JUDGE BARS OKLAHOMA CITY RESIDENTS FROM OPERATING EMPLOYEE-LEASING COMPANIES ALLEGEDLY USED TO EVADE EMPLOYMENT TAXES

Court Finds Defendants Tried To Hinder Irs Collection Through "Abusive Scheme"

WASHINGTON, D.C. - The Department of Justice announced today that a federal judge has ordered Oklahoma City residents Joseph Wolf, Cecil Fisher, Louise Qualls, and Eric Wolf to stop operating most of their professional employer organizations (PEOs) or employee leasing companies, and not to establish new ones, because of their continued failure to pay federal employment taxes. The order, known as a preliminary injunction, will remain in effect until the case goes to trial.

“The Department of Justice is determined to put a stop to schemes to evade the payment of employment taxes,” said Eileen J. O=Connor, Assistant Attorney General for the Justice Department’s Tax Division. “Employment tax schemes rob the Federal Treasury, leaving law-abiding taxpayers to make up the shortfall.”

The court held that “the continued loss of millions of dollars to the federal ‘fisc’ through the [defendants’] abusive scheme” justified the injunction. Further, the court found that the defendants allegedly used PEOs “to frustrate and hinder the ability of the Internal Revenue Service to collect the taxes that are legitimately due.” The injunction order authorized the four individuals to continue to operate one of their companies, TSI Installers and Erectors, as long as they fully complied with the applicable tax laws, but prohibited them from affiliating themselves with any other PEO or employee leasing company without first notifying the government. The court also ordered the individual defendants to file past due corporate income tax returns for tax years 2000-2002.

On April 5, 2004, the IRS issued a consumer alert warning businesses and individuals to watch for questionable employment tax practices. See IRS press release IR 2004-47 at http://www.irs.gov/newsroom/article/0,,id=122521,00.html.

The Justice Department has obtained injunctions against a number of employers who were not paying employment taxes. Information on some of these court cases can be found at:
http://www.usdoj.gov/tax/txdv03692.htm
http://www.usdoj.gov/tax/txdv03498.htm
http://www.usdoj.gov/tax/txdv03412.htm
http://www.usdoj.gov/tax/paysourcepr.htm

More information about this case can be found at http://www.usdoj.gov/tax/txdv04023.htm.