Tax

Did CFO’s Tax Scheme Drive HR Firm Under?

Once-honored ex-finance chief of Castleton Group charged with falsifying books, and CEO says that did in the North Carolina company.
Stephen TaubMay 1, 2008

A former finance chief was charged with tax conspiracy stemming from a scheme that may have driven North Carolina human resources firm Castleton Group out of business.

James O. McLamb Jr., ex-CFO and ex-COO of Raleigh-based Castleton Group, faces up to five years in prison, three years supervised release, and a $250,000 fine, according to U.S. Attorney George E.B. Holding.

According to the Triangle Business Journal, Castleton founder Suzanne Clifton blamed McLamb for the company’s collapse, asserting in court that he falsified Castleton’s books without her knowledge. Attempts by CFO.com to reach McLamb were unsuccessful.

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According to the prosecutor, from January 2005 to January 2008 McLamb and others collected and withheld federal taxes from individual employers on behalf of employees, then prepared false and fraudulent documents to mislead the Internal Revenue Service, causing Castleton to unlawfully retain these federal taxes instead of remitting them to the IRS.

Specifically, on at least four occasions McLamb filed or caused to be filed false IRS Forms 941 in the name of Castleton Affiliates LLC also known as Castleton Group Inc., according to prosecutors.

“When a corporation willfully violates our tax laws, the corporation and the responsible officer must be held accountable,” said Holding.

According to the newspaper, Castleton Group provided payroll and benefits processing for about 100 clients. It was declared insolvent by the state Department of Insurance in December 2007 and shut down a few weeks later, citing its dire financial situation.

McLamb wasn’t always on the outs with his boss. In August 2005 Clifton announced that McLamb was named to the accounting practices committee for the National Association of Professional Employer Organizations, a trade association representing more than 325 professional employer organizations nationwide.

The announcement said that as a member of the committee, McLamb was to oversee financial ratio and operating statistic surveys, and assist in program development. The committee also was to explore employer-organization finance and accounting issues, which include employee rights, responsibilities, and risks, as well as establishing, and maintaining relationships between employees and clients.

“We are honored to have Jay assist in the progress of this committee,” said Clifton in a press release at the time. “I am confident that his expertise in the human resource field will prove to be a great asset in providing PEO direction and insight.” Responded Lamb in the same release, “In this role I hope to offer my knowledge of finance and accounting, as well as aid in the development of strong relationships with staff and clients.”