Kentucky man had ‘lavish lifestyle’ while not paying taxes. He’s going to federal prison
A Kentucky businessman who allegedly carried on a lavish lifestyle while not paying nearly $400,000 in taxes has been sentenced to a year and three months in prison.
John Paul Cates also is liable for $811,312 in restitution to the Internal Revenue Service, which includes penalties and interest on top of the unpaid taxes, according to the court record.
Cates pleaded guilty to tax evasion.
Cates, 50, of Scottsville, operated Trinity Steel Works, which had projects around the country, and TSW Fabrication.
His attorney, James A. Earhart, said in a sentencing memorandum that Cates did not try to evade paying taxes, but rather didn’t have the money by the time he learned of the debt.
Cates found out in 2017 that an employee had been stealing money from the business and fired her.
The next year, Cates learned from his accountant that Trinity Steel Works had not paid employee withholding taxes to the IRS for several years, Earhart said.
In that same period, the company lost a lot of money on projects Texas and Mississippi for customers that went bankrupt or failed to pay, according to the sentencing memo.
When an IRS agent approached Cates about his unpaid taxes in late 2018, he tried to set up a payment arrangement, but the agency said he couldn’t because he was under criminal investigation.
That meant the penalty and interest on the unpaid taxes continued to grow as the investigation went on, according to Cates’ attorney.
Earhart said Cates had never failed to pay employees even if he had to sell property to do it, and noted that while he didn’t pay $396,000 in employee withholding taxes, he’d paid a total of $15 million in such taxes at other times.
However, Assistant U.S. Attorney Madison T. Sewell said Cates actively tried to avoid paying taxes even after his accountant warned him about the debt.
“If we do not make these deposits AND stay current with them, the IRS will show no mercy,” the accountant said in a March 2017 email, according to a sentencing memo by Sewell.
Cates didn’t pay most of the employment taxes his business owed between 2014 and 2017 even as he bought high-dollar gifts from brands such as Tiffany & Co., Gucci, and Louis Vuitton, took his family on expensive vacations and owned a Bentley at one point, Sewell said.
From 2014 through 2018, Cates spent $194,371 in casinos, $34,466 on StubHub tickets and $245,187 on his private plane, Sewell said.
Cates’ “lavish lifestyle” showed he had the money to pay the taxes, but chose not to, the prosecutor said.
Cates also took steps to conceal his assets, including creating companies under the names of other people; depositing more than $1 million in checks payable to Trinity Steel Works into the account of another company; and transferring personal and business real estate to another company, according to the prosecution memo.
U.S. Attorney Michael A. Bennett and the IRS announced the sentencing Nov. 7.
This story was originally published November 12, 2024 at 12:10 PM.
