Indictment — United States v. Dale Vernon Thrush (E.D. Mich., Dkt. 1)

Summary

Indictment, Case 1:20-cr-20365, ECF No. 1, filed 08/19/20 (E.D. Mich.), against Dale Vernon Thrush. The caption lists Counts 1-10 as Failure to Pay Over Payroll Taxes under Title 26, United States Code, Section 7202 and Counts 11-14 as Failure to File a Tax Return under Section 7203. It alleges that the defendant was the sole owner and operator of Xtreme Enterprises, Inc., Verno All Tune, Inc., USAuto Repair, Inc., and another limited liability company that handled payroll. It alleges that from in or about April 2014 to in or about December 2016 the defendant directed over $396,516 from that payroll account for remodeling expenses and construction costs for a business operated by his wife, while payroll taxes withheld from employees' paychecks were not paid over to the IRS. The signature lines show /s/ Jason H. Poole and /s/ Mark McDonald.

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; Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.1 Filed 08/19/20 Page 1 of 11

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

Case:1:20-cr-20365
Judge: Ludington, Thomas L.
UNITED STATES OF AMERICA MJ: Morris, Patricia T.
Filed: 08-19-2020 At 01:17 PM
USA V SEALED MATTER (LG)

Plaintiff,

Cts. 1-10: 26 U.SC. § 7202 -

Vv. Failure to Pay Over Payroll Taxes
DALE VERNON THRUSH, Cts. 11-14: 26 U.S.C. § 7203 -

Failure to File a Tax Return

Defendant.
/
INDICTMENT

The Grand Jury in and for the Eastern District of Michigan, sitting in

Detroit, charges:

INTRODUCTION

The Defendant and Relevant Entities

At all times relevant to this Indictment:
1. 402 N Mission St, LLC (“402 N Mission") was a limited liability
company operating in Mount Pleasant, Michigan using the business names Ninety-

One, LLC and Oakridge DVD Rental. 402 N Mission provided employer-related
Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.2 Filed 08/19/20 Page 2 of 11

services, such as managing payroll and payroll-related taxes, and other employer-
related administrative functions necessary to operate a business.

2. Xtreme Enterprises, Inc. (“Xtreme”) was a corporation operating in
Mount Pleasant, Michigan and Lansing, Michigan that provided automotive repair
services to customers at two different locations using the business names Auto-Lab
Lansing, Adam’s Auto Repair Mt. Pleasant, and Four O Two N Mission.

3. Verno All Tune, Inc. (“Verno”), was a corporation operating in Mount
Pleasant, Michigan using the business names Xtreme Race Cars, Racer’s Speed
Shop (“Racer’s”) and All Tune and Lube (“All Tune”). Verno sold motorsport
vehicles repair parts and equipment to customers.

4. USAuto Repair, Inc. (““USAuto”) was a corporation operating in
Mount Pleasant, Michigan using the business name Mount Pleasant Auto-Lab.
USAuto provided automotive repair services to customers.

5. The defendant DALE VERNON THRUSH (“Defendant”) was the
sole owner and operator of 402 N Mission, Xtreme, Verno, and USAuto.
Defendant exercised control over 402 N Mission’s finances, possessed signatory
authority over its operating account, and controlled its expenditure of funds to pay

expenses.
Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.3 Filed 08/19/20 Page 3 of 11

6. The Internal Revenue Service (“IRS”) was an agency of the United
States Department of the Treasury, responsible for administering and enforcing the
tax laws of the United States.

Individual Income Taxes

7. Pursuant to Title 26 of the United States Code, every citizen and
resident of the United States who received gross income in excess of the minimum
filing amount established by law for a particular calendar year was required to
make and file annually an individual income tax return with the IRS, such as an
U.S. Individual Income Tax Return, Form 1040 (“Form 1040”).

8. 402 N Mission, Xtreme, and Verno were organized as S Corporations.
S Corporations were required to file U.S. Income Tax Returns for an S-
Corporation, Form 1120S (“Forms 1120S”), with the IRS each calendar year,
specifically reporting the entity’s gross income, deductions, and distributions.
Defendant as the sole owner and shareholder of 402 N Mission, Xtreme, and Verno
was required to file a Form 1040 reporting the net profits and the distributions he
received from 402 N. Mission, Xtreme, and Verno each year.

