ELYRIA — Eleven new alleged victims ranging from an Oregon day-care center to a Cincinnati church have joined Spitzer Management’s lawsuit against jailed Lorain tax preparer Richard Zakarian and his company.
According to an amended lawsuit filed in Lorain County Common Pleas Court, the new corporations and nonprofits lost a combined total of at least $726,291.
Spitzer sued Zakarian in August accusing him of failing to make roughly $754,000 worth of payments to the U.S. Internal Revenue Service and the Ohio Department of Taxation to cover the taxes of the company and its employees.
Based upon the lawsuits and criminal charges filed against Zakarian, the 47-year-old now stands formally accused of stealing around $1.8 million from 16 alleged victims who had entrusted their money to his company, Benjamin Franklin Payroll Service.
Spitzer attorney Anthony Giardini and county Prosecutor Dennis Will have both said they’ve heard from many more alleged victims and they expect the investigation will ultimately show Zakarian stole several million dollars.
So far, Zakarian has only been charged in connection with the alleged theft from Spitzer, not paying $20,198 in taxes for Pallens Auto Concepts in Lorain and for allegedly stealing about $14,000 from a man who hired him to invest the money in a retirement account.
Gary Gudmundson, spokesman for the Ohio Department of Taxation, has confirmed that the state is taking a hard look at Zakarian’s business dealings.
“We are sorting through the evidence and we have to do some reading of information we’ve received so we can get a handle on the extent of this,” he said.
Giardini has said Zakarian used three basic schemes to get his client’s money, one of which was simply taking money from investors. He said Zakarian also would get corporate clients by posing as a legitimate business to get contracts and then take the money without ever filing paperwork or paying money to the IRS and other taxing authorities.
Some of the hardest hit, Giardini has said, are the nonprofits that Zakarian approached with offers of free tax services.
Larry Nelson, treasurer of the Presbytery of Lake Michigan, which oversees roughly 70 Presbyterian churches in the southwest corner of Michigan, said his organization is among those who fell for Zakarian’s offer.
He said Zakarian contacted the church in early 2011 offering a $2,040 grant to cover the costs of payroll processing and the church accepted.
“There is no doubt in our mind that the ‘grant’ was just a ploy of Zakarian’s to entice clients in specifically to defraud them,” Nelson said.
The church learned that none of the approximately $56,000 Zakarian took out of the church’s coffers for taxes made it to the proper authorities after learning of his legal entanglements in Lorain County, he said.
“Zakarian never deposited one cent of the tax monies withheld,” Nelson said.
Nelson said the church has contacted prosecutors about Zakarian and is considering joining Spitzer’s lawsuit in the hopes of recovering the money it gave to Zakarian.
Nelson’s story mirrors that of Pooh County Day Nursery School in Cleveland, another nonprofit group Zakarian allegedly offered a grant to. In Pooh County’s case, the school was offered a $3,360 grant by Zakarian who promised that his charity, the now-defunct Benjamin Franklin Foundation, would cover two years’ worth of payroll, tax and accounting services that would be provided by Ben Franklin Payroll Services.
But according to a lawsuit filed by Pooh County, Zakarian withdrew more than $117,000 from the school’s accounts to cover taxes which weren’t paid.
The Pooh County lawsuit also named Mark Douglas, an account executive with Zakarian’s firm as a defendant. According to the lawsuit, it was Douglas who first made contact with the school about the grant.
In a response filed by Douglas without the help of an attorney, he wrote that he performed his duties in “good faith” during his tenure with the company and never had control of any business accounts. He also noted that while working for Zakarian he witnessed Zakarian and his company “make numerous payments to taxing authorities” on behalf of clients.
Douglas declined additional comment Tuesday, but in his court filing, he wrote that the lawsuit against him should be dropped because he was an employee and not in charge of the company.
“Plaintiff entered into a contract with Ben Tax/Zakarian, not Mark Douglas the salesperson,” Douglas wrote. “Ben Tax/Zakarian made promises, not Mark Douglas the salesperson.”
Nelson said the losses nonprofits like his church have suffered takes away from what they can do. His church, for instance, will have to take money from its mission support fund to cover the tax liabilities Zakarian didn’t pay, he said.
“Being a religious group, we certainly believe in love, peace and helping less fortunate individuals the world over,” Nelson said. “Although we see poverty and cruelty all around us, we never cease to be amazed at what man can do to fellow man.”
Zakarian and his company are also facing other issues beyond the mounting criminal charges and lawsuits.
Ben Franklin Payroll Service has been stripped of its accreditation by the Better Business Bureau serving Greater Cleveland, according to the group’s senior vice president, Sue McConnell.
She said the BBB had received a few complaints about Zakarian over the years, but he always addressed them. There was nothing, she said, that set off any alarms.
“We wish we could predict the future, but it’s just not possible,” McConnell said.
The BBB and the trade group Integrity in Payroