Share

CEO sentenced to 18 months in federal prison for failure to pay all payroll taxes

Federal prosecutors said Michael Lucas shorted the IRS nearly $5 million between 2011 and 2015

The CEO of a Del Mar-based company that sold software to car dealerships was sentenced this week to 18 months in federal prison for failing to provided the IRS nearly $5 million in payroll taxes.

Michael Lucas, who ran TradeMotion Inc., pleaded guilty in April to a charge of failing to pay federal employment taxes. Aside from ordering Lucas to spend time in custody, U.S. District Judge Anthony Battalia on Thursday also sentenced the defendant to three years of supervised release and ordered him to repay the amount he’d shorted the IRS.

According to federal prosecutors, Lucas collected more than $2.1 million in withholdings from TradeMotion employees between late 2011 and mid-2015. But he paid only $760,017 of the money to the IRS.

The government also accused Lucas of withholding more than $3.5 million in payroll taxes from paychecks of the employees of other companies he ran, and failing to pay that money to the IRS as well.

Prosecutors had asked that Lucas be sentenced to two years in custody, and in a sentencing memorandum, they wrote that prison sentences in tax cases can act as a general deterrent to others.

In a brief filed with the court before sentencing, Lucas’ attorneys Charles La Bella and Andrew Young asked for house arrest, saying their client was “deeply remorseful and prepared to accept whatever punishment the Court deems appropriate.”

They wrote that Lucas had been engaged in good-faith talks with the IRS several years before the criminal investigation started, and that he had paid “a significant portion” of this tax obligation. They also noted that Lucas’ failure to pay the taxes “was motivated entirely by his desire to keep company operational.”

The brief noted that the company had been successful, but after the collapse of the auto industry in 2008, Lucas’ company spent the next decade “under the constant threat of bankruptcy.” The defense attorneys said Lucas wrongly saw the IRS “as just another creditor,” and fell further behind on the tax obligation.

They also said Lucas never hid the actual amount he owed the IRS.


Advertisement