Has a company been indicted for failing to pay taxes on benefits?

Question

CNN is reporting that Ron Fischetti, an attorney for former President Donald Trump, stated:

“It’s outrageous. It’s unprecedented. It’s never happened before,” he said of a company being indicted in connection with failing to pay taxes on benefits.

This seems unlikely to me, as benefits have been a way to extract ill gotten gains (eg. Tyco Scandal) and the IRS are quite keen on prosecuting this stuff. Is it true that no company has previously been indicted for failing to pay taxes on benefits given to employees?

Answer 1

Is it true that no company has previously been indicted for failing to pay taxes on benefits given to employees?

Probably true, and even if not, it's very uncommon.

After an hours long search with many different keywords, I could not find any examples of a company being indicted for failing to pay taxes on benefits given to employees. I could find examples of employees being indicted (and, futhermore, pleading guilty) for failing to pay taxes on such benefits. The New York Times has written that such a move would be "highly unusual" according to several lawyers (who also couldn't come up with any examples). (If anyone knows differently, please correct me!)

---

In the 1990s, the IRS investigated NBA referees for not paying taxes on money they pocketed as compensation for air travel.

Another NBA referee was indicted by a federal grand jury on charges he downgraded first-class airline tickets purchased by the league and pocketed the difference without telling the Internal Revenue Service. ... [Joe Crawford's] attorney said he would admit his responsibility in failing to report the fringe benefit income. (CBS News)

The 45-year-old referee was charged with tax evasion and obstructing federal tax laws. The indictment says Mauer received "substantial taxable income" from 1989 through 1994 but failed to declare it. ... At least 11 other NBA officials pleaded guilty earlier. (Associated Press via Deseret News)

An ESPN article wrote that 45 NBA officials "have been lynched" in connection with these cases:

Mauer is one of the 45 NBA officials who have been lynched -- fairly or unfairly is up for debate -- by the Internal Revenue Service for an airline ticket scam that netted them additional income. ... Worse, while the other 43 referees who chose to plea bargain and wanted their jobs back got them back, Mauer possibly may not be reinstated by the NBA, depending on what the outcome of his sentencing hearing -- yet to be scheduled -- is.

With the benefit of hindsight, Mauer was indeed reinstated as most of his fellow colleagues were. Surprisingly for me, news stories are sparse, though there's a brief Wikipedia page on this.

---

From reading articles on these and similar enforcement actions, I have the impression that it's usually only individuals, and not companies, who are indicted. (e.g. take a look at IRS Criminal Investigation Press Releases or the list of Office of Labor-Management Standards Criminal and Civil Enforcement Actions dating back to 2001; note that these are all individuals who are sentenced/charged/indicted, even when something illegal they are getting indicted for benefits the company they work for, as in this case.)

Given 1) the large number of NBA officials charged, 2) these officials pled guilty and got their NBA jobs back, and 3) that the NBA itself wasn't charged, I would cite the NBA referee case as another example that indicting an organization itself is uncommon, even if problems within an organization are pervasive and (potentially) reflect more on the organization rather than on individuals.

On the Trump Organization case specifically, the New York Times wrote:

Several lawyers who specialize in tax rules have told The New York Times that it would be highly unusual to indict a company just for failing to pay taxes on fringe benefits. None of them could cite any recent example, noting that many companies provide their employees with benefits like company cars.

(Since this is not clear in the question, the Trump Organization has not actually been indicted yet.

Update on July 1, 2021: The Trump Organization has since been indicted.)

---

I also asked this question on Law.SE. The only answerer could not come up with an example of a company being indicted for failing to pay taxes on fringe benefits, though they could come up with an example of an individual being indicted for such a thing. Based on searches of links provided in the answer on Law.SE, I was still unable to come up with an example. You can read the answer for other legal perspectives if you are interested.

---

What about the other answer?

@DenisS's answer lists 3 examples of "owners of businesses", i.e. individuals and not the businesses themselves, being indicted and going to prison. In addition to @Nate Eldredge's comment that @DenisS's answers are on avoiding payroll tax and not avoiding taxes on benefits, these examples relate to individuals but not businesses getting indicted.

Answer 2

The Journal of Accountancy provides several examples of owners of businesses not only being indicted, but going to prison over not paying payroll taxes.

These examples are laid out in their article The consequences of willful failure to pay payroll taxes.

Maryland Business Owner: 24 Months in Prison

In January 2013, Alphonso Tillman was sentenced to 24 months in prison and three years of supervised release for failing to account for and pay over employment taxes. Tillman was also ordered to pay restitution of $2,205,991. According to his plea agreement, Tillman was the president and sole owner of two companies that provided security guards to protect commercial and residential properties. Both companies withheld taxes from their employees’ paychecks, but Tillman failed to file the required forms or pay the payroll taxes due, with the exception of payments from IRS collection efforts. The total amount of taxes lost from Tillman’s failure to pay these taxes was $2,205,991.

Tillman spent hundreds of thousands of dollars from the business bank accounts to cover his personal expenses between 2005 and 2008. “Using money withheld from your employees’ compensation for personal gain is reckless,” said Sheila Olander, acting special agent in charge, IRS Criminal Investigation, Washington Field Office. “Business owners are responsible to withhold and pay over income taxes from their employees’ compensation to the IRS. [This sentence] shows failing to do so is a serious offense to which Mr. Tillman is being held accountable” (U.S. Attorney’s Office, District of Maryland, Press Release, March 26, 2013).

Colorado Business Co-Owner: 28 Months in Prison

In September, Beth Ann Pettyjohn, of Englewood, Colo., was sentenced to 28 months in prison and three years of supervised release, and was ordered to pay $4,669,532 in restitution to the IRS, as well as a $25,000 fine. According to court documents, Pettyjohn, the co-owner and vice president of Overhead Door Co. of Denver, stopped paying over the payroll taxes withheld from employee wages, as well as the employer’s matching portion of FICA, totaling almost $4.7 million. Pettyjohn managed the accounting department, determined which bills would be paid, and issued and signed checks. She used the money to buy a number of houses, including paying $285,000 cash to purchase a condominium for her son.

“Employers who fail to remit employment taxes are victimizing legitimate businesses by creating an unfair competitive advantage over those businesses that lawfully pay their share of employment taxes,” said Stephen Boyd, special agent in charge, IRS Criminal Investigation, Denver Field Office. “As this sentence demonstrates, there are real consequences for committing employment tax fraud” (U.S. Attorney’s Office, District of Colorado, Press Release, Sept. 12, 2013).

Nebraska Couple: Husband and Wife Both Get Prison Time

Michael and Laurie Russell, of Hickman, Neb., were sentenced to prison terms (16 months and six months, respectively) for failing to pay over employment taxes. The Russells were also jointly ordered to pay the IRS $311,486 in restitution. According to court documents, the Russells jointly owned and operated a window installation business, for which they withheld employee income and FICA taxes, but paid none of it to the IRS. The couple lived a comfortable lifestyle and could afford to pay the taxes, but apparently chose not to.

“Business owners have a responsibility to withhold income taxes for employees and remit those taxes to the Internal Revenue Service,” said Sybil Smith, special agent in charge of IRS Criminal Investigation. “We are committed to pursuing those who violate the employment tax laws” (U.S. Attorney’s Office, District of Nebraska, Press Release, July 30, 2013).