Accu-pay, a Bel Air payroll company, shut its doors Wednesday after a local business filed suit, claiming the company didn't pay withheld taxes to the IRS, and a judge quickly issued an order telling its owners refrain from destroying any documents or records.
Wags Inc. in the 800 block of Belair Road, filed a complaint in Harford County Circuit Court Wednesday against Accu-pay Inc., and its owners Beverly, Kevin and Kieran Carden, of the 500 block of Weatherby Road in Bel Air, alleging that Accu-pay collected and withheld its company's payroll taxes but did not pay the full amount to the state and federal government.
A similar suit was filed in July 2012 by DuClaw Brewing Company and its affiliates claiming that hundreds of thousands of dollars had been collected by Accu-pay over a period of several years but never paid to the IRS or state, in a "scheme to defraud defendants tantamount to the age old Ponzi Scheme," according to the suit.
Two companies say in court documents they are already out nearly $90,000 and more than $300,000, respectively.
"This deliberate and systematic fraudulent scheme of robbing Peter to Pay Paul was tantamount to a game of musical chairs where at some point the music would stop and the Accu-pay client without its payroll being covered would be liable to the IRS and the state comptroller's office for the delinquent payroll taxes," according to one of the suits.
Coincidentally, the company, which bills itself as "payroll specialists" is situated in the 200 block of East Churchville Road at a heavily-traveled location frequently used by police for speed sting operations. State police were conducting such an operation Thursday morning, which was unrelated to anything going on at Accu-pay.
An hour after the Wags, Inc. complaint was filed Wednesday, Harford County Circuit Court Judge William O. Carr ordered that the owners of Accu-pay "shall preserve all documents and records, both electronic and paper records, relating to the operation of Accu-pay..." according to court records.
It's unclear the status of the Accu-pay business. A sign posted on the door of its Churchville Road office reads: "Payrolls were mailed or are in the back mailbox. Thank you." No one answered the office phone number Thursday afternoon, nor did anyone answer the door of the business.
The owner of Wags Inc., also known as Animal Emergency Hospital, claims in court documents that in the five years Accu-pay has been handling its payroll services, Accu-pay has failed to pay $89,194.53 to the state and federal governments.
Wags contracted with Accu-pay in 2008 for its payroll and related tax services, including payroll, debit federal and state withholding taxes and federal and state unemployment taxes and report and remit those taxes on behalf of the company as required by law, at a rate of $60 bi-weekly, according to the suit.
The owner of Wags, citing her own records and those from government agencies, claims in the suit that, "Accu-Pay has underreported and under remitted Plaintiff's withholding taxes and unemployment taxes since 2008." The company still, however, "withdrew from Plaintiff's account the full amount of taxes owed" but allegedly failed to pay that full amount to the state and federal governments.
Those payments that were made, the suit claims, "were late and penalties and interest have been assessed and more penalties are imminent."
"Plaintiff believes ... the Defendants are fraudulently withholding Plaintiff's funds for their benefit and personal gain," the suit reads.
When the Wags owner confronted Accu-pay officials Monday at the Accu-pay office on Churchville Road, they "refused to provide any explanation" and told her to call their lawyer, according to the suit.
The Wags suit claims fraud, negligent misrepresentation and breach of contract on the part of Accu-pay and seeks damages of $500,000.
The DuClaw suit filed last year lays out an alleged scheme: Accu-pay and its owners would use payroll tax money for their personal use, not to pay the clients' taxes, then they would "use payroll taxes from other clients to cover [DuClaw's] stolen payroll tax monies," according to the plaintiff's complaint.
The suit also named as defendants Brian and Stephanie Winterbauer and Erin Carden, all of the 300 block of Woltham Court in Joppa, the address also listed for Kevin and Beverly Carden. Kieran Carden is not named as a defendant in the DuClaw suit.
DuClaw had been an Accu-pay client since 1995, according to the suit.
Accu-pay would allegedly hide the delinquent payments from the IRS and state comptroller's office by purposely either not filing or late filing the necessary paperwork "as they waited for other clients payroll tax monies to come in so they could cover the delinquent and non-paid payroll taxes," the suit alleges.
When the economy started to decline, Accu-pay's client base began to dwindle, according to the DuClaw suit, and it became more difficult for Accu-pay to cover the payroll gap from its larger clients' payroll tax obligations. Accu-pay then began to change mailing address of its clients so the delinquency and levy notices from the IRS and state comptroller's office would be sent directly to Accu-pay, creating an illusion that Accu-pay and reconciled its payroll tax issues, the DuClaw suit alleges.
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Between 2008 and 2012, DuClaw's owners received notices from the IRS "stating that its payroll tax was deficient and in some instances had not even been paid." Similar notices were received from the state, according to the suit. Each of the notices included a fine and penalty associated with the delinquent amount.
When DuClaw officials confronted Accu-pay, according to the suit, each time they were told the IRS and state comptroller's offices were at fault and that Accu-pay would reconcile the account with both agencies.
This went on for several years, according to the suit, and each time Accu-pay said it would reconcile the issues with the state and IRS. Accu-pay, according to the suit, eventually changed DuClaw's mailing address with the government, so delinquent notices would go directly to Accu-pay and not DuClaw, "thus hiding the IRS notices from Plaintiff and promoting the facade that Defendant Accu-pay had 'taken care' of the payroll discrepancies."
Between 2008 and 2012, however, Accu-pay failed to respond to the IRS or the state about the delinquency notices, nor did it pay the fines and fees that came with the unpaid taxes, according to the suit, which also says DuClaw's payroll account was depleted every month, with the money transferred to Accu-pay's account, "yet the IRS on numerous occasions never received the payroll tax monies" on behalf of DuClaw.
An audit by DuClaw's accountant showed a discrepancy of $306,836 that Accu-pay had taken from DuClaw, but failed to pay to the IRS and state, according to the suit.
In their suit, DuClaw and its associated companies allege breach of contract, negligence, breach of fiduciary duty, constructive fraud, intentional misrepresentation, conversion, civil conspiracy and piercing the corporate veil on the part of Accu-pay.
"This vile fraud created a paramount inequity in that it not only pilfered the payroll taxes coffers of Plaintiffs and other clients of Defendant Accu-pay, it also forces these small businesses to repay the IRS and Maryland State Comptroller's Office the original tax liability, plus the interest and penalties associated with late payments," the DuClaw complaint states.