A Pennsylvania couple has pleaded guilty to conspiring to defraud the United States related to their efforts to evade paying employment taxes.
According to court documents and statements made in court, Theodore Shearba and Jennifer Cemini (who are not married) owned and operated a landscaping and excavation business in Perkiomenville, Pennsylvania. Perkiomenville is located just over an hour’s drive from Philadelphia.
The name of the pair’s business changed many times—it has operated under the names Quantum Landscaping, Hope Contracting, LLC, and Quantum Acquisitions. Shearba and Cemini typically referred to the business as Quantum.
Shearba hired and supervised employees, controlled bank accounts, and signed tax forms submitted to the IRS, while Cemini controlled business bank accounts, wrote checks from business bank accounts, maintained business books and records, and interacted with tax-return preparers engaged to prepare tax returns for the business.
According to the government, the couple did not report income received from the business, nor did they pay employment taxes the business owed to the IRS. Specifically, for the taxable quarters from the fourth quarter of 2013 through the third quarter of 2017, the couple is alleged to have filed employment tax returns (Forms 941) but did not pay the taxes they owed, and in the fourth quarter of 2017 through fourth quarter of 2021, they failed to file Forms 941 and to pay the taxes they owed.
Shearba and Cemini did withhold taxes from their employees’ paychecks—and issued Forms W-2—but did not remit those taxes to the IRS. They failed to make payments, the government alleged, despite the fact that their accountants advised them to do so. The pair even hired a payroll company, Intuit
Instead, the government alleged that Shearba and Cemini used business funds to pay personal expenditures, including mortgage payments, vacations, and a race car. They did not pay themselves wages or other reported compensation, but rather dipped into their business accounts directly to pay for personal expenditures.
The government also maintains that Shearba and Cemini took steps to thwart IRS collection efforts. Shortly after an IRS Revenue Officer opened a collection case for their business in the fall of 2013, the couple began paying their employees in cash. This also followed the Revenue Officer’s attempts to collect seven years’ worth of Shearba’s unpaid individual taxes.
Additionally, Cemini withdrew large amounts of cash from business bank accounts, including dozens of withdrawals of exactly $9,900. The government suggested that was purposeful. Under the Bank Secrecy Act, financial institutions are required to file a suspicious activity report—called a SAR—for a reportable transaction. That includes cash transactions that exceed $10,000 in one day. Making withdrawals of $9,900 kept the couple under the reporting threshold (though clearly, the bank could have chosen to file a report if they felt the behavior was suspicious.
The couple also deposited business gross receipt checks in nominee bank accounts in the name of Quest Insulation, LLC.
According to the government, Shearba and Cemini continued to take steps to avoid payment even after they were made aware that they were under criminal investigation for failing to pay employment taxes. Their collective behavior caused a tax loss to the IRS of $682,446.80.
Shearba and Cemini are scheduled to be sentenced on Feb. 27, 2024, and face a maximum penalty of five years in prison. They also face up to a three year period of supervised release, restitution, a $250,000 fine, a $100 special assessment, and the costs of prosecution.