BOSTON - The co-owners and former owner of a payroll company in Worcester pleaded guilty in U.S. District Court in Worcester to defrauding the Internal Revenue Service (IRS) and tax evasion. One of the co-owners also pleaded guilty to embezzling client and employee funds.
William McCullough, 72, of Westborough, Mass., pleaded guilty to two counts of conspiracy to defraud the IRS, four counts of false statements, four counts of tax evasion, and one count of wire fraud. Robert McCullough, 43, also of Westborough, the son of William McCullough, pleaded guilty to two counts of conspiracy to defraud the IRS and four counts of tax evasion. Gary Davis, 74, of Jupiter, Fla., pleaded guilty to one count of conspiracy to defraud the IRS, and three counts of tax evasion. On Aug. 31, 2015, William McCullough was charged in two Informations, and today, Robert McCullough and Davis were charged in one Information. U.S. District Court Judge Timothy S. Hillman scheduled sentencing for William McCullough on Dec. 1, 2015, for Gary Davis on Dec. 8, 2015, and for Robert McCullough on Jan. 14, 2016.
The McCulloughs are co-owners of Harpers Data Services, a payroll company in Worcester. William McCullough is also the treasurer and his son, Robert, is the president. Gary Davis was a former owner and president of Harpers until his retirement in 2010.
Beginning around 2006, William and Robert McCullough opened and operated two corporate bank accounts at Webster Five Cents Savings Bank. From 2007 to 2012, they funneled approximately $11 million of taxable income into these accounts. The McCulloughs kept these accounts off of the corporation’s books and concealed their existence from the corporate accountant. Thus, the income deposited into these accounts was not reported to the IRS on the corporation’s annual tax returns. As a result, the corporation failed to pay approximately $3.78 million in taxes.
Also during that time, William McCullough wrote checks totaling approximately $4.7 million from one of the Webster Five corporate accounts to himself, Robert McCullough, and Gary Davis. In addition, from 2007 to 2011, William McCullough wrote bonus and dividend checks from Harpers totaling approximately $2.7 million to himself, Robert McCullough, and Gary Davis. William McCullough ensured that none of this income appeared on the appropriate tax reporting forms, and as a result, the defendants failed to pay approximately $1.7 million in taxes from 2007 through 2011.
In a separate Information, William McCullough pleaded guilty to one count of wire fraud. From 2009 through 2011, Harpers maintained client trust accounts and a client tax account. These accounts contained client funds, which were to be used to pay employees’ paychecks and employees’ federal and state taxes. From 2009 through 2011, William McCullough took approximately $1 million from the client trust accounts and deposited it into a Harpers account. In 2010, he took $750,000 from the client tax account and deposited it into a Harpers account. At the time William McCullough took this money, the funds belonged solely to the clients of Harpers Data Services. McCullough’s fraud resulted in a theft of approximately $1.8 million dollars.
The charge of conspiracy to defraud provides a sentence of no greater than five years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss, whichever is greater. The charge of false statements in a tax return provides a sentence of no greater than three years in prison, one year of supervised release, and a fine of $100,000. The charge of tax evasion provides a sentence of no greater than five years in prison, three years of supervised release, and a fine of $100,000. The charge of wire fraud provides a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
United States Attorney Carmen M. Ortiz; William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston; and Joseph R. Bonavolonta, Acting Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. The case is being prosecuted by Karin M. Bell, Chief of Ortiz’s Worcester Branch Office.
Source: U.S. Department of Justice, Office of the United States Attorneys
