Police investigating whether Harford County payroll company AccuPay stole years of tax payments rather than sending them to tax collectors on behalf of clients warned Monday that potential victims might number in the hundreds.
An investigation by the Bel Air Police Department is in the early stages and likely will involve multiple agencies, a spokesman said. Potential victims could include any business that hired AccuPay to handle its payroll and remit its state and federal taxes, the spokesman said.
"It's very preliminary at this point, and we're beginning to take information from potential victims," said Bel Air Police detective Sgt. Jim Lockard. No charges have been filed against any of the payroll company's owners, he said.
Bel Air-based AccuPay, which has an estimated 500 to 600 clients, closed its East Churchville Road office last week after a Bel Air veterinary hospital accused the company in a lawsuit Wednesday of "repeatedly and regularly" failing to pay or making only partial payments of federal and state withholding and unemployment taxes over the past five years.
During that time, AccuPay withdrew the full amounts from the accounts of its client, Animal Emergency Hospital, the lawsuit said. Shortly after the animal hospital filed its case, Harford County Circuit Judge William O. Carr ordered AccuPay to preserve all documents and records relating to its operations.
As of Monday, state records showed AccuPay is being sued by five clients making similar allegations and claiming losses of more than $465,000.
Lockard said he could not comment on whether AccuPary's owners are cooperating in the investigation.
A woman who answered the door at the Bel Air address of AccuPay owners Beverly and Kevin Carden identified herself as Beverly Carden's sister but would not provide her name. She said the allegations against her family are false and that her sister cannot afford to retain an attorney.
Kieran Carden, another defendant in Animal Emergency Hospital's case, declined to comment.
Besides Animal Emergency Hospital, other clients that have filed suit include DuClaw Brewing Co., a law firm, another veterinary clinic and a construction company. DuClaw alleged in a complaint last summer that AccuPay took more than $306,000 in tax payments over multiple years that it failed to pass on to the Internal Revenue Service and the state, paying only after the brewing company discovered the problem last year and leaving DuClaw with the accrued penalties and interest.
On Friday, the Towson law firm of Mark Van Bavel filed a complaint seeking $30,000 in damages for AccuPay's alleged underpayment of the firm's withheld taxes. And on Monday, two more clients filed lawsuits, Equine Architectural Products Inc. and Cambria Veterinary Center Inc., both of Whiteford. Equine is seeking more than $29,000 and Cambria more than $10,000.
"It's beyond my comprehension," said Equine owner John Riston, who said his wife, Dr. Amy Hartman, owns the veterinary center. "We trusted them."
Six months ago, his company started getting notices of delinquent taxes, he said. Each time, AccuPay representatives, including owner Kevin Carden, told him AccuPay would fix the problem, he said.
About three months ago, Riston said, he noticed that money withdrawn from his account for his employees' direct-deposit accounts was taking about a week longer than usual to get to the employees. Two months ago, an IRS agent came to his business to notify him of unpaid payroll taxes. Again, AccuPay said it would handle the matter, blaming a new software program, he said.
After the Maryland comptroller's office filed a lien for back taxes, Riston said, he contacted that agency and found out AccuPay had not filed returns for six months. He then discovered AccuPay hadn't filed federal taxes for an entire year. The business had signed a power of attorney allowing AccuPay to deal with the IRS, and AccuPay, without Riston's knowledge, had all IRS correspondence diverted to its own offices, he said.
Last week, AccuPay again withdrew money for Equine's payroll, but the employees' checks, about $1,800 worth, bounced, Riston said. He said his company reimbursed employees and would have to absorb the double tax payment if the amount can't be recovered in court.
Payroll checks also bounced for three AccuPay clients represented by Stuart Levine, a Towson attorney, Levine said Monday. None of Levine's clients have filed suit yet, he added.
The allegations surfacing against AccuPay appear to echo earlier court cases against the company and its principals.
In 2010, Saxon's Inc., a jeweler with outlets in Bel Air and Aberdeen, filed a lawsuit in Harford County Circuit Court against AccuPay and its owners, alleging that AccuPay failed to remit payroll taxes. Tax payments were missing and deficient even though Saxon's "payroll account was consistently depleted on a monthly basis of the payroll amounts necessary to pay" the jeweler's payroll taxes, according to the lawsuit.
Saxon's received late-payment and deficiency notices from the IRS starting in 2002, the lawsuit said. Saxon's would pass the notices on to AccuPay, which assured its client that the notices were the fault of the IRS and state comptroller's office, according to the suit. AccuPay told Saxon's it would fix the problem, but from 2006 through 2009, AccuPay "failed to respond to the IRS or State" about Saxon's delinquency notices and fines even after reassuring Saxon's "it was in control of the situation."
In April 2010, the IRS sent agents to Saxon's during business hours to try to seize the jeweler's assets, the suit said. The IRS claimed Saxon's owed hundreds of thousands of dollars in payroll taxes and related fines and penalties, the case said.
"The activity (i.e. the non-payment and delinquency notices from the IRS and State and the reassurance from Defendant AccuPay that it would handle the reconciliation of [Saxon's] account) became so commonplace that [Saxon's] owners believed that this was a normal function of dealing with the IRS and State through a payroll company," Saxon's lawsuit said.
Saxon's suit was voluntarily dismissed in April 2011, according to online court records. Saxon's owners could not be reached for comment Monday.
Similar suits against AccuPay were filed in Harford County District Court in 2008 and 2009 by a local electrician and a company that moved to Phoenix from Maryland in 2007. The outcome of the suits could not be determined.
In its investigation, Bel Air police will look at many of the same issues raised in the complaints, Lockard said. He did not identify other agencies involved in the investigation. A spokeswoman for the U.S. attorney's office in Maryland said she could not confirm or deny any investigations, while a spokesman for the FBI in Baltimore said he was unaware of an investigation but would not comment on a continuing matter.
Investigators are looking at the state and federal tax withholdings of AccuPay's clients and "whether the amounts that were reported coincide with the amounts that were actually paid, and whether the monies withheld from the business to pay those income taxes were the amounts remitted to the IRS and the comptroller's office," Lockard said. "We're looking for discrepancies between the reported amounts and the actual amounts."
Police have not determined how many clients AccuPay had. Potential victims could include "anybody they've done business with," Lockard said. "It could be hundreds."