The owners of Kauai Freight Service, Inc. pleaded not guilty to charges of failure to file tax returns, failure to provide tax information, first-degree theft and attempted tax evasion Thursday, April 17 in Fifth Circuit Court in Lihu’e. Stephen C.
The owners of Kauai Freight Service, Inc. pleaded not guilty to charges of failure to file tax returns, failure to provide tax information, first-degree theft and attempted tax evasion Thursday, April 17 in Fifth Circuit Court in Lihu’e.
Stephen C. Girald, 56, and Ashlet S. Girald, 48, of Kapa’a, and Kauai Freight were charged by grand jury indictment filed March 17.
They were booked April 17 and released on their own recognizance, according to court and police records. Trial was set for Aug. 25.
They were charged with eight counts of willful failure to file a return, six counts of failing to supply tax information, one count of first-degree theft, and one count of attempted tax evasion.
Under state law, if withholding taxes are not turned over, a corporation and its officers can both be held liable, said state Deputy Attorney General Rick Damerville.
Charges involved failure to report three types of taxes, according to Criminal Tax Investigator Stephen Hironaka.
First, they are accused of failing to file public service company taxes for 1999 and 2000. As a public carrier using roads, company officials must pay a tax of 4 percent of revenues, he said.
Next, they were accused of failing to report general excise taxes for 1998 and 1999. This tax is imposed on those who sell items or goods, or provide services.
Lastly, they were charged with failure to report withholding taxes for 1998, 1999 and 2000.
According to the indictment, from about Jan. 1 1998 to Feb. 28, 2001, the Giralds failed to turn over withheld taxes found to be in excess of $20,000.
They were also charged with attempted tax evasion for falsifying business records and concealing income and assets, according to the indictment.
Kauai Freight has been delinquent for many years, Hironaka said. He said he started an investigation into Kauai Freight in late 2000. Hironaka is the only tax investigator in the state.
“Because the tax office has a limited number of employees, we make contact with employers and try to get them to cooperate. After a certain period of time Kauai Freight still did not cooperate, (so) the case was turned over to me for investigation,” Hironaka added.
Companies are bound to keep their employees’ withheld taxes in trust, and turn the money over to the state each year, Damerville said. If it does not, the state is in effect loaning money so that employees are still able to claim tax credits when they file returns.
The tax department has not been penalizing employees, but perhaps in the future, if an employee had knowledge that taxes were not being turned over, they could also be penalized, Damerville said.
Damerville said he has no information that Kauai Freight employees may have known the Giralds’ accounting practices.
A call to the state Bureau of Conveyances, where all tax liens are recorded, found that Kauai Freight Service had 96 state and federal liens filed. Personnel could not release specific details right away, or determine which had been released over time.
“They have tax problems, that’s all I can say,” said the Giralds’ attorney, Stephen Pingree.
“In a lot of cases we’re not really concerned with charging theft if the money is used to continue the business,” Hironaka said. He said that it becomes a more egregious offense if employers lavish themselves with money, expensive gifts and trips.
“It’s not fair to the other businesses who are abiding by the law,” Hironaka said.
He couldn’t comment on whether his investigation found the Giralds doing such things, but did say that Kauai Freight is not the only company being investigated.
Prior to 1995, there was practically no criminal enforcement of tax laws, and as a result a whole lot of people didn’t comply, Damerville said.
The state employs 20 criminal investigators for the Department of Health and Human Services for welfare fraud cases, and one for the taxation department.
A bill is moving in the state Legislature that if approved would provide funding for more criminal investigators in the state Department of Taxation.
Staff Writer Kendyce Manguchei can be reached at mailto:kmanguchei@pulitzer.net or 245-3681 (ext. 252).
