From the U.S. Attorney’s Office in Baltimore:
Government Contends that the Scheme Resulted in Losses to the IRS, Maryland Comptroller, and Individual AccuPay Clients of Approximately $2.6 Million
Baltimore, Maryland – Kevin Carden, age 55, formerly of Bel Air, Maryland, pleaded guilty today to wire fraud and to filing a false tax return, arising from a scheme to steal money from his clients and the IRS. The guilty plea was entered just before Carden’s trial was scheduled to begin.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Thomas Jankowski of the Internal Revenue Service – Criminal Investigation, Washington, D.C. Field Office; and Special Agent in Charge Kevin Perkins of the Federal Bureau of Investigation.
“When customers realized that the money they entrusted to AccuPay was not being used as intended to pay their taxes, Kevin Carden misled them with false cover stories,” said U.S. Attorney Rod J. Rosenstein. “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.”
According to his plea agreement, until its closure in March 2013, Kevin Carden and his wife, Beverly Carden operated AccuPay, Inc. which provided payroll and payroll tax services to small and medium businesses. Kevin Carden ran the company’s “tax department,” which was responsible for handling the employment tax portion of the business. AccuPay received funds from its clients that it held in trust to pay over to the IRS and the Comptroller of Maryland for AccuPay’s clients’ employment taxes. Kevin Carden was responsible for transferring the client funds to make the required tax payments.
During the course of the fraud scheme, which Kevin Carden admitted lasted from 2010 to March 2013, AccuPay withdrew from the clients’ funds the full amount of payroll taxes owed, but then paid the taxing authorities only a portion of the funds. While AccuPay falsely represented to its clients that it paid all of the taxes owed, in fact, Beverly Carden diverted some of those funds to a joint personal bank account that she and her husband maintained which the couple then used to pay personal expenses.
Because of the Cardens’ failure to fully pay existing tax obligations owed by their clients, both the federal and state taxing authorities imposed interest and penalties on AccuPay’s clients, thereby further increasing the magnitude of their tax obligations. Thus, the payments that the Cardens did make to the taxing authorities in part were being applied to pay interest charges and penalties imposed as a result of underpayments earlier in the scheme.
The Cardens used various methods to cover up their diversion of funds and to allay their clients’ concerns when they learned that the taxing authorities had apparently not been paid the full amounts they were supposed to receive. For example, in the instances in which AccuPay’s clients confronted employees at AccuPay about the underpayment of their taxes, Kevin Carden either told those clients that the underpayment would be addressed or (in some cases) avoided their inquiries. Kevin Carden further represented to those clients with whom he spoke that the underpayment was due to (1) a mistake by the taxing authority; (2) an error made by AccuPay employees; and/or (3) problems with the software AccuPay used to file tax returns. These representations were often untrue.
In addition, as a further means of covering up their diversion of funds and allaying their clients’ concerns, in late 2011 AccuPay sent a letter to their clients stating that they had hired a Chief Financial Officer (CFO) to audit all tax deposits and filings for all tax clients back to 2009 “for correctness, compliance, and completeness.” In fact, that individual was not AccuPay’s CFO, but rather was an independent tax preparer the Cardens had hired to prepare their own personal taxes and the corporate taxes of AccuPay, rather than those of the clients.
In 2012, a client of AccuPay confronted representatives of AccuPay with the fact that the company had failed to pay over $300,000 in taxes owed from 2008 to 2012. In response, AccuPay paid the client’s tax deficiencies.
Kevin Carden admits that the amount of loss arising from this scheme is at least $250,000, but the government will argue that the loss amount is approximately $2.6 million.
Carden also admits that he filed a false individual tax return for 2011 in which he did not report the amount of payroll taxes that had been diverted from AccuPay’s clients to the Cardens’ personal account. Kevin Carden admits that the amount of loss arising from the false tax return offense is between $40,000 and $100,000, but the government will argue that the loss amount is approximately $144,720.
As part of his plea agreement, Kevin Carden will be ordered to pay restitution in the full amount of the victims’ losses, including both the IRS and the individual clients of AccuPay.
Kevin Carden faces a maximum penalty of 20 years in prison for wire fraud, and a maximum of three years in prison for filing a false tax return. U.S. District Judge Marvin J. Garbis scheduled sentencing for May 18, 2016, at 10:00 a.m.
Beverly Carden, age 53, formerly of Bel Air, Maryland, previously pleaded guilty to mail fraud and filing a false tax return, and is also scheduled to be sentenced on May 18, 2016, at 10:00 a.m.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
United States Attorney Rod J. Rosenstein commended the IRS – Criminal Investigation and FBI for their work in the investigation. Mr. Rosenstein praised the Bel Air Police Department for their assistance in the investigation, and thanked Assistant U.S. Attorneys Evan T. Shea and Jefferson M. Gray, who are prosecuting the case.