9. Defendant timely filed his Form 1040 with the IRS for tax years 2011

and 2012, as required by law.
Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.4 Filed 08/19/20 Page 4 of 11

Payroll Taxes

10. Pursuant to Title 26 of the United States Code, employers, including
402 N. Mission, were required to collect, truthfully account for, and pay over to the
IRS a variety of taxes withheld from employee Wages, collectively referred to as
“Payroll Taxes.” These taxes were: Federal Income Tax Withholding
(“Withholding Taxes’) and Federal Insurance Contribution Act taxes (““FICA
Taxes”), as more particularly described below:

(a) Withholding Taxes: In general, an employer was required to
deduct and withhold income tax on the amount of wages that actually or
constructively were paid to its employees, and pay over those withholding taxes to
the IRS; and

(b) FICA Taxes: The FICA tax was comprised of two elements:
old-age, survivor and disability insurance, commonly referred to as “Social
Security,” and health insurance, commonly referred to as “Medicare.” Social
Security taxes were used to fund retirement and disability benefits, while Medicare
taxes were used to provide health and medical benefits for the aged and disabled.
An employer had to deduct FICA taxes on the amount of wages that were actually
or constructively paid to its employees, and pay over those FICA taxes to the IRS.

11. To account for Payroll Taxes that had to be paid to the IRS, the

Internal Revenue Code required employers to prepare tax forms, including Forms
4
Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.5 Filed 08/19/20 Page 5 of 11

W-2 and W-3, and to file them with the proper government agency. The Internal
Revenue Code required employers to accurately report to the IRS amounts of
employee wages paid, as well as the payroll tax withheld based on those wages.

12. Section 7501 of the Internal Revenue Code provided that whenever
any person was required to withhold or collect any internal revenue tax from any
other person and to pay over such tax to the United States, the amount of tax so
withheld or collected was required to be held in trust on behalf of the United
States.

13. Employers were required to report Payroll Taxes on an Employer’s
Quarterly Federal Tax Return, Form 941 (“Form 941”). The Form 941 was filed
quarterly, and was due one month after the conclusion of each quarter.

COUNTS ONE to TEN

26 U.S.C. § 7202
Failure to Pay over Payroll Tax

14. The allegations in Paragraphs | through 13 of this Indictment are re-
alleged as if set forth in full herein.

Payment of Payroll Taxes

15. As the sole owner of 402 N Mission and as a person who exercised
control over 402 N Mission’s finances, possessed signatory authority over its
operating account, and controlled its expenditure of funds to pay expenses,

5
Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.6 Filed 08/19/20 Page 6 of 11

Defendant was a “responsible person,” that is, he had the corporate responsibility
to collect, truthfully account for, and pay over 402 N Mission’s Payroll Taxes.

16. From in or about April 2014 to in or about December 2016, 402 N
Mission withheld taxes from its employees’ paychecks. However, beginning in or
about June 2014, Defendant, on behalf of 402 N Mission, failed to timely file
Forms 941 and make payments of the full amount of the 402 N Mission payroll
taxes due to the IRS.

17. From in or about June 2014 through December 2016, Defendant on
behalf of 402 N Mission failed to pay over approximately $238,223 in 402 N
Mission payroll taxes due and owing.

18. From in or about April 2014 to in or about December 2016, Defendant
directed over $100,000 from the 402 N Mission payroll bank account to other
entity bank accounts for, among other things, the payment of ordinary business
expenses, while at the same time failing to pay over to the IRS Payroll Taxes
withheld from 402 N Mission employee’s paychecks.

19. From in or about April 2014 to in or about December 2016, Defendant
directed over $396,516 from the 402 N Mission payroll account for, among other
things, the payment of remodeling expenses and construction costs for a business
operated by his wife, while at the same time failing to pay over to the IRS Payroll

Taxes withheld from 402 N Mission employee’s paychecks.
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Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.7 Filed 08/19/20 Page 7 of 11

20. On or about the dates set forth below, in the Eastern District of
Michigan and elsewhere,
DALE VERNON THRUSH,
the Defendant herein, did willfully fail to truthfully account for and pay over to the
IRS all of the Payroll Taxes due and owing to the United States on behalf of 402 N
Mission and their employees, as set forth below, with each of the calendar quarters

constituting a separate count of this Indictment:

TWO 2014 3rd Quarter October 31, 2014
THREE | 2014 4th Quarter January 31, 2015
FOUR 2015 1st Quarter April 30, 2015

FIVE 2015 2nd Quarter July 31, 2015

SIX 2015 3rd Quarter October 31, 2015
SEVEN | 2015 4th Quarter January 31, 2015
EIGHT | 2016 Ist Quarter April 30, 2016

NINE 2016 3rd Quarter October 31, 2016
TEN 2016 4th Quarter January 31, 2017

Allin violation of Title 26, United States Code, Section 7202 and Title 18, United

States Code, Section 2.

