Stephen C. Girald and Ashlet Girald of Kauai Freight Service, Inc., and the company, were indicted by a Kaua’i grand jury Monday on charges of multiple violations of state tax laws.
The Giralds were also charged with first-degree theft, for allegedly failing to pay over withholding taxes on employee wages to the state department, and tax evasion for allegedly falsifying business records and concealing company income and assets, according to a tax department investigator.
The company was charged with failing to file public service company tax returns for 1999 and 2000, failing to file annual general excise tax returns for 1998 and 1999, and failing to file annual withholding tax returns for 1998, 1999 and 2000.
Federal tax liens were earlier filed against the company, alleging failure to pay nearly $1 million in Social Security withholding in 1998 and 2000; and unemployment in various months in 1999, 2000 and 2001. A separate federal lien alleged non-payment of $165,764 in heavy-vehicle use taxes in July 2001, and unemployment in June 2001.
Further, the Giralds were charged this week with failing to file public service company tax returns for Kauai Freight Service, Inc., for 1999 and 2000, failing to file annual general excise tax returns for Kauai Freight Service, Inc., for 1998 and 1999, and failing to file annual withholding tax returns for Kauai Freight Service, Inc., for 1998, 1999 and 2000.
Stephen Girald referred all questions to his Honolulu attorney, Stephen P. Pingree. Pingree could not be reached for comment yesterday.
If convicted of the state charges, the Giralds each face fines of up to $300,000, and up to 22 years in prison, or probation, for the felony (tax evasion and theft) and misdemeanor (tax-return) offenses. The company could be fined up to $700,000 for misdemeanor violations.
State Deputy Attorney General Rick Damerville requested bench warrants be issued for the Giralds, and that after their arrests they be released on their own recognizance, he said.
“They’re not a threat of going anywhere, they’re long-time residents,” Damerville said.
As of yesterday, they hadn’t been arrested, nor had they turned themselves in.
Damerville said: “The theft charge arises out of accusations that they over a period of time failed to turn over more than $20,000 in withholding taxes to the state Department of Taxation. Under state law, withholding taxes are held by employers in trust, and if they fail to pay them over, they can be charged with theft.”
The indictments should send a clear message that the state will prosecute fully those who fail to pay taxes to the state, and that other similar indictments are forthcoming, he said.
“You cannot just withhold wages from employees and use them for your own purposes, it’s a crime under state law,” Damerville said. “The Kauai Freight indictment, and likely some others, is notice out there, that that’s not your money, mister employer. That money belongs to the employees, and it belongs to the state Department of Taxation.”
The Giralds’ first court appearance is expected within the first 10 days of April, in Lihu’e, Damerville said.
“Kauai Freight has been an active account in the (state Department of Taxation) collection department for many, many years,” said Stephen Hironaka, criminal tax investigator with the state Department of Taxation.
“I do not negotiate,” said Hironaka, who once a case is referred to him tries to find out why voluntary payment agreements fall apart.
“After awhile, years add up, and pretty soon, you’re way behind. And the issue with the withholding taxes is a prominent one, where they are withholding their employees’ state taxes and are not paying over,” Hironaka explained.
“It’s kind of like stealing from the employee,” and taxpayers end up paying for the refund that those employees get, as the employees get credit for that withholding whether or not the employer pays those taxes to the state, he said.
“That’s a very serious offense,” one that draws the attention of the U.S. Internal Revenue Service as well, Hironaka said.
Staff Writer Paul C. Curtis can be reached at mailto:firstname.lastname@example.org or 245-3681 (ext. 224).