Frederick Man Pleads Guilty To Federal Fraud And Tax Charges Related To A Fraud Scheme
BALTIMORE (WJZ) -- A Frederick man who owned and operated a payroll processing business pleaded guilty to federal charges of wire fraud and aiding in the filing of a false tax return, in connection with a fraud scheme in which he took funds from his clients' tax escrow account and used them to pay his own personal expenses.
David Richison, 64, owned and operated a Frederick-based payroll processing business -- Period Financial -- doing business as Period Payroll.
Period Payroll provided payroll processing and payroll tax payment services to businesses in Maryland and Virginia, using special software specifically designed by Richison.
Period Payroll was responsible for printing paychecks for client employees, calculating the employment taxes owed to federal and state taxing authorities by the client companies and those companies' employees, and preparing and filing the client companies' employment tax returns.
Richison admitted that from at least 2012 through 2014, the tax forms he prepared and filed on behalf of Period Payroll clients properly reported the amount of taxes owed, but a corresponding amount of tax deposits was not made with the IRS.
Richison began taking money from the client escrow fund to pay for his own personal and business-related expenses rather than paying those funds to the IRS.
In July 2012, Richison transferred $53,000 from the client escrow account to his personal attorney to pay legal fees. Over the course of 2013 and 2014, the frequency with which Richison failed to pay over client funds to the IRS increased.
When clients received notices from the IRS that their employment taxes had not been paid, Richison provided false explanations for the missed payments and falsely promised to make the payments and cover the penalties and interest.
Between around February 2013 and December 2014, Richison used approximately $598,365 of client escrow funds to make payments to the IRS to cover the penalties and interest his clients had accrued in order to conceal the fraud and continue to deceive his clients into thinking that Period Payroll was solvent.
By the end of 2014, there were insufficient funds in the client escrow account to cover the mounting debts.
By that time, the difference between the amount taken from clients and reported to have been paid to the IRS per the tax returns filed on behalf of clients, and the actual payments made as required by those returns totaled at least $1,622,481.56.
As part of his plea agreement, Richison will be required to pay restitution in the full amount of the victims' losses, which is agreed to be at least $1,609,561.59.
Richison faces a maximum sentence of 20 years in federal prison for wire fraud and a maximum of three years in federal prison for aiding in the filing of a false tax return.
