Fayette County

Officers at Central Kentucky health companies allegedly took part in $1.6 million tax fraud

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Do you suspect someone of committing fraud, waste, or abuse against Social Security? SSA’s OIG Fraud Hotline takes reports of alleged fraud, waste, or abuse.

Two officers at Central Kentucky healthcare companies allegedly conspired to defraud the government by not paying in $1.6 million in payroll taxes.

A federal grand jury indicted Lu Anne Wallace and Ann Sonderman Giles Thursday on a charge of conspiracy.

The grand jury also charged the two with embezzlement for allegedly withholding money from employees’ checks for health-insurance premiums, but not paying the money to insurance providers.

The two did not notify employees that the company’s group health coverage had been canceled, the indictment said.

Some employees alleged in a separate lawsuit that they incurred substantial medical expenses during the time they didn’t know their insurance was not in force.

In addition, the grand jury indicted Wallace on more than 30 charges of failing to account for and pay the Internal Revenue Service all the income taxes withheld from employees and failing to pay all the taxes owed to the Social Security program.

The indictment listed five companies where Wallace and Sonderman served as co-owners and directors, or officers, between January 2014 and July 2017: GW Management, Inc.; Clark Medical Ventures, LLC; Madison Primary Care, LLC; Paragon Kentucky, LLC; and Primary Care of the Bluegrass, LLC. The money didn’t go to taxes or health insurance at the same time the women caused thousands of dollars in business expenditures, according to court records.

Giles and Wallace lived in Fayette County at the time, the indictment said.

The companies offered services that included primary-care clinics and healthcare staffing, the indictment said.

Bookkeepers at the companies regularly prepared quarterly tax returns for Wallace to review and submit, but many times she chose not to submit the returns and didn’t remit payroll taxes, the indictment said.

Over a period of three and a half years, the companies skipped most required returns, the indictment charged.

When IRS agents contacted Wallace and Giles about delinquent taxes, they agreed to pay, but instead allegedly switched operations to different companies.

“Often, the only change for employees was a new corporate name on their paychecks, which were drawn from different corporate bank accounts,” the indictment said. “This pattern of behavior allowed Giles and Wallace to continue in business without paying payroll taxes on employee wages to the IRS.”

Changing their company names and bank accounts also made it difficult for the IRS to track that Giles and Wallace weren’t paying taxes, the indictment said.

The most serious charge in the indictment has a top penalty of 10 years in prison.

U.S. Magistrate Judge Matthew A. Stinnett issued summonses for the women to appear in court later this month.

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