Employer Indicted for Failing to Pay over $580,000 in Employment Taxes to the IRS

December 16, 2010

Baltimore, Maryland - A federal grand jury indicted Rony Natanzon, age 58, of Baltimore, late yesterday for failing to pay $586,043 in employment taxes owed to the IRS by his company ERN LLC. The indictment alleges that at the same time Natanzon failed to pay the employment taxes owed to the IRS, he diverted more than $1 million of ERN’s funds to other companies that he controlled.

The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.

"The IRS-Criminal Investigation realizes the detrimental consequences of employment tax evasion,” stated Rebecca Sparkman, Internal Revenue Service-Criminal Investigation Special Agent in Charge, Washington DC Field Office. "It results in the loss of tax revenue to the United States government and the loss of future social security or Medicare benefits for the employees."

According to the five count indictment, Natanzon owned and operated ERN, which was in the business of guaranteeing checks for merchants. ERN was required to withhold, report and pay over employment taxes to the IRS on the amount of wages ERN paid to its employees, on at least a quarterly basis. Employment taxes are federal income withholding taxes and Federal Insurance Contribution Act taxes (FICA taxes). The FICA tax is comprised of Social Security and Medicare taxes. ERN was responsible for paying half of the employee’s FICA taxes.

The indictment alleges that for the four quarters of calendar year 2003 and the first quarter of calendar year 2004, ERN reported withholding approximately $635,446.89 in employment taxes from its employees’ paychecks. For those same five quarters, the employer’s share of the FICA taxes for which ERN was allegedly responsible was approximately $276,966.99. For that time period, ERN allegedly reported that it owed $912,415.29 in total employment taxes to the IRS. However, Natanzon allegedly caused ERN to pay only $326,372.10 to the IRS in employment taxes. Thus, Natanzon is alleged to have caused ERN to not pay $586,043.19 in employment taxes owed to the IRS for these five quarters. He also allegedly transferred $1,023,260 from ERN’s bank accounts to bank accounts of other companies he controlled during that same time period.

Natanzon faces a maximum sentence of five years in prison on each of the five counts of failing to account for and pay employment taxes. Natanzon is scheduled to have an initial appearance in U.S. District Court in Baltimore on January 7, 2011, at 11:00 a.m.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

United States Attorney Rod J. Rosenstein praised the IRS-Criminal Investigation for its work in the investigation and thanked Assistant United States Attorneys Kathleen Gavin and Jonathan Biran, who are prosecuting the case.

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