South Carolina Bank Involved in Employment Tax Fraud Scheme

The former Vice President of a South Carolina-based bank has pleaded guilty to conspiring to defraud the United States by participating in an employment tax fraud scheme that resulted in over $1 million in unpaid payroll taxes. This case shows that the Department of Justice will go after those who are complicit in employment tax fraud in addition to businesses or individuals that fail to remit payroll taxes.

Douglas Corriher made several loans to a bank customer who operated staffing companies in North Carolina. These loans were made through nominees to circumvent federal laws that limit the amount that can be loaned to a single entity. Engaging in illegal activities is one of the badges of tax fraud, so these illegal loans may have indicated to the IRS that an intentional violation of a known legal duty was occurring.

The staffing company handled the payroll responsibilities—including remitting payroll taxes and filing W-2 forms—for thousands of low-wage temp workers. The W-2 forms indicated that the employment taxes had been withheld from the workers’ wages, even though they had not actually been paid.

According to court documents, Mr. Corriher was aware that the staffing company owed over $1 million in payroll taxes to the IRS, but continued to make loans to the company, knowing money saved by failing to remit the payroll taxes would allow the company to repay the loan. In exchange, the bank received high interest rates on the loan and additional fees.

Mr. Corriher faces a statuary maximum sentence of up to five years in prison, in addition to supervised release, restitution, and monetary penalties.

The facts presented in the court documents show a clear engagement in illegal activities and attempts to conceal these activities. Any employee at the staffing company who was responsible for submitting the payroll taxes could also be held personally responsible for paying the trust fund recovery penalty, in addition to possible criminal tax fraud charges. The IRS takes employment tax fraud very seriously, and it more likely to seek criminal tax charges when there is clear evidence showing that the responsible person was trying to conceal a tax fraud scheme that was perpetrated over a number of years and involved hundreds of employees.

If you have failed to submit payroll taxes for your business, contact a tax fraud attorney immediately to discuss how you can minimize the potential penalties and back taxes owed to the IRS, and how you can avoid the risk of criminal prosecution.