Paying Employees Under the Table

by Vincent Davis on February 11, 2013

Are You Paying Employees in Cash? – It just cannot end well!

Textile business owners plead guilty to tax evasion

Textile business owners plead guilty to tax evasionA couple from Whitehall Township, PA, Michel Kastoun, 44, and his wife, Maha, 47, pleaded guilty to paying their employees in cash, thus allowing the textile company owners to evade payroll taxes of at least $120,000.

The couple admitted that they participated in a tax-cheating scheme involving four other defendants, including a former U.S. Congress House candidate named Rima Fahl. The couple admitted to personally diverting $700,000 in employee wages in what was a multi-million dollar scheme.

The Kastouns pleaded guilty to conspiracy to defraud the IRS (Internal Revenue Service) and in exchange for their cooperation (testifying against the other defendants), federal prosecutors agreed to recommend that they receive a lighter sentence than is called for by the Federal sentencing guidelines.

The Kastouns admitted that in December 1993 they met with El-Fahel to discuss the tax scheme (El-Fahel owned the former Beirut Restaurant in Allentown, PA and has never appeared in court and is likely now a fugitive in Lebanon, which does not have an extradition treaty with the United States) From December 1993 through and including January 1996, The Kastouns paid El-Fahel a 3 percent fee to coordinate the scheme — commonly known as paying employees “under the table.”

Every week the Kastouns gave El-Fahel checks as large as $27,000, (issued by the Kastouns’ textile customers as payment for their company’s services). According to information revealed in the indictments, El-Fahel would then deposit the weekly checks into bank accounts that he controlled. In exchange, El-Fahel gave the Kastouns much smaller checks or cash to pay their employees.

Why this arrangement? – This seemingly complicated arrangement helped avoid government scrutiny, since banks are required to report to the government any checks issued for more than $10,000.

In addition, Rima Fahl, a local lawyer who helped run the scheme, pleaded guilty. In 1998, Ms. Fahl lost the race for the Republican nomination for the 132nd District House seat, covering parts of Allentown and South Whitehall Township. Rima Fahl is El-Fahel’s daughter.

The Kastouns the other defendants face a maximum of 5-years in prison and a $250,000 fine. In addition, they will have to pay interest and penalties on the taxes that they evaded as well as any state and local governments for any taxes they avoided.


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