Executives of Kentucky clinics sentenced to prison in $1.6 million tax case
Two executives at a string of Central Kentucky health clinics have been sentenced to prison and ordered to pay nearly $1.5 million after admitting they didn’t pay federal taxes.
Ann Sonderman Giles, 56, the chief executive officer of the companies, was sentenced to two years and six months in prison.
U.S. District Judge Karen K. Caldwell sentenced Lu Anne Wallace, 67, chief financial officer of the clinics, to two years and eight months in prison.
The two are jointly liable for $1,595,726 in payments to the Internal Revenue Service for unpaid taxes from 2014 through 2017, according to court records.
Giles and Wallace led several healthcare companies, including GW Management, Inc.; Clark Medical Ventures, LLC; Madison Primary Care, LLC; Paragon Kentucky, LLC; and Primary Care of the Bluegrass, LCC.
At one time, Giles and Wallace had more than 300 employees at more than two dozen clinics in Fayette, Jessamine, Woodford, Scott, Anderson, Franklin, Madison and Clark counties, according to a court document.
Giles and Sonderman each pleaded guilty to one charge of conspiring to defraud the federal government.
The two withheld income taxes and Social Security and Medicare taxes from employees’ paychecks but didn’t pay them to the government, according to their plea agreements.
In addition, their companies didn’t pay the required match in Social Security and Medicare taxes.
Prosecutors dropped a number of charges as part of the plea agreement with the two.
Their companies ran into financial problems because of reductions in Medicaid payments for the services they provided, defense attorneys said in court documents.
Giles and Wallace decided to withhold payments they owed the IRS so they could avoid laying off employees and continue serving patients, Giles’ attorney, Brian Butler, said in a sentencing memorandum.
Giles and Wallace hoped Medicaid reimbursements would go up so they could catch up on their tax payments, but that didn’t happen, Butler said.
An FBI agent said the two didn’t appear to live a lavish lifestyle with the money, the defense memo said.
“Their decision was an ill-fated and ill-conceived attempt to save their employees jobs and their health clinics, which are necessary and so valuable to a vulnerable and underserved population,” Butler said.
Assistant U.S. Attorrney William P. Moynahan noted in a sentencing memorandum that employees of Giles and Wallace sued them in 2013 over health insurance premiums that had been deducted from their paychecks but not paid to the insurance company.
Giles and Wallace should have known from that case about their legal obligations in handling money withheld from employees, the prosecutor said.
“Instead, for several years during and after the civil case, Giles and Wallace continued misappropriating taxes generated by their businesses,” the prosecutor said.
Defense attorneys asked U.S. District Judge Karen K. Caldwell to place Giles and Wallace on probation, but the judge declined to do that. Caldwell sentenced the two on Tuesday, ordering them to report to prison next March.
They will have to serve at least 85 percent of the sentence.
