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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of Ohio

FOR IMMEDIATE RELEASE
Wednesday, July 18, 2018

Owner of Canton company that manufactures American flags indicted for failing to pay $162,000 in payroll taxes

The owner of a Canton company that manufactures American flags was indicted for failing to pay more than $162,000 in payroll taxes.

Richard Spencer, 51, was indicted in federal court on 15 counts of failure to account for, collect and pay over employment taxes.

U.S. Attorney Justin Herdman said: “This defendant is accused of not paying over taxes he collected from his employees, and intentionally misclassifying others to avoid taxes. This defendant benefitted from being able to say that his flags were made in America, but he failed to meet his obligations to his employees and the American taxpayer.”

“In an attempt to avoid his employment tax responsibilities as owner of RS Sewing, Richard Spencer misclassified a portion of his employees as independent contractors. He also withheld employment taxes from his appropriately classified employees, but never paid them to the IRS,” said Ryan L. Korner, Special Agent in Charge, IRS Criminal Investigation, Cincinnati Field Office.

Spencer controlls RS Sewing, which manufactures American flags. Spencer oversaw production, source materials, paperwork and the company’s financial operations, according to the indictment.

Spencer, beginning around 2008, reclassified some of his workers from employees to independent contractors. Following an audit in 2011, Spencer was informed he improperly classified the workers as independent contractors, and a penalty was assessed against Spencer. He continued to misclassify some employees and failed to pay employment taxes, according to the indictment.

Spencer classified some workers as independent contractors and others as employees, although all RS Sewing workers were required to clock in and out, were paid wages by the hour, were provided materials to make the flags by RS Sewing and were otherwise treated the same by managers, according to the indictment.

Spencer from 2012 through 2015, Spencer failed to withhold taxes from workers he knowingly and willfully misclassified as independent contractors. For workers classified as W-2 employees, Spencer withheld federal income, Social Security and Medicare taxes from employees but never paid the money to the IRS, according to the indictment.

Overall, he failed to collect, account for and pay over approximately $162,728 of federal employment taxes, according to the indictment.

If convicted, the defendant’s sentence will be determined by the Court after reviewing factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases, the sentence will not exceed the statutory maximum and, in most cases, it will be less than the maximum.        

This case was investigated by the Internal Revenue Service – Criminal Investigations. It is being prosecuted by Assistant U.S. Attorney Carmen Henderson.

An indictment is only a charge and is not evidence of guilt. The defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Topic(s): 
Tax
Component(s): 
Contact: 
Mike Tobin 216.622.3651 michael.tobin@usdoj.gov
Updated July 18, 2018