Dauphin County Payroll Firm Owner Sentenced to Jail for Stealing Nearly $6 Million from Small Businesses

June 20, 2018 | Topic: Criminal

AG Shapiro: Business Owner Stole Payroll Funds from Small Businesses & Non-Profits and Used Funds for Personal Expenses

HARRISBURG — Attorney General Josh Shapiro today announced that a former Dauphin County business owner has pleaded guilty and was sentenced to jail for stealing nearly $6 million from 266 clients who entrusted their payroll funds and administration to his company.

William Sullivan, 45, formerly of S. Progress Avenue, Harrisburg, pleaded guilty to theft by failure to make required disposition of funds, a first-degree felony, for stealing $5,737,948 from clients between 2006 and 2011. As part of his guilty plea, Sullivan was ordered to pay approximately $4 million in restitution to victims. Sullivan’s company, Net Pay Solutions, filed for Chapter 7 bankruptcy in 2011.

Sullivan was sentenced Tuesday in Dauphin County Court by Judge William Tully to 15 to 30 months in state prison, followed by 54 months of probation. The sentence will run concurrent to a federal sentence Sullivan received earlier this month for similar crimes. Sullivan’s company had clients across Pennsylvania, as well as Maryland and New Jersey.

“Sullivan badly hurt Pennsylvania businesses by not paying their federal, state and local tax returns for five years – as he promised to do under agreement for his clients,” Attorney General Josh Shapiro said. “These were small businesses and non-profits – some of which were forced to close their doors because of his repeated thefts. He violated their trust and stole their money. His guilty plea and sentencing today will ensure justice is served.”

The Office of Attorney General launched an investigation into Sullivan’s payroll firm in 2013, following a referral from the Pennsylvania Department of Revenue. Net Pay Solutions was supposed to process payroll, handle the filing of taxes and unemployment compensation for its clients.

“This individual deceived his clients by using the taxes they withheld from their employees to pay for his own expenses,” said Pennsylvania Revenue Secretary Dan Hassell. “His actions put several of his clients out of business. We want the public to know that this illegal conduct is unacceptable. Our department will continue working with our law enforcement partners to ensure business owners who steal from their clients are held accountable.”

Investigators learned that Sullivan stole the $5.7 million by making false entries in a tax-tracking software program, and then manually reversing them out to make it appear as though the funds had been remitted to various taxing authorities – even though they were not.

In earlier bankruptcy proceedings, Sullivan testified that after 2006 his company was operating at a loss. However, records showed that from August 2009 through December 2010 the company brought in 131 new clients. Net Pay Solutions did not disclose its mounting financial troubles to new clients. Sullivan further stated in this testimony that he co-mingled Net Pay Solutions funds with his personal accounts.

One company that contracted with Net Pay Solutions, Network Associates, lost $112,391 to Sullivan’s criminal scheme.

“I’m very glad Mr. Sullivan will be held accountable for his crimes,” said Dan Ryan of Information Network Associates in Harrisburg. “His thefts and deceit negatively affected my business and employees. I am grateful that Attorney General Shapiro and his office are working to protect Pennsylvanians like myself from such a horrendous criminal scam.”

Attorney General Josh Shapiro’s office is standing up to protect small businesses and non-profits from both crimes like the large theft perpetuated by Sullivan, as well as consumer scams. Earlier this week, his office participated in “Operation Main Street”, a joint effort with the Federal Trade Commission and 11 Attorneys General to educate small businesses on how to protect themselves from scams. For more details on how to protect your small business, please click here.

The Sullivan case was prosecuted by DAG Megan Madaffari.

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