[US] Texas businessman ordered to pay $38.9 million restitution for tax scheme

The U.S. Attorney for the Northern District of Texas announced that a former Frisco man was sentenced to 52 months in prison and ordered to pay more than $38.9 million in restitution to the IRS earlier this week, U.S. Department of Justice reports.

Ronald James Paolucci (55) co-founder and employee of American Management Staffing (AMS), was charged with felony information in January 2023 and pleaded guilty in February 2023 to conspiracy to defraud the United States and making and subscribing a false tax return. 

On September 16, he was reportedly sentenced by U.S. District Judge Sam A Lindsay.

“We were proud to partner with IRS-CI on this important case,” U.S. Attorney Leigha Simonton said.  “We stand ready to prosecute any employer who pockets employees’ payroll taxes and those who otherwise refuse to meet their tax obligations.” 

“Nearly 70% of total U.S. revenues collected by the IRS are collected through employment taxes.  When the employer withholds the payroll taxes but fails to pay the taxes over to the IRS, they may be criminally investigated and prosecuted for failing to withhold, collect, and pay over the tax. This was the case with Mr. Paolucci, his failure to remit withheld taxes is not only a breach of trust but a serious crime with severe consequences,”  Christopher J. Altemus Jr. - Special Agent in Charge IRS Criminal Investigation, Dallas Field Office - said. 

“In addition to failing to meet payroll tax obligations, Mr. Paolucci failed to report his personal compensation and was ordered to pay approximately $10 million in restitution for his personal tax obligations.  Let this sentence serve as a stark reminder: tax compliance is not optional; it is the law.”

According to court documents, AMS provided temporary staffing services to business clients. Mr Paolucci was reportedly employed by AMS from approximately 2011 until 2020 and had control over AMS’ business affairs, including approving payments and controlling AMS’s bank accounts.

AMS was obligated to pay the temporary employees and withhold and pay all applicable taxes for the employees. Mr Paolucci withheld payroll taxes from the employees’ paychecks, including federal income taxes, Medicare and social security taxes. AMS was required to make deposits of the payroll taxes to the Internal Revenue Service (IRS) on a periodic basis and to file Employer’s Quarterly Federal Income Tax Return forms setting forth the total amount of wages, total amount of income tax withheld, total amount of social security and Medicare taxes due and the total tax deposits.

Mr. Paolucci reportedly agreed to continue to withhold payroll taxes from the temporary employees but understood that taxes would not be paid over to the IRS.  Mr Paolucci continued to issue IRS Forms W-2 to the temporary employees representing to the employees and the IRS that AMS was withholding and paying to the IRS payroll taxes.

From 2014 until 2020, AMS paid temporary employees and withheld approximately $13 million in payroll taxes from its employees. During the same time, AMS issued IRS W-2 forms to the employees showing that AMS withheld approximately $13 million in payroll taxes from those employees, however, the investigation revealed that AMS did not make any payments to the IRS.

Source: U.S. Department of Justice

(Quotes via original reporting)

The U.S. Attorney for the Northern District of Texas announced that a former Frisco man was sentenced to 52 months in prison and ordered to pay more than $38.9 million in restitution to the IRS earlier this week, U.S. Department of Justice reports.

Ronald James Paolucci (55) co-founder and employee of American Management Staffing (AMS), was charged with felony information in January 2023 and pleaded guilty in February 2023 to conspiracy to defraud the United States and making and subscribing a false tax return. 

On September 16, he was reportedly sentenced by U.S. District Judge Sam A Lindsay.

“We were proud to partner with IRS-CI on this important case,” U.S. Attorney Leigha Simonton said.  “We stand ready to prosecute any employer who pockets employees’ payroll taxes and those who otherwise refuse to meet their tax obligations.” 

“Nearly 70% of total U.S. revenues collected by the IRS are collected through employment taxes.  When the employer withholds the payroll taxes but fails to pay the taxes over to the IRS, they may be criminally investigated and prosecuted for failing to withhold, collect, and pay over the tax. This was the case with Mr. Paolucci, his failure to remit withheld taxes is not only a breach of trust but a serious crime with severe consequences,”  Christopher J. Altemus Jr. - Special Agent in Charge IRS Criminal Investigation, Dallas Field Office - said. 

“In addition to failing to meet payroll tax obligations, Mr. Paolucci failed to report his personal compensation and was ordered to pay approximately $10 million in restitution for his personal tax obligations.  Let this sentence serve as a stark reminder: tax compliance is not optional; it is the law.”

According to court documents, AMS provided temporary staffing services to business clients. Mr Paolucci was reportedly employed by AMS from approximately 2011 until 2020 and had control over AMS’ business affairs, including approving payments and controlling AMS’s bank accounts.

AMS was obligated to pay the temporary employees and withhold and pay all applicable taxes for the employees. Mr Paolucci withheld payroll taxes from the employees’ paychecks, including federal income taxes, Medicare and social security taxes. AMS was required to make deposits of the payroll taxes to the Internal Revenue Service (IRS) on a periodic basis and to file Employer’s Quarterly Federal Income Tax Return forms setting forth the total amount of wages, total amount of income tax withheld, total amount of social security and Medicare taxes due and the total tax deposits.

Mr. Paolucci reportedly agreed to continue to withhold payroll taxes from the temporary employees but understood that taxes would not be paid over to the IRS.  Mr Paolucci continued to issue IRS Forms W-2 to the temporary employees representing to the employees and the IRS that AMS was withholding and paying to the IRS payroll taxes.

From 2014 until 2020, AMS paid temporary employees and withheld approximately $13 million in payroll taxes from its employees. During the same time, AMS issued IRS W-2 forms to the employees showing that AMS withheld approximately $13 million in payroll taxes from those employees, however, the investigation revealed that AMS did not make any payments to the IRS.

Source: U.S. Department of Justice

(Quotes via original reporting)