The chief financial officer of a Charlotte payroll services company has agreed to plead guilty to fraud after the company defrauded clients of more than $2 million, according to federal court documents.
John Bernard Thigpen and two un-charged co-conspirators at CenterCede Services, Inc., kept some client funds for their own use during 2011, court records show. The funds were supposed to go toward taxes, health insurance premiums and other obligations.
Thigpen could face up to five years in prison, a $250,000 fine or both, and up to three years of supervised release. He signed a plea agreement in June, but has not filed an acceptance of plea letter and it’s unclear when sentencing will take place.
At CenterCede, Thigpen instructed employees to conceal the fraud from clients, court filings show. When an employee asked Thigpen to respond to a client’s questions about unpaid obligations, prosecutors say Thigpen responded:
“This is the same situation as (another client)...Their accountants are asking why they are using a bunch of bozos who can’t get their processes straightened out. But we tell them that’s the cause because if we tell them the truth ... that we’re falling behind on tax payments by $200,000 per month, they’ll be gone immediately. So we make up a story.”
Thigpen’s two co-conspirators, who hired him in December 2010, established CenterCede in August 2010 to assume operations of The Resource Solutions Group, according to court filings. The predecessor, a similar payroll services company, was shut down by the Internal Revenue Service for failing to pay more than $9 million in federal taxes it had collected from clients.
At CenterCede, employees repeatedly protested that they were lying, emails included in court filings show.
“Morally this is killing me. We are doing it again,” one employee said in September 2011 in an email to one of the co-conspirators.
Thigpen and the co-conspirators “diverted the funds to pay their own exorbitant salaries, to fund lavish expense accounts and to cover growing liabilities, including the tax liabilities of other CenterCede clients,” court documents say.
When clients became suspicious and began to leave CenterCede, the company filed for bankruptcy protection in November 2011. Filings show it owes 88 businesses and government entities in 20 states. As a result, clients have to pay again the obligations that CenterCede had taken their money to fulfill.
One of those businesses, West Virginia-based Gaming Enterprises LLC, is owed more than $100,000 intended for tax payments, said Charlotte attorney Shelley Abel, whose firm represents the creditor in the on-going bankruptcy case.
Abel said more can be done to better protect clients of the payroll services industry. For example, the government could institute minimum-capital requirements for payroll companies, she said.
Attempts to reach Thigpen and his attorney were unsuccessful.
Staff Researcher Maria David contributed.