to the tax collectors as required — leaving the companies on the hook.

Plaintiffs include DuClaw Brewing Co. and Animal Emergency Hospital, both of Harford County, which are each claiming losses of tens of thousands of dollars in separate lawsuits against payroll firm AccuPay. Stuart Levine, a Towson attorney who represents other businesses that used AccuPay, said he believes the payroll company had as many as 600 clients, most of them in Harford.

"Every one of them is at risk," Levine said.

The Bel Air Police Department said Friday that it is investigating "suspected criminal activity" at AccuPay after receiving "numerous" complaints about unpaid federal income tax withholdings. Police urged AccuPay clients to call the Internal Revenue Service to determine if their taxes had been paid.

Bel Air police blocked access to AccuPay's Churchville Road office on Friday while investigators went through boxes of paperwork. Yellow police tape was strung across the property, a converted home.

AccuPay officials, including Kieran and Beverly Carden, could not be reached for comment. The company's phones were answered Friday first by voice mail and later not at all. A notice on the front door Thursday said only, "Payrolls were mailed or are in the back mailbox. Thank you."

George S. Robinson IV, DuClaw's attorney, said AccuPay handled taxes for many local companies, and he's hearing from some of them. "It could have a tremendous … economic impact on the area, depending on how large the scope is," he said.

A Bel Air competitor said Friday that it has been swamped by AccuPay clients since the company — officially or not — closed its doors this week. George Heidelmaier, president of It's PayDay, said that "there's a lot of people who are going to get hurt" by the AccuPay fallout — and business owners don't know whom to rely on now.

"One of the first questions out of people's mouths is, 'How do I know I can trust you?' " Heidelmaier said.

Dennis Brager, a California tax lawyer and former trial attorney for the IRS, said it's not an unusual problem for payroll taxes to go unsent without the employer's knowledge. Sometimes the fault lies with a payroll services firm, sometimes with an employee. The problem for employers, he said, is that the taxes must be paid — again.

And while the IRS might forgo penalties, it probably won't waive interest payments, he said.

"The employer's ultimately responsible for making sure those taxes get paid," said Brager, of Brager Tax Law Group. "While all this is going on, it's not unusual for the IRS to file a tax lien, which will impact the business' credit rating and could cause the bank to pull the credit line. I mean, it's just a nightmare."

DuClaw's lawsuit was filed last summer in Harford County Circuit Court. The company alleged that AccuPay took more than $306,000 in tax payments over multiple years that it failed to pass on to the IRS and the state, paying only after the brewing company discovered the problem last year — and leaving DuClaw with the accrued penalties and interest.

In its complaint, DuClaw asked for about $58,000 in compensation for losses from the "vile fraud," plus punitive damages. The company accused AccuPay of perpetrating a Ponzi scheme in which clients' taxes were diverted for personal uses and to cover the payroll taxes of other client companies.

"This deliberate and systematic fraudulent scheme of robbing Peter to pay Paul was tantamount to a game of musical chairs where at some point the music would stop and the AccuPay client without its payroll being covered would be liable to the IRS and the State Comptroller's Office," DuClaw said in its suit. Now, it added, "the music has stopped."

DuClaw owner Dave Benfield said Friday that he discovered discrepancies in an internal audit, launched after one of his employees ran into an attorney working on a different case against AccuPay.

"It made me sick to my stomach," he said.

The IRS waived some but not all of the penalties and fees, he added.

Benfield said the payroll company owners "were driving very nice cars," including Jaguars and BMWs, and "had very nice houses."

Animal Emergency Hospital said in its suit, filed Wednesday, that AccuPay "repeatedly and regularly" failed to pay or made only partial payments of federal and state withholding and unemployment taxes over the past five years, even though the payroll firm withdrew the full amounts from the hospital's account.

Animal Emergency Hospital alleged that about $89,000 was not passed on, and said it owes "substantial" penalties and interest. An official at the veterinary hospital declined to comment Friday; its attorney did not return telephone calls.

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