Camden County, New Jersey, Man Charged With Defrauding City Of Trenton And Others Of $5.6 Million In Payroll Tax Scheme
TRENTON, N.J. – The owner and president of a Camden County, New Jersey, payroll processing company was charged today with defrauding more than 50 clients – including the City of Trenton – out of more than $5.6 million, U.S. Attorney Paul J. Fishman announced.
John Scholtz, 67, of Winslow, New Jersey, was charged by complaint with wire fraud, fraud against a local government receiving federal funds, and money laundering. He is scheduled to appear in court later today before U.S. Magistrate Judge Douglas E. Arpert.
According to the complaint:
Scholtz owned and operated Innovative Payroll Services LLC (IPS), a company that provided payroll services to clients in New Jersey and elsewhere. His clients included municipalities, educational institutions, and various small- to medium-sized, privately held companies. Each payroll period, IPS provided its clients with a payroll summary setting forth the payroll taxes owed for that period. IPS clients then deposited the specified payroll taxes into an IPS bank account, where IPS held the funds until they were remitted to the taxing authorities.
Starting at least in June 2015, Scholtz allegedly withdrew funds from that IPS account and used them to pay for his own expenses, including as a deposit on a $1.8 million house in Florida, credit card payments, investments in other businesses, and payments for cars, boats and airplanes.
Over time, this ongoing misappropriation of funds caused many IPS clients to be in delinquent status with the IRS and state and local taxing authorities. As clients’ tax deposit funds came in, IPS used such funds to pay other clients’ taxes owed for prior pay periods, as well as penalties and interest. As a result of the scheme, more than 50 IPS clients sustained over $5.6 million in losses based on federal tax deposits that IPS failed to make, as well as associated penalties and interest. The City of Trenton was an IPS client from July 2009 to January 2016 and is one of the IPS clients whose tax deposit funds were misappropriated by Scholtz.
The count of wire fraud with which Scholtz is charged carries a maximum potential penalty of 20 years in prison; the count of fraud against a local government receiving federal funds and the count of money laundering each carry a maximum penalty of 10 years in prison. All three charges also carry a fine of $250,000 or twice the gross gain or loss from the offense.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Acting Special Agent in Charge Andrew Campi in Newark; special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen; and the Mercer County Prosecutor’s Office, under the direction of Acting Prosecutor Angelo Onofri, with the investigation leading to today’s charges.
The government is represented by Assistant U.S. Attorney Sarah M. Wolfe of the U.S. Attorney’s Office Criminal Division in Trenton.
The charges and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
Defense counsel: Lisa Mathewson Esq. of Philadelphia and Brian Reilly Esq., Assistant Federal Public Defender