By Rick Pfeiffer
Seven top executives of Niagara Falls-based Sevenson Environment Services have been indicted by a federal grand jury on tax fraud and tax evasions charges.
The original indictment in the case was filed, under seal, last May. A superseding indictment was unsealed and made public Wednesday.
None of the individuals named in the indictment have been arraigned yet.
The 25-page filing in U.S. District Court in Buffalo names Sevenson President and CEO Michael Elia, and company Vice Presidents Laurence Elia, Richard Elia, Philip DeLuca, Alfred LaGreca and Frank Fracassi as defendants. They are charged with conspiracy, filing false tax returns and aiding in the preparation of false tax returns.
The grand jury investigation began in November 2010 and the indictment claims the tax fraud scheme started in the late 1990s and continued until around April 2007.
Prosecutors charge that the top Sevenson execs conspired to give up to 23 company employees “bonus compensation” that was not reported to the Internal Revenue Service. The compensation, which was reportedly referred to inside the company as “Spanky Bucks” allowed some employees to receive goods and services instead of actual monetary bonuses.
The goods and services were paid for by the corporation but their value was not reported, as required, to the IRS. The corporation also deducted the costs of the goods and services as non-payroll business expenses on its corporate tax return.
Lawyers from the U.S. Department of Justice Tax Division in Washington, D.C., claim that during the course of the tax fraud scheme Sevenson awarded approximately $1 million in unreported, non-cash bonuses. The scam reportedly cost the IRS Almost $311,000 in unpaid taxes.
Among the items Sevenson paid for in place of cash bonuses were lavish vacation trips and home improvements for employees. The indictment also charges that employees created fake invoices to hide what the company was actually paying for.
In one case, an employee was told to fabricate a letter from a travel company indicating his $11,280 travel expenses were for a seminar and conference in Los Angeles. Prosecutors say the trip was a personal vacation for the employee.