State Senate nominee says he will settle corporate taxes

A Democratic nominee for the Kentucky Senate says his Madison County company fell behind on paying its taxes at a time when he was not running daily operations five years ago, but he'll settle up this election year.

Lee Murphy on Tuesday defeated two other Democrats for the right to run in Senate District 34, the seat held by retiring Senate Democratic Leader Ed Worley, D-Richmond. Murphy, whom Worley backed, faces a Republican opponent on Nov. 2.

Murphy is president of Chapel Communications, a small Internet service provider, which failed to pay its property taxes — about $4,300 a year — to Madison County in 2004 and 2005.

The man who bought the tax liens at sheriff's sales, retired doctor William Grise, said he had to repeatedly demand payment and finally threaten foreclosure last November before Murphy wrote him a check for about $6,300, which covered the 2004 taxes, plus penalties and interest.

The 2005 taxes remain unpaid, at a total debt of about $6,500, Grise said.

"This is a guy who doesn't want to pay his taxes until somebody twists his arm and makes him do it," said Grise, who buys tax liens around Central Kentucky as an investment. "Why in the hell would we want to send anyone to Frankfort to be a senator if he doesn't pay his taxes?"

Murphy, a longtime Democratic Party activist and former aide to Lt. Gov. Daniel Mongiardo, said the case isn't so simple.

In 2004, Murphy said, he tried to sell Chapel Communications to another telecommunications company that was expanding its territory in Kentucky. However, the larger company failed, nearly taking Chapel with it, Murphy said. He resumed control of Chapel in 2006, he said.

"It was a very stressful time for us," Murphy said. "We thought that we were going to become multimillionaires and retire to Florida, and instead we almost went broke."

During the time Murphy was not controlling the company, some of Chapel's bills, including taxes, evidently were not paid, Murphy said. He did his best to settle all of those accounts once he resumed control, but he didn't know about Grise and the tax liens until he received the foreclosure threat last November, he said.

Murphy said he assumed he paid Grise everything owed and didn't know about the outstanding 2005 taxes until rumors spread shortly before Tuesday's primary. One of his Democratic primary opponents told the local news media about his tax situation, Murphy said.

"I thought we had everything wrapped up," Murphy said. "If we haven't, then we'll take care of it very quickly."

This story was originally published May 21, 2010 at 12:00 AM with the headline "State Senate nominee says he will settle corporate taxes."