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  • TEEMCO implicated in massive tax evasion scheme

    Earlier this month, OKCTalk.com posted a story about Edmond-based TEEMCO, a company which had received a great deal of positive exposure and press where bold claims of the company and its chief executive were published without scrutiny or verification.

    We documented in great detail key information which had not been previously reported, including the extensive criminal histories of its two top executives, dubious academic claims, concerning business activities, stalled work on its proposed new headquarters and extravagant spending. See our exclusive report: “Troubled times at TEEMCO”.

    Now, our continuing investigation has uncovered something even more serious: Allegations that TEEMCO has engaged in practices whereby millions in federal taxes have gone purposely unreported and unpaid.

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    Unpaid employment taxes
    OKCTalk was told by those with direct access to the TEEMCO books that the company has in fact never paid the federal taxes they have been withholding from employees since the company was formed in 2010, a cumulative amount of nearly three million dollars.

    Through the normal course of business, TEEMCO – like most companies with full-time employees – issues paychecks which reflect government-mandated deductions for various state and federal taxes. Laws dictate that those funds be held in trust for the government, and are often referred to as “trust fund taxes”. There are specific rules that require expedient deposit to the Internal Revenue Service and other appropriate agencies on a strict schedule. It is important to note that TEEMCO processes all payroll internally rather than using an outside service.

    However, OKCTalk has learned that over its entire four years of operation, TEEMCO has yet to forward a penny of the federal trust fund taxes and has instead kept the money for its own use.

    Furthermore, employees tell us Chief Executive Officer Greg Lorson gave specific instructions to not pay these taxes or to set aside any funds for future payment. We were told the employment taxes have been used as operating funds and spent indiscriminately.

    Reportedly, the issue first came to light in early 2011 when TEEMCO, having newly formed the previous June, skipped depositing the federal withholding taxes for both previous quarters. The initial plan was to set aside funds to cover the obligation, but the reserve account was soon abandoned and the company proceeded to operate without reporting or paying an ever-growing mountain of money that was owed to the government.

    Although a small amount of employees involved with the company's finances and payroll were aware of this issue, they say they were given strict instructions by Lorson not to pay these back taxes, as the company had “other priorities”. As we also previously reported, just last year at the behest of CEO Lorson, TEEMCO splashed out hundreds of thousands for a 58-foot yacht and a private suite at Chesapeake Arena, among many other extravagances (see Lavish spending section from “Troubled times”). The IRS expressly forbids using employment taxes for general operations or paying others.

    OKCTalk was told an IRS audit of a TEEMCO employee for the tax year 2013 recently brought the employment tax issue to the attention of others in the company. During the course of the audit, the IRS revealed it had no record of having received the taxes shown on the employee's W-2 form issued by TEEMCO, and thus a rebate was disallowed. The employee approached Greg Lorson who then allegedly authorized a quick bonus payment to the affected employee.

    Social Security and retirement plan issues
    Employees also reported problems with Social Security funds being properly credited to their accounts. In the case of Social Security, an employer is required to withhold 6.2% of an employee's gross salary for every pay period, then match that amount with their own funds. Similar to federal withholding taxes, Social Security is considered to be funds placed in trust by the employer and are to be deposited on a regular basis for each employee.

    The Social Security Administration operates a website which allows individuals to monitor their running balance. Several employees told OKCTalk that in the process of checking their accounts, they found no funds had been deposited by TEEMCO for 2011 and beyond. The issue was reportedly raised to CEO Lorson early this year who only then authorized the payment of Social Security for first 2012, then 2011. Employees still report no new funds in their account since 2012.

    Social Security and Medicare taxes are typically grouped together as “FICA” deductions, but it is not clear if TEEMCO is current on its Medicare obligations, or its state and unemployment taxes.

    Additionally, employees report not being able to verify account balances in their TEEMCO retirement accounts. Employees told OKCTalk they have not received any sort of account statement and cannot get verification of where those funds are being held.

    Possible consequences
    Failing to pay employment and Social Security taxes are matters taken very seriously by both the Internal Revenue Service and the Social Security Administration with possible civil and criminal repercussions.

    When taxes are not paid in a timely manner, there are often significant financial penalties and interest charges added to any outstanding balance which can quickly turn a large debt into an insurmountable sum.

    Under Sec. 7202 of the Internal Revenue Code, a willful failure to pay over or collect tax is a felony punishable by up to a $10,000 fine or five years in prison, or both. There are many cases documented by the IRS where the failure to pay even a few hundred thousand dollars in a timely manner resulted in significant prison sentences.

    Employees may also suffer because they may not qualify for social security, Medicare, or unemployment benefits when employers do not report or pay employment and unemployment taxes. Consequently, taxes withheld and paid by compliant employers are used to pay the refunds and social security benefits of employees whose employers did not pay the withheld taxes.

    Also, the persons deemed responsible for paying these taxes are often held personally liable for the entire amount owed to the government. Bankruptcy laws do not provide protection in this area.

    Uncertain future
    Compounding the situation are the current financial difficulties faced by TEEMCO. Lorson told The Oklahoman in a 10/7/14 article, the company was experiencing “financial stress”. We had previously documented the company being seriously past due on many bills. (see Unpaid bills, near eviction section of “Troubled times”)

    Records obtained by OKCTalk show only 28 employees have logged hours into the TEEMCO time tracking system in the month of October. Although we have learned a handful of employees are not required to use this system, it appears the total number of employees has dropped dramatically in just the last few months.

    When Lorson first discussed moving TEEMCO headquarters to the Gold Dome he cited a rapidly-growing enterprise of 100 employees; now only a fraction of that number seem to be on the payroll. Former employees confirm large-scale firings and layoffs in recent months.

    In the 10/7/14 Oklahoman article, Lorson said the company still intends to move to the Gold Dome.

    OKCTalk's investigation of TEEMCO is ongoing.

    Related Information

    10/2/14: "Troubled times at TEEMCO", OKCTalk.com

    10/7/14: “ Oklahoma City landmark Gold Dome saga continues with financial problems, conflicting claims from buyer“, The Oklahoman

    June 2014: "The consequences of willful failure to pay payroll taxes", Journal of Accountancy

    10/3/11: "Fail To Pay Payroll Tax: Go To Jail", Forbes

    "Examples of Employment Tax Fraud Investigations -- Fiscal Year 2012", Official website of the Internal Revenue Service
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