WASHINGTON – U.S. District Judge Royce C. Lamberth sentenced Stephen B. Cohen of Washington, D.C., to 12 months and one day in prison for tax crimes involving his willful failure to collect and pay more than $500,000 of payroll and sales taxes, the Justice Department announced today. Cohen, a one-time lawyer, owned several businesses in the Washington area, including Washington Park Gourmet, a delicatessen and grocery store.
Cohen pleaded guilty to these offenses on March 10, 2008. According to a plea agreement, between June 1997 and December 2003, Cohen withheld payroll taxes from his employees’ paychecks but failed to pay over those taxes to the Internal Revenue Service (IRS). Cohen, who also owned Western Market, a grocery store in Bethesda, Md., pleaded guilty to withholding payroll taxes from his Western Market employees’ paychecks for 16 years while failing to pay over those taxes to the IRS as well. He also failed to pay sales taxes owed to the District of Columbia government. In addition, Cohen failed to timely file his federal individual income tax returns for tax years 1996 through 2006, and despite residency in the District of Columbia, failed to file District income tax returns for tax years 2003 to the present. According to documents filed with the court, the tax loss – including federal and District of Columbia taxes – is approximately $580,000.
In sentencing the defendant, Judge Lamberth noted that the conduct was a serious offense and stated that imprisonment was necessary for a deterrent effect. Judge Lamberth also sentenced Cohen to three years of supervised release and ordered him to pay restitution in the amount of $586,584 to the IRS and the District of Columbia Office of Tax and Revenue.
"Grocers and other business owners who withhold payroll taxes from their employees' paychecks hold that money in trust for the United States. It is not theirs, but satisfies their employees' obligations to the government," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "When businessmen, like Mr. Cohen, decide to steal their employees' money instead of paying it over to the IRS, they face being investigated, convicted and sentenced to prison. They will also have a felony on their records for the rest of their lives as well as having to pay back all the money with interest and penalties."
"The tax law is very clear," said Eileen Mayer, Chief, IRS Criminal Investigation (IRS-CI) Division. "Employers who withhold employment taxes from the salaries of their employees must pay those taxes over to the government. Failure to do so often results in consequences such as the sentence handed to Mr. Cohen today."
Assistant Attorney General Hochman thanked Tax Division trial attorneys Shawn Noud and Jerrod Patterson who prosecuted the case, and IRS-CI and the D.C. Office of Tax and Revenue who investigated the case.