A federal judge has ordered Alpha Technologies Inc., distributors of uninterruptible broadband power supplies, and manufacturer G.B. Enterprises Inc. to pay $35.5 million in back taxes, interest, and penalties for committing tax fraud.
The sentence was handed down June 25 in U.S. District Court in Seattle.
Each company was also fined $500,000, according to the U.S. Attorney’s Office for the Western District of Washington.
G.B. Enterprises was placed on probation for three years, while Alpha Technologies will serve one year of probation with special conditions aimed to ensure that neither company commits further tax fraud, according to authorities.
Reached at corporate headquarters in Bellingham, Wash., an Alpha Technologies company spokesman who identified himself as Paul Humphries declined to comment on the sentence.
The government alleged that G.B. paid 8% sales commissions to Alpha, which in turn paid only about half of that amount to its independent sales representatives.
The remainder of the commissions was wired to off-shore bank accounts for Alpha Technologies GRC Ltd., a Cayman Islands corporation; and to Alphatec Ltd., incorporated in Cyprus.
According to the U.S. Attorney’s Office, Alpha CEO Fred Kaiser — who lives in Cyprus and the Bahamas — ordered the wire transfers. Then G.B. Enterprises took a full business tax deduction on the 8% commission.
Violations date back to 1996, according to the government. For that year, G.B. Enterprises paid $5 million in taxes instead of the $9.5 million it actually owed. The company continued to “exaggerate” its commission costs through 2001, according to the government.
The penalties were part of a plea agreement.
In sentencing the companies, Judge John C. Coughenour expressed regret that the “person most culpable for these crimes is not facing indictment,” according to a statement released by the U.S. Attorney. The judge noted that person is not in the country and is not extraditable.
Steven Pasholk, the special agent in charge of the local criminal investigations unit of the Internal Revenue Service, said in a prepared statement: “The IRS expects the same level of honesty from corporate citizens as we do from individuals. This investigation makes clear the commitment of IRS criminal investigation to combat corporate tax fraud.”