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Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.8 Filed 08/19/20 Page 8 of 11

26 U.S.C. § 7203
Failure to File a Tax Return
21. The allegations in Paragraphs 1 through 13 of this Indictment are re-
alleged as if set forth in full herein.
22. Defendant filed Applications for Automatic Extension of Time to File
U.S. Individual Income Tax Return, Forms 4868, for calendar years 2013, 2015,
and 2016.
23. During the calendar years set forth below, in the Eastern District of
Michigan and elsewhere,
DALE VERNON THRUSH
the Defendant herein, who was a resident of Farwell, Michigan, had and received
gross income through 402 N Mission, Xtreme, and Verno in excess of $21,000 in
each of the calendar years shown in the chart below. By reason of such gross
income, he was required by law, following the close of the calendar year shown in
the chart below, on or before the filing deadline shown in the chart below, to make
an individual income tax return to the IRS, stating specifically the items of his
gross income and any deductions and credits to which he was entitled. Well
knowing and believing all of the foregoing, Defendant did willfully fail, by on or

about the filing deadline shown in the chart below, in the Eastern District of
_ Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.9 Filed 08/19/20 Page 9 of 11

Michigan and elsewhere, to make an individual income tax return for the calendar

years shown in the chart below:

ELEVEN 2013 October 15, 2014

TWELVE [2014 April 15, 2015
THIRTEEN [2015 October 15, 2016
FOURTEEN [2016 October 15, 2017

All in violation of Title 26, United States Code, Section 7203, and Title
18, United States Code, Section 2.
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_ Case 1:20-cr-20365-TLL-PTM ECF No. 1, PagelD.10 Filed 08/19/20 Page 10 of 11

THIS IS A TRUE BILL

Dated: August 19, 2020 /s/ GRAND JURY FOREPERSON

/s/ Jason H. Poole /s/ Mark McDonald

JASON H. POOLE MARK MCDONALD

Chief, Northern Criminal DOJ Tax Division Trial Attorney
Enforcement Section Northern Criminal Enforcement Section
Tax Division Washington, DC 20005

|
|
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U.S. Department of Justice, 150 M Street, NE
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Case 1:20-cr-20365-TLL-PTM ECF No.1, PagelD.11 Filed 08/19/20 Page 11 of 11

|

Companion Case information MUST be completed by
United States District Court imi .
Eastern District of Michigan Criminal Case C: noe: ruangton. Thomas L.
: Morris, Patricia T.
Filed: 08-19-2020 At 01:17 PM
USA V SEALED MATTER (LG)

NOTE: It is the responsibility of the Assistant U.S. Attorney signing this form to cc

This may be a companion case based upon LCrR 57.10 (b)(4)": Judge Assigned:

[-] Yes No AUSA’s Initials: aD

: : Companion Case Number:

Case Title: USA v. DALE VERNON THRUSH

County where offense occurred : Isabella VA
Y

Check One: Felony [_] Misdemeanor LJ Petty
X Indictment/ Information --- no prior complaint.
Indictment/ Information --- based upon prior complaint [Case number: ]
Indictment/ Information --- based upon LCrR 57.10 (d) [Complete Superseding section below].

Superseding to Case No: Judge:

LJ Original case was terminated; no additional charges or defendants.
Corrects errors; no additional charges or defendants.
[J Involves, for plea purposes, different charges or adds counts.
[_] Embraces same subject matter but adds the additional defendants or charges below:

Defendant name Charges Prior Complaint (if applicable)

Please take notice that the below listed Assistant United States Attorney is the attorney of record for
the above captioned case.

August 19, 2020 YM. AA &

Date ark McDonaid~
_7 Assistant United States Attorney

210 Federal Building

600 Church Street

Flint, Michigan 48502

Telephone: (810) 766-5177

Email: mark.s.mcdonald@usdoj.gov

‘ Companion cases are matters in which it appears that (1) substantially similar evidence will be offered at trial, (2) the same or related parties are present, and the cases arise out of the
same transaction or occurrence. Cases may be companion cases even though one of them may have already been terminated. 3/11/0013
0


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