The Department of Justice U.S. Attorney’s Office District of Connecticut announced that a former payroll manager of a Connecticut home healthcare company has pled guilty to one count of conspiracy to defraud the United States and impede and impair the Internal Revenue Service (IRS). The charges are related to his employment at the home healthcare company.
The accused worked as a payroll manager for the Connecticut home healthcare company that was originally established as a partnership between his sister and another individual. In September 2012, the partnership ended, and, by court order, the sister was obligated to make payments to her partner for the purchase of the partner’s interest in the home healthcare company. Between 2012 and 2016, the payroll manager helped his sister by processing payroll that caused checks to be issued to “ghost employees.” The “ghost employees” never worked for the company, and the checks were paid to his sister. She did not report the money on her income tax returns. This resulted in false Forms W-2 and W-3 to be submitted to the IRS.
The former payroll manager faces imprisonment of up to five years and has agreed to pay $248,827 for his involvement in the scheme. He has been released on a $20,000 bond pending sentencing. His sister was previously convicted of several offenses related to this scheme and ordered to pay more than $600,000 in restitution to the IRS.
The former Chief Financial Officer of the company has also been convicted in related cases.
Issue:
To minimize fraud in payroll, it is recommended that payroll steps be broken up between at least two individuals so that no one person is responsible for processing the payroll, disbursement of funds, and distribution of payroll. Additionally, it is recommended that paper paychecks be eliminated by use of direct deposit as much as possible to make it more difficult to forge checks. Violations of payroll management can be considered fraud, resulting in fines, criminal charges, and imprisonment.
Discussion Points:
- Review your policies and procedures on your payroll process, as well as resident funds and accounts payable and receivable. Update the policies and procedures as needed.
- Train appropriate staff on your procedures for processing payroll, management and protection of resident funds, and disbursement related to accounts payable and receivable. Document that these trainings occurred, and file the signed document in each employee’s education file.
- Periodically audit the payroll process to ensure that paychecks issued match your roster of current employees. Also, review resident funds management and accounts payable and receivable transactions to ensure their accuracy.
