Richard Joseph SalonSpa owners sentenced for tax fraud
Published 11:54 am Tuesday, September 2, 2014
FROM STAFF REPORTS
BIRMINGHAM – A federal judge on Sept. 2 sentenced the owners and operators of Richard Joseph SalonSpas in the Birmingham area to three years in prison for conspiring to avoid paying more than $1 million in employment taxes to the IRS, announced U.S. Attorney Joyce White Vance and Internal Revenue Service Criminal Investigation Special Agent in Charge Veronica Hyman-Pillot.
U.S. District Judge Abdul K. Kallon sentenced both Richard Joseph Smith, 54, and Timothy Euell Brown, 55, to prison for the tax fraud conspiracy in which they failed to pay employment taxes to the IRS that they withheld from employees’ wages over eight years from 2006 to 2013. Smith and Brown pleaded guilty to the charge in May, and acknowledged that they also skimmed money from the salons for personal use.
The judge ordered the men to pay $1.4 million in restitution to the IRS, which they agreed to as part of their plea agreements with the government. The $1.4 million represents only the payroll taxes withheld from employees, not the employer portion of payroll taxes, which also went unpaid.
The government is seeking an order restraining the defendants’ assets and directing the proceeds from the sale of personal property be applied to the restitution.
The men’s Hoover home was lavishly furnished with antiques, art, fine china and chandeliers. The house is now for sale and most of the furnishings have been moved into storage. The IRS has a tax lien on the house for unpaid employment taxes, predating the current prosecution. Any proceeds from the home sale would go, first, to satisfy the tax lien.
Richard Joseph SalonSpa has been a prominent business for more than two decades in the Birmingham area, with Smith as master stylist and Brown as business manager handling finances, including payroll, according to government documents.
By neither paying over to the IRS the taxes they withheld from their employees, nor reporting and paying taxes on their individual incomes, Brown and Smith lived an extravagant lifestyle, according to the government’s Aug. 27 sentencing memorandum.
Brown bought the couple’s home in the Preserve neighborhood in Hoover in 2005 for $891,000, and they have maintained the $5,245 monthly mortgage payment, according to the memorandum. In 2008 and 2009, they paid more than $80,000 to add a swimming pool and outdoor fireplace. The two men also employed as many as four full-time staff to perform housework, lawn maintenance, elder care for a live-in relative and pet care for their 12 dogs, according to the sentencing memorandum.
IRS Criminal Investigation Division investigated the case, which Assistant U.S. Attorney Robin Beardsley Mark prosecuted.