An owner of a shuttered Harford County payroll services company pleaded guilty Monday to wire fraud and filing a false tax return in a three-year, $2.6 million scheme to steal money from clients and the federal government, prosecutors said.
Kevin Carden, 55, formerly of Bel Air, owned and operated Accupay Inc., which provided payroll and tax services for small and medium-size businesses, with his wife, Beverly.
The firm, which filed for Chapter 7 bankruptcy-law protection in 2013, withdrew clients' funds for payroll taxes, then paid the Internal Revenue Service and other taxing authorities only a portion of the money, according to the guilty plea.
Beverly Carden, who pleaded guilty in December, admitted to diverting the other funds to a joint personal bank account.
Kevin Carden's plea came just before his trial was set to begin, federal prosecutors said, about a month after his wife pleaded guilty to the same charges.
"What really happened was that Kevin and Beverly Carden took money intended for the IRS and spent it themselves, causing millions of dollars in losses to their customers," U.S. Attorney Rod J. Rosenstein said in a statement.
Kevin Carden ran the company's "tax department," which was responsible for paying clients' employment taxes, according to his guilty plea.
The incomplete payments incurred penalties and interest, which further increased AccuPay's clients' tax debts, prosecutors said. The partial payments, in part, went toward paying the penalties.
When clients approached them about the unpaid taxes, the Cardens blamed mistakes by the taxing authorities, errors by AccuPay employees and faulty software AccuPay used to file tax returns, prosecutors said. They either assured clients that the underpayments would be addressed or, in some cases, avoided the inquiries, prosecutors said.
In late 2011, the company sent a letter to clients announcing that it had hired a chief financial officer to audit tax deposits and filings back to 2009 "for correctness, compliance and completeness," prosecutors said. In reality, the Cardens had merely contracted an independent tax preparer to do their own personal taxes and AccuPay's corporate taxes — not those of their clients.
A year later, one client confronted the Cardens with $300,000 in unpaid taxes from 2008 until 2012. The company paid the balance, prosecutors said.
In his plea, Carden admitted the scheme cost clients and taxing authorities at least $250,000. Federal prosecutors allege that the scheme netted $2.6 million.
He also admitted filing a false individual tax return for 2011 to hide the amount of money that had been diverted from AccuPay's clients to the Cardens' personal account. He said the false tax return cost the government between $40,000 and $100,000; prosecutors argue it was $144,720.
Dave Benfield, president of Bel Air-based DuClaw Brewing Co., said his company had lost more than $500,000 to the AccuPay scam. He said the Cardens explained away the discrepancies when the company inquired about them.
The Evening Sun
"You believe them because you'd never think somebody would just outright steal your money," Benfield said. "But they did."
He hopes the federal government will reform the tax system so companies like AccuPay can be held accountable when they don't pay their clients' taxes.
"They make it so complicated, you have to hire an outside company, but then they can cheat you out of money," Benfield said. "There were so many smaller companies that never got their money back. We hope this helps the IRS settle this matter with those companies."
Carden and his wife have been ordered to pay full restitution to the IRS and the victimized clients. Both face a maximum of 20 years in prison for wire fraud and up to an additional three years for the false tax return.
Their sentencing is scheduled for May 18.