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Jury finds Falmouth man guilty of tax fraud
March 20, 2015
AUGUSTA, Maine — Attorney General Janet Mills announced today that a Cumberland County jury found John M. Kendall, 66, of Falmouth, guilty after a six-day trial on numerous counts related to tax evasion. Assistant Attorney General Gregg Bernstein tried the case for the State of Maine. Kendall committed these crimes in his capacity as President of Chipco International, a now closed poker chip manufacturing company which did business in Yarmouth.
Kendall was found guilty on all eight counts, including theft by misapplication of withholding taxes, conspiracy to commit withholding tax evasion, failure to truthfully collect, account, or pay over withholding taxes, and making a false statement in a Maine income tax return.
From late 2007 through the end of 2012, Chipco International withheld the income taxes from the wages of its employees. Rather than pay over these withholding taxes to both federal and state tax authorities, Kendall diverted the funds to pay for business and personal expenses, including the mortgage on his Falmouth residence, legal fees for his personal bankruptcy, and dues and expenses at the two country clubs to which he and his wife belonged. Kendall also conspired with one of his finance employees to evade payment of withholding taxes by paying certain management employees “off the books,” thereby concealing the company’s withholding tax obligation. Finally, Kendall falsely underreported his income on his personal 2009 Maine income tax return. Six other employees of the former Chipco International previously pled guilty to theft of unemployment benefits or income tax evasion, offenses committed when Kendall facilitated the payment of these employees “off the books” on a number of occasions from 2009 through 2011. Kendall used the unemployment benefits to maintain payroll for these employees when the company’s cash flow was disrupted in part by the many debts it owed to various creditors and vendors. The employees were encouraged to apply for unemployment benefits while in fact they continued to work at Chipco and were paid “off the books” an additional amount. The jury returned the guilty verdict on Tuesday, March 17 and Kendall is currently free on bail pending his sentencing, which is expected to be scheduled in 30 to 45 days before Cumberland County Superior Court Justice Thomas D. Warren. Kendall faces up to 10 years in prison and the payment of restitution still owed to the State. This case represents a cooperative investigation by the Office of the Attorney General, the Criminal Investigative Unit of Maine Revenue Services and the Maine Department of Labor.
Of the approximately $165,000 of Maine state withholding taxes which Chipco withheld from its employees from late 2007 through the end of 2012 but failed to pay over as required, Maine Revenue Services was able to recover approximately $110,000, leaving the balance for the State to seek as restitution from Kendall when he is sentenced. The 6 employees who pleaded guilty to theft of unemployment benefits or tax evasion owed approximately $110,453.20 in total restitution, which includes the taxes which were not withheld when they were paid “off the books.” They all cooperated with the State to resolve their cases quickly. These employees have paid back approximately $47,100 in restitution pursuant to continued payment plans. “Employers are entrusted with the obligation to deduct withholding taxes from their employees and to turn those taxes over to the IRS or Maine Revenue services. The employer’s responsibility to handle these funds truthfully and responsibly is crucial to the financial operation of our State.” Mills said. “My office will vigorously prosecute those individuals who would abuse this trust by illegally diverting the taxes to enrich themselves or finance their business operations.”
Attorney General Mills praised the work of Assistant Attorney General Gregg Bernstein and the collaboration with Russell Veysey, a senior investigator with Maine Revenue Service’s Criminal Investigation Division, who conducted the investigation along with The Maine Department of Labor who assisted in the investigation of unemployment benefits theft.