Las Vegas Sun

February 11, 2016

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Las Vegas payroll-services business owner admits to embezzling more than $3 million from clients

Clients included Culinary Local 226, whose audit raised initial suspicions

A Las Vegas woman is likely headed to federal prison for at least five years after admitting she embezzled more than $3.3 million from small-business customers of her payroll-services firm.

Deborah A. DiFrancesco, 55, pleaded guilty Thursday in U.S. District Court in Las Vegas to one count of tax evasion and three counts of wire fraud.

According to a plea agreement with federal prosecutors, DiFrancesco admitted the following:

As early as 2005 she started embezzling money from clients of Lakes Payroll Inc., the payroll-services agency she began in 2001. During 2009, 2010 and 2011, she evaded payment of $3.8 million in payroll taxes, penalties and interest.

As part of Lakes Payroll services, DiFrancesco would calculate payroll taxes for her clients. She would inform clients of taxes due, and clients would authorize transfer of those amounts to DiFrancesco for payment to tax authorities.

Reports for her clients reflected the true tax liabilities, but DiFrancesco would prepare a second, separate set of reports for the tax agencies that reflected understated tax liabilities. She would pocket the difference.

Between 2005 and 2008, in the first three quarters of the year, she would under-report payroll amounts and under-remit tax payments. She would file the fourth quarter reports months after their due date, which allowed her to use current deposits to pay the prior year’s liabilities, plus any penalties and interest.

DiFrancesco was able to hide the fraud through a combination of a growing client base, a growing tax base associated with growing payrolls, late filings and paying past liabilities with current client deposits. But as the economy slowed, so did Lakes Payroll’s business.

In January 2011, one of the business’ clients, Culinary Local 226, hired an independent CPA to audit the union’s filings with the IRS. The audit uncovered a deficiency for the union of about $673,000 with tax authorities. IRS special agents were notified and began their investigation.

By July 2011, Lakes Payroll had closed. A month later, DiFrancesco confessed to the embezzlement and provided the IRS with spreadsheets identifying clients from whom she embezzled, along with specific amounts of money and years affected.

In all, Lakes Payroll served 66 small businesses. The embezzled funds, authorities said, were used for gambling and personal expenditures.

DiFrancesco has agreed to pay restitution of $3,823,544 to her client victims and must pay the IRS $1,128,505, the amount of personal taxes owed on embezzled funds for 2009, 2010 and 2011.

Under the plea agreement, which is not binding on the sentencing judge, DiFrancesco faces a minimum of 63 months in federal prison. Sentencing is scheduled for Sept. 4.

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