Father, Son From Westborough Plead Guilty to Tax Evasion and Fraud

A father and son from Westborough face prison time and fines after pleading guilty to charges of conspiracy to defraud the IRS and tax evasion. The co-owners and former owner of a payroll cpm any in Worcester pleaded guilty in U.S. Court in Worcester on Wednesday.

William McCullough, 72, of Westborough, Mass., pleaded guilty to two counts of conspiracy to defraud the IRS, four counts of false statements, four counts of tax evasion, and one count of wire fraud. Robert McCullough, 43, also of Westborough, the son of William McCullough, pleaded guilty to two counts of conspiracy to defraud the IRS, four counts of false statements, and four counts of tax evasion. Gary Davis, 74, of Jupiter, Fla., pleaded guilty to one count of conspiracy to defraud the IRS, and three counts of tax evasion.

The McCulloughs are co-owners of Harpers Data Services, a payroll company located in Worcester. William McCullough is also the treasurer and his son, Robert, is the president. Gary Davis was a former owner and president of Harpers until his retirement in 2010.

According to the United States Attorney’s announcement, beginning around 2006, William and Robert McCullough opened and operated two corporate bank accounts at Webster Five Cents Savings Bank. From 2007 to 2012, they funneled approximately $11 million of taxable income into these accounts. The McCulloughs, according to an investigation, kept these accounts off of the corporation’s books and concealed their existence from the corporate accountant. The income deposited into these accounts was not reported to the IRS on the corporation’s annual tax returns. As a result, the corporation failed to pay approximately $3.78 million in taxes.

During that time period, it is reported that William wrote checks that totaled approximately $4.7 million from one of the Webster Five accounts to himself, Robert and Davis. During the time period of 2007 to 2011, William also wrote bonus and dividend checks from Harpers that totaled approximately $2.7 million to himself, Robert and Davis. William ensured that none of this income appeared on the appropriate tax reporting forms, and as a result, the defendants failed to pay approximately $1.7 million in taxes from 2007 through 2011, said the US attorney.

William also pleaded guilty to one count of wire fraud. From 2009 to 2011, Harpers maintained a client tax account and client trust accounts. These accounts contained client funds, which were to be used to pay employees’ paychecks and employees’ federal and state taxes. From 2009 through 2011, William took approximately $1 million from the client trust accounts and deposited it into a Harpers account. In 2010, he took $750,000 from the client tax account and deposited it into a Harpers account. At the time William took this money, the funds belonged solely to the clients of Harpers Data Services. McCullough’s fraud resulted in a theft of approximately $1.8 million dollars, said the statement.

Conspiracy to defraud can bring up to five years in jail and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Other charges could result in up to three years in jail and fines of $100,000.

Sentencing is scheduled for Dec. 1.