Stable owner Ron Paolucci has been sentenced to over four years in prison and ordered to repay nearly $39 million to the Internal Revenue Service, according to a federal prosecutor's announcement this week.
The 55-year-old, whose Thoroughbred racing operation was the second-highest in race wins during 2017 and 2018, pleaded guilty in February 2023 to felony charges involving conspiracy to defraud the U.S. government and filing a false tax return. U.S. District Judge Sam Lindsay delivered the 52-month sentence in Texas on Monday.
"We are proud to collaborate with IRS criminal investigations on this significant case," stated U.S. Attorney Leigha Simonton. "We are committed to prosecuting employers who fail to remit their employees’ payroll taxes and those who neglect their tax obligations."
IRS Special Agent Chris Altemus Jr. emphasised the seriousness of Paolucci’s actions, noting, "His failure to remit withheld taxes is a breach of trust and a serious crime that carries severe consequences. Not only did he neglect payroll tax obligations, but he also failed to report his income, leading to approximately $10 million in restitution for his tax commitments. Let this case serve as a clear reminder: tax compliance is mandatory, not optional."
Court documents reveal that Paolucci co-founded American Management Staffing (AMS), which provided temporary staffing solutions to various businesses. He served as an employee of AMS from around 2011 until 2020, having authority over the company's financial operations, including approving payments and managing bank accounts.
AMS was responsible for compensating its temporary employees as well as withholding and submitting all required taxes on their behalf. Paolucci deducted payroll taxes from employee wages, including federal income taxes and contributions to Medicare and Social Security. Although AMS was required to remit these taxes regularly to the IRS and file quarterly tax forms, Paolucci chose to withhold the payroll taxes without making the necessary payments.
Between 2014 and 2020, AMS withheld approximately $13 million in payroll taxes but failed to send any payments to the IRS, all while issuing W-2 forms to employees that falsely indicated tax withholdings had been made.
The case was prosecuted by Assistant U.S. Attorney Marty Basu under the supervision of U.S. Attorney Leigha Simonton from Texas.