Owner of Health Care and Rehabilitation Facilities Indicted in $38 Million Payroll Tax Scheme | OPA

A federal district court in Newark, New Jersey, unsealed an indictment today charging the owner of a network of health care and rehabilitation facilities with willfully failing to withhold and pay over employment taxes on behalf of his employees, tax evasion, and failing to file benefit plan reports.

According to the indictment, Joseph Schwartz, an insurance broker, failed to collect, truthfully account for, and pay over millions of dollars in payroll taxes owed to the IRS on behalf of his employees as required by law. Schwartz owned and operated the New Jersey-based Skyline Management Group LLC and several related companies (Skyline), which in turn owned and managed 95 health care and rehabilitation facilities operating in at least 11 states. Schwartz allegedly controlled the finances of Skyline and the related companies.

In approximately late 2016, Schwartz and an associate allegedly created several businesses to provide staffing and management services for approximately 15,000 employees of the Skyline-owned health care and rehabilitation facilities. Although the staffing companies were nominally owned by other individuals, Schwartz allegedly controlled their finances and operation. From mid-2017 through June 2018, Schwartz allegedly caused the staffing companies to not pay approximately $38,982,016 in payroll taxes and unemployment taxes due the IRS. To evade unemployment taxes owed by the staffing companies, Schwartz allegedly used nominees to hide his control of the companies. He allegedly also provided, and directed others to provide, insufficient funds to pay the taxes owed.

In addition, as the trustee of Skyline’s 401K retirement plan, Schwartz allegedly did not file required reports with the Department of Labor relating to the financial condition, investments and operation of the retirement plan.

Schwartz made his initial court appearance on Thursday, Jan. 20, before U.S. Magistrate Judge André M. Espinosa of the U.S. District Court for the District of New Jersey. If convicted, Schwartz faces a maximum penalty of five years in prison for each count of willful failure to collect, account for, and pay over employment taxes, five years in prison for each count of tax evasion, and ten years in prison for each count of failure to file a benefit plan report. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division; U.S. Attorney Philip R. Sullinger for the District of New Jersey; Special Agent In Charge Michael Montanez of IRS-Criminal Investigation, Newark Field Office; and the Department of Labor Criminal Investigations Program made the announcement.

IRS-Criminal Investigation and the Department of Labor Criminal Investigations Program are investigating the case.

Trial Attorney Shawn Noud of the Justice Department’s Tax Division and Senior Litigation Counsel Vincent Grady O’Malley of the U.S. Attorney’s Office are prosecuting the case.

An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.