On Friday, March 23, 2018, it was announced that two former executives at a Virginia-based software company had pleaded guilty to conspiring to defraud the government by failing to pay over employment taxes to the Internal Revenue Service. Documents and information provided to the court showed that Robert Lewis served as the Chief Executive Office and Kristie Lynn McDonald was the Vice President of Finance and Administration for a software company based out of Sterling, Virginia.
From January of 2011 to February of 2013, McDonald and Lewis conspired to defraud the United States by failing to pay the IRS more than $1.8 million in payroll taxes withheld from employee paychecks. As a part of the scheme, the defendants admitted that they circumvented the company’s normal payroll and accounting procedures to pay some employees with manual checks. The employees received their correct salary. However, by bypassing the accounting system, the defendants were able to hide the fact that the withholdings were not paid to the IRS.
The defendants admitted that they intended to conceal the company’s failing financial condition from its Board of Directors. They also admitted to causing the company to file false quarterly employment tax returns with the IRS underreporting the amount of tax due. Lewis and McDonald confessed to intentionally failing to remit the full amount of employee retirement contributions to the company’s retirement plan. The defendants caused the company to fail to transfer and credit nearly $225,000 in voluntary employee retirement withholdings.
Lewis and McDonald admitted to misappropriating money to pay the operating expenses of the company. The defendants face a statutory maximum sentence of five years in prison. They have agreed to pay restitution in the amount of $1,812,706. Lewis is scheduled to be sentenced on June 29. McDonald will be sentenced on June 22. Further details have been made available here.