The former chief executive officer and chief financial officer of Caremerica Inc. each received 60-month jail sentences and were ordered to pay restitution of more than $4.8 million after pleading guilty to conspiracy to defraud the Internal Revenue Service (IRS), the Department of Justice announced.
Ronald E. Burrell and Michael R. Elliott are the former CEO and CFO, respectively, of Caremerica, Inc., a Leland, N.C.-based assisted living management company the two owned and operated. Burrell was the president and CEO for Caremerica, the Caremerica assisted living communities operated by the company, and other related companies, while Elliott, formerly a certified public accountant, served as CFO and tax return preparer for the Caremerica companies.
The two were responsible for ensuring the Caremerica companies collected, reported, and paid federal employment taxes to the IRS, but during their time as corporate officers between about 2003 and 2006, the companies accrued more than $4.5 million in employment tax liabilities.
Additionally, Burrell and Elliott filed, or caused to be filed, false IRS forms that reported full payment of the employment taxes that were due when in fact only a “small fraction” of the taxes—or none at all—were paid, according to the charging documents cited by the Department of Justice.
In 2003, Burrell and Elliott acquired majority ownership of Partners Pharmacy Services Inc. (PPS), which provided prescription drug and related services to the Caremerica assisted living communities. In April 2005, the two sold PPS to a subsidiary of leading long-term care pharmacy services provider Omnicare, Inc.
Burrell and Elliott received $1.6 million and $1.4 million, respectively, when the transaction closed, and the sale proceeds were disbursed at a time when the IRS was trying to collect unpaid employment taxes from the Caremerica companies as well as from Burrell personally, say the court documents.
In order to prevent the IRS from discovering their PPS proceeds, the two officers “took active steps to conceal them,” according to the Department of Justice, including Burrell forming a nominee company in his wife’s name through which he funneled some of his portion of the sale proceeds to avoid IRS collection action.
As a result of these concealment efforts, Burrell reportedly deceived the IRS into accepting a $29,000 settlement on a $300,000 personal tax liability, and then opened another assisted living community with proceeds from the sale of the pharmacy services company. Meanwhile, Elliott directed his share of the sale proceeds to be wired into his then-girlfriend’s bank account.
Burrell and Elliott then filed false 2005 federal income tax returns that omitted the PPS proceeds, and the two “obstructed justice by making false statements under oath” in bankruptcy proceedings and in IRS disclosure forms, says the Department of Justice.
The two were sentenced on Jan. 16 in Wilmington, N.C.
Written by Alyssa Gerace