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Judge: Man pocketed employees' tax money

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Kevin Murphy
June 15, 2011
— A Monroe businessman was sentenced in federal court Tuesday to two years in prison and three years supervised release for withholding employee taxes but not paying them to the federal Internal Revenue Service.

District Judge Barbara Crabb told Donald Penniston, 47, of Brodhead that it wasn't simply a mistake that he failed to pay Social Security and Medicare taxes for Canton Promotions employees. She said he "lived a lavish lifestyle" while his employees lived on "only a fraction" of his income.


"You deliberately took more to take vacations, to eat out and have more money than was rightfully yours, taking it away from your employees and partners," she said.


Crabb noted Penniston's trip to Ireland in 2005, airline and water park tickets for his family and restaurant expenditures that he paid from company funds as examples of money that should have been applied to Canton's tax liability that totals about $155,000 from 2004 to 2006.


There is no record of Canton Promotions paying any federal taxes since 2001, which makes it likely that its liability exceeds the $155,000, Crabb said.


Penniston pleaded guilty in February to failing to pay employment taxes and theft of funds. A month later, he paid about $12,000 in restitution, the amount he withheld from several employee in taxes that should have been paid to their retirement accounts.


Crabb's remarks came after Penniston said that he knew he'd made a mistake and knew "there must be punishment."


He explained that in 1997 he and two friends started Canton Promotions in Monroe, and he assumed bookkeeping duties for which he wasn't trained and "didn't do a very good job with it."


Defense attorney Erika Bierma said her client "eats and sleeps this business" and has no prior convictions, "not even a speeding ticket." She asked Crabb for a sentence of nine months of home confinement followed by supervised release to allow him to continue to work at Canton Promotions and start paying what it owes to the IRS.


"He faces prison time and losing his business. He wants to keep his employees in Monroe, employed, a place without an abundance of jobs," Bierma said.


After court, Assistant U.S. Attorney Laura Prbyzylinski Finn said Penniston was caught by an IRS program that cross checks what businesses report as income and contributions against records kept by other agencies including the Social Security Administration and state governments.


The IRS began investigating after discrepancies were discovered in 2006. Initially, Penniston said he hadn't understood he needed to pay employee taxes. Later, he admitted he knew that he had withheld the funds but hadn't paid them to the IRS.


Crabb ordered Penniston to report to prison by July 18.



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