Risk Management

Ex-CFO to Help Case Against His Old Firm

He pleads guilty as part of deal to help pursue others connected with Castleton Group, report says.
Stephen TaubJune 3, 2008

The former finance chief of defunct North Carolina human-resources services provider Castleton Group pleaded guilty to tax evasion, and reportedly will cooperate with prosecutors pursuing others related to Castleton.

Jay McLamb, the former CFO, entered the plea as part of a negotiated settlement with the government, according to a report it the Triangle Business Journal.

McLamb reportedly faces a maximum penalty of five years in prison, three years of supervised release, and a $250,000 fine, according to the report.

We reported last month that Castleton founder Suzanne Clifton blamed McLamb for the company’s collapse, asserting in court that he falsified Castleton’s books without her knowledge. According to the prosecutor at the time McLamb was charged, from January 2005 to January 2008 McLamb and others collected and withheld federal taxes from individual employers on behalf of employees, and then prepared fraudulent documents to mislead the Internal Revenue Service, causing Castleton to unlawfully fail to pay the federal taxes.

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,” U.S. Attorney George E.B. Holding said at the time.

According to the newspaper this week, Castleton 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 hadn’t always been on the outs with his boss. In August 2005 Clifton announced that McLamb had been 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,” Clifton said 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.”