A father and son who operated a Cornelius payroll company are accused of stealing at least $11 million from 113 clients “to support their personal lifestyles,” U.S. Attorney Anne Tompkins announced Tuesday.
Prosecutors said the son spent the stolen money on strip clubs, jewelry, alcohol, a new Mercedes-Benz and a luxury home.
Defrauded companies include one that serves children with developmental disabilities and chronic illnesses and another that builds engines for NASCAR Sprint Cup teams, Tompkins said.
William James Staz, 72, of Huntersville and his son, James William Staz, 43, of Iron Station are named in a 10-count indictment that was returned by a federal grand jury on Thursday and unsealed Tuesday after the men’s arrests.
Each is charged with a count of wire fraud. James Staz also was charged with nine counts of money laundering.
James Staz had his initial appearance before U.S. Magistrate Judge David Keesler on Tuesday and will remain in custody pending his arraignment and detention hearing at 9:30 a.m. Friday. William Staz will be ordered to appear in court on a summons, prosecutors said.
The maximum prison term for wire fraud is 20 years and a $250,000 fine. The maximum term for each money laundering charge is 20 years and a $500,000 fine, or twice the amount of the criminally derived proceeds, whichever is greater.
The men operated Employee Services Net Inc., a third-party payroll company they formed in 2004, prosecutors said.
James Staz was the company’s vice president and financial manager until August 2011, when he became the company’s president.
His father was a company shareholder and managed ESN’s daily operations until 2008, when he was imprisoned on a federal bank fraud conviction, prosecutors said. He returned to ESN after his release and stayed involved in company operations, prosecutors said.
During the scheme, William Staz drew a salary as high as $200,000, including for the nine months he was incarcerated, prosecutors said.
ESN provided personnel services, including processing payroll, collecting and paying federal, state and local employment taxes and preparing and filing the required employment tax forms.
To provide the services and make payments for its clients, ESN had access to clients’ company bank accounts and directly drafted the money needed to cover the expenses, prosecutors said. At one point, ESN had about 500 clients nationwide, Tompkins said.
From about 2008 to March 2014, prosecutors said, James Staz embezzled at least $3.7 million in client funds and directed the money to his personal bank account.
To conceal the embezzlement, prosecutors said, Staz made false entries into ESN’s accounting system to make it appear as though the stolen funds were used for legitimate client expenses. In reality, Staz used the money to pay for alcohol, strip club entertainment, jewelry, a Mercedes-Benz and a luxury home with a lavish three-tiered pool, a cascading waterfall, wet bar and dining area.
To conceal the theft and cover losses and tax penalties caused to ESN clients by delinquent payments, the men commingled and used client funds that ESN collected for a current payroll/tax period to cover the previous period’s payroll and taxes.
The men then sent regular emails to clients, falsely stating that all employment taxes had been paid, prosecutors said.