BLOOMINGTON, Ind. – The State of Indiana has criminally charged the owner of a cabinet-making company in Bloomington with 13 felonies including tax evasion and money laundering after he allegedly failed to remit more than $56,000 in sales tax owed the State, Indiana Attorney General Greg Zoeller announced today.
The Monroe County Prosecutor’s Office with continuing assistance from the Attorney General’s Office filed criminal charges Thursday against Larry Joe Ferree, 59, owner of Ferree Cabinet Inc. in Bloomington. The charges are corrupt business influence, a Class C felony, and four counts each of theft, money laundering and failure to remit or collect sales tax, all Class D felonies.
A probable cause affidavit filed with the charges in Monroe County Circuit Court alleges that Ferree Cabinet collected the 7 percent sales tax from customers purchasing merchandise and it filed proper sales tax returns with the Indiana Department of Revenue, but did not remit revenue to the department. Instead, Ferree Cabinet took the tax money collected on behalf of the State and re-directed the money back into the business in violation of law, the affidavit said
“We support commerce and small business, but when a merchant flagrantly defies the law even after acknowledging his taxpaying obligation, the State and all other taxpayers are the victims. This type of sales-tax evasion is unfair to law-abiding competing businesspeople who play by the rules and pay their taxes, and misleading to consumers who assumed the additional 7 percent they were charged above the price was being forwarded to the State,” Zoeller said.
“It is important that businesses honor their obligation to collect, report and pay sales taxes required by state law,” noted Revenue Commissioner Mike Alley. “Businesses failing in this responsibility betray the trust the citizens of the state place in them. When all businesses collect, report and remit sales tax it creates a level playing field for all businesses and helps ensure the continued funding of important state functions at the lowest tax rates possible.”
An investigation by the Attorney General’s Office and Department of Revenue established that on 14 occasions between December 2008 and June 2011, Larry Ferree filed a monthly ST-103 return with the State showing the amount of sales tax collected from customers but he included no payment. The total Ferree reported but did not remit is $56,388.70, according to the affidavit. Businesses that are registered retail merchants are required to collect, report and remit to the State the sales tax generated from their transactions. The investigation concluded, however, that Ferree redirected the tax payments in order to maintain the business and his personal expenses through tax money. The monthly returns signed by Ferree are the basis for the theft charges, and Ferree’s diverting unpaid taxes into the company’s operations is the basis for the corrupt business influence and money laundering charges.
The probable cause affidavit notes that Ferree Cabinet was behind on its sales tax remittal between 2005 and 2011, with unpaid tax, fines and penalties totaling $662,753.22. The Department of Revenue sought to work out a repayment plan with Ferree but Ferree defaulted on repayment in September 2010. Ferree Cabinet also petitioned for Chapter 11 bankruptcy in April 2011, but the U.S. Bankruptcy Court dismissed the petition in July 2011, the affidavit said, meaning Ferree and Ferree Cabinet do not have bankruptcy protection from the tax obligation owed.
In September 2011, the Attorney General’s Office, on behalf of the Department of Revenue, obtained a permanent restraining order prohibiting Ferree Cabinet from continuing any business activities due to the non-remitted sales tax until payment of the unpaid tax was made.
Instead of closing the business, the investigation found, Ferree and his wife Donna Ferree allegedly re-opened the same business at the same Bloomington address Ferree Cabinet had used, using a new company name Donna Ferree had incorporated, Fleur De Lis Design LLC. According to the affidavit, the use of the same facilities for the same declared purpose indicates that Larry Ferree and Donna Ferree have used tax proceeds kept from the State by Ferree Cabinet to continue work under the name Fleur De Lis Design LLC.
Monroe County Prosecutor Chris Gaal’s office filed the criminal charges with continuing assistance from Attorney General Zoeller’s Office, which represents the Indiana Department of Revenue. The court found probable cause for the charges and issued an arrest warrant for Larry Ferree, with bond set at $10,000 surety or $500 cash. Indiana State Police served the arrest warrant Thursday night, and Ferree’s initial court appearance is at 1:30 p.m. July 19 in Monroe County Circuit Court. Donna Ferree was not charged.
All defendants charged in criminal cases are legally considered innocent until proven guilty in a court of law.
“When a retailer keeps the 7 percent sales tax it has collected from customers rather than remitting it, the State is made an unwilling party subsidizing the business. It’s the equivalent of an interest-free loan that the retailer does not expect to repay. Responsible business owners who don’t engage in such schemes should not have to unfairly carry the tax burden for one individual who has flouted the law,” Zoeller added.
Participating in the prosecution team along with Gaal’s office will be Deputy Attorney General Matthew Whitmire, section chief of criminal prosecution in the Attorney General’s Office, Zoeller said. Although the Indiana Attorney General typically does not have jurisdiction to file criminal charges, sales-tax evasion is a crime in which the AG’s Office does have concurrent jurisdiction with county prosecutors to bring charges.
Zoeller thanked the Indiana Department of Revenue, the Indiana Secretary of State’s Office which receives and maintains corporate registration from businesses, and the Monroe County Prosecutor’s Office for their assistance in the tax-evasion investigation.
NOTE: The probable cause affidavit filed with the criminal charges in Monroe County Circuit Court is attached.