NEW JERSEY BUSINESSWOMAN SENTENCED TO PRISON FOR TAX FRAUD

Defendant Failed to Pay Employment Taxes Withheld from Workers’ Wages

WASHINGTON, D.C. - Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division; Christopher J. Christie, U.S. Attorney for the District of New Jersey; and Nancy Jardini, Chief, Internal Revenue Service (IRS) Criminal Investigation Division, today announced that at the federal courthouse in Camden, New Jersey, U.S. District Judge Joseph E. Irenas sentenced Dorothea Daraio to 41 months imprisonment, to be followed by three years supervised release and a $25,000 fine. Judge Irenas also ordered Ms. Daraio to file all delinquent tax returns within six months of sentencing and pay all taxes due.

“Employers are required to withhold Social Security, Medicare and income taxes from their employees’ pay, keep the proceeds in trust for payment to the United States, and file employment tax returns correctly reporting those taxes,” said Assistant Attorney General O’Connor. “Misusing money withheld from employees’ paychecks is a crime.”

A substantial portion of the total tax gap, the difference between what is owed and what is paid, is believed to involve employee withholdings, said IRS Criminal Investigation Chief Jardini. “Today’s sentence is a clear reminder that the IRS is working diligently to close that gap through enforcement action.”

According to the Indictment and evidence offered at trial, Ms. Daraio, 57, of Marlton, New Jersey, owned Eagle Security Inc., a company that provided security guard services in Southern New Jersey. On November 10, 2004, she was convicted for tax evasion, relating to her failure to pay employment taxes for Eagle Security, Inc. She failed to pay over approximately $222,000 in payroll taxes owed by Eagle Security and its employees for the quarters ended March 30, 1994 through March 30, 1998. After the IRS began collection activity against Eagle Security, Ms. Daraio created a new corporation, ESS Co., as a successor to Eagle Security. When the IRS issued levies to third parties who owed monies to Eagle Security requiring them to pay the IRS instead of Eagle Security, Ms. Daraio directed clients instead to make payments to ESS Co., in an effort to further evade the payment of the payroll taxes due.

Assistant Attorney General O’Connor and U.S. Attorney Christie thanked Tax Division trial attorneys Nanette L. Davis and Diana H. Beinart., who prosecuted the case. They also thanked the special agents of the IRS whose assistance was essential to the successful investigation and prosecution of the case.

Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at http://www.usdoj.gov/tax.

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