Insurance Agent Sentenced for Failing to Pay Withheld Taxes

United States Attorney Deborah R. Gilg announced that John Stanley Clabaugh, Jr., 69, of Lincoln, Nebraska, was sentenced today in Lincoln, to 6 months in prison by United States District Judge John M. Gerrard, for failing to pay over withholding and FICA taxes.  After prison, Clabaugh will serve 3 years of supervised release, with an additional 6 months of home confinement.  Judge Gerrard also ordered that Clabaugh pay restitution in the amount of $135,109.92.

Clabaugh was the owner/operator of an insurance agency located in Crete, Nebraska.  He and a secretary were the only full time employees, although there have been occasional part time employees.  Clabaugh always withheld the federal income tax and FICA taxes from his and his employees’ paychecks, until 2001 when he stopped paying these withheld funds over to the IRS.   These taxes are required to be reported and paid to the IRS on a quarterly basis, and Clabaugh also stopped filing the required quarterly forms.  The total ‘trust fund’ taxes withheld from employee paychecks for the period of time covered by the indictment was $135,330. 

"Business owners have a responsibility to withhold income taxes for their employees and then remit those taxes to the Internal Revenue Service," said Sybil Smith, Special Agent in Charge of IRS Criminal Investigation.  “We are committed to pursuing those who violate the employment tax laws.”

This case was investigated by the Internal Revenue Service, Criminal Investigations Division.
Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.