60-year old Darrell Smith of Forest City was the president and general partner of Energae, which was a minority investor in Permeate Refining LLC, an ethanol-production business in Hopkinton. In his position, Smith was responsible for paying over to the IRS the employment tax on behalf of Permeate’s employees.
From the first quarter of 2011 through the third quarter of 2012, Smith failed to pay nearly 503-thousand dollars. After Smith discovered that a subordinate employee had made some payments to the IRS, Smith stopped that employee from making further payments.
Smith pled guilty in June to one count of failing to pay employment taxes. He was sentenced Wednesday in federal court to 13 months in prison. He was also ordered in June to serve two years of supervised release.
“Willful failure to comply with employment tax obligations is a crime,” said Principal Deputy Assistant Attorney General Ciraolo. “Darrell Smith’s jail sentence sends the clear message that the Department will work to ensure that withholdings due to the United States are in fact paid to the Treasury and that honest employers are given the opportunity to compete on a level playing field.”
“Mr. Smith’s failure to pay employment taxes for over a year was an attempt to dodge his obligations to his employees and to the United States,” said U.S. Attorney Techau. “Our system and our citizens depend upon employers like Mr. Smith to be honest and pay what they owe in employment taxes. This sentence shows that failing to do so is criminal and there will be consequences.”
“IRS Criminal Investigation realizes the detrimental consequences of employment tax evasion. It results in the loss of tax revenue to the United States government and the loss of future social security or Medicare benefits for the employees,” said Karl Stiften, Special Agent in Charge of IRS Criminal Investigation.
His co-defendant, Randy Less, also pled guilty in June to failing to pay employment taxes and violating the Clean Water Act. Less’ sentencing is scheduled for March.