MECHANICSBURG MAN PLEADS GUILTY TO $6 MILLION TAX FRAUD

Dennis C. Pfannenschmidt, United States Attorney for the Middle District of Pennsylvania announced that Stephen H. Ritter, 38, of Mechanicsburg, Pennsylvania, pleaded guilty in federal court today for failing to pay the IRS approximately $6 million in payroll taxes that were due and owing for Kandersteg, Inc., a Camp Hill based company which Ritter owned and operated. As a result of today’s guilty plea, Ritter faces up to five years’ imprisonment, a fine of $250,000 and full restitution of the tax liability due the IRS.

Ritter was the President and owner of Kandersteg, Inc., a company that handled pick-ups and deliveries for DHL Worldwide Express in Pennsylvania and several other states. Kandersteg operated between 2000 and 2008, employing up to 325 employees. Ritter admitted today that he was responsible for collecting, accounting for and paying over Kandersteg’s payroll taxes to the IRS but failed to do so from the inception of the company in 2000 until it went bankrupt in early 2008. Ritter also admitted that he caused Kandersteg’s employees to receive false W-2 forms on an annual basis reflecting non-existent withheld payroll taxes which the employees used to offset their tax liabilities.

Federal law requires employers to collect and withhold federal income taxes, medicare and social security taxes from their employees paychecks. Those taxes, known as payroll taxes, are supposed to be accounted for on a quarterly basis in an Employer’s Quarterly Federal Income Tax Return (Form 941). Ritter filed delinquent Form 941's for Kandersteg in December 2007 and April 2008 but failed to remit any of the payroll taxes that were due and owing for the prior tax periods. Ritter admitted today that he used the funds for operating expenses of the company rather than remitting them to the IRS.

The case was investigated by the Criminal Division of the IRS and is assigned to Senior Litigation Counsel Bruce Brandler for prosecution.

****