Father and Son from Westborough Sentenced for Tax Evasion and Fraud

WESTBOROUGH, MA — A father and son team from Westborough and former owner from Florida of a payroll company in Worcester were were sentenced for defrauding the IRS and tax evasion. One of the co-owners was also sentenced for embezzling client and employee funds.

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William McCullough, 73, of Westborough, was sentenced to one year and one day in prison, three years of supervised release and restitution of $1,825,933. In September 2015, he pleaded guilty to two counts of conspiracy to defraud the IRS, four counts of making false statements in tax returns, four counts of tax evasion, and one count of wire fraud, said an announcement.

William's son Robert McCullough, 43, also of Westborough, was given eight months in prison and three years of supervised release. He previously pleaded guilty to two counts of conspiracy to defraud the IRS and four counts of tax evasion. Gary Davis, 74, of Jupiter, FL, was sentenced to six months in prison and three years of supervised release. He 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 in Worcester. William McCullough was the treasurer and his son, Robert, is the president. Gary Davis was a former owner and president of Harpers until his retirement in 2010.

William and Robert McCullough in 2006 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, according to United States Attorney Carmen M. Ortiz. The McCulloughs kept these accounts off of the corporation’s books and concealed their existence from the corporate accountant. None of 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, said officials.

Also during that time, William McCullough wrote checks totaling approximately $4.7 million from one of the Webster Five corporate accounts to himself, Robert McCullough, and Gary Davis. In addition, from 2007 to 2011, William McCullough wrote bonus and dividend checks from Harpers totaling approximately $2.7 million to himself, Robert McCullough, and Gary Davis. William McCullough 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 United States Attorney Ortiz

In a separate case, William McCullough was sentenced for committing wire fraud, said the announcement. From 2009 through 2011, Harpers maintained client trust accounts and a client tax account, United States Attorney Ortiz. 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 McCullough 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 McCullough 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.