Five Companies Accused Of Not Paying Unemployment Insurance Tax

Posted 9:36 a.m. Jul 8, 2004 — Updated 9:36 a.m. Jul 8, 2004

RALEIGH, N.C. — Most companies are charged what is called an unemployment insurance tax. State officials found five companies that were not paying the right amount of tax, which cost the state millions of dollars. It also meant other employers had to pay more to make up the difference.

The five companies are Blythe Construction based in Charlotte, Coats American also based in Charlotte, Standard Commercial Tobacco in Wilson, Mega Force Staffing in Fayetteville and National Textiles in Winston-Salem.

The

Employment Security Commission

(ESC) has been investigating the five companies and reaching settlements with them, collecting $3.22 million. ESC officials said the companies set up dummy corporations to get a lower tax rate.

"We think people should beware. We want people to follow the law," said ESC official Andy James.

However, the ESC is not punishing the companies by charging penalties or interest. The agency said some of the companies may not have known they were cheating the system.

The agency has also subpoenaed documents from the accounting firm Deloitte & Touche. One of the firm's documents shows companies how to reduce their unemployment tax burden.

Deloitte & Touche representative Deborah Harrington said the company is "cooperating fully with the state" and "had been advising clients on the scheme and was in full compliance of N.C. law."

Sandy Jones, an representative from Mega Force Staffing, said the company used Ernst & Young and got the same advice. She said, "We undertook the restructuring relying upon professional advice that our unemployment tax liabilities could be reduced."

She also said, "Mega Force believed our payment of such taxes under our new business structure was permitted under existing state law."

State Sen. David Hoyle, D-Gaston, said the state should go after accounting firms giving the bad advice.

"They know they're bordering on illegality or that they are blatantly illegal and those people somewhere along the way, they are going to have to get indicted," he said. "We're going to have to deal with them and send some people to jail."

After the ESC gets all the documents requested from Deloitte & Touche, a criminal investigation may follow. Right now, the ESC is investigating 50 other companies and expects to collect millions of dollars.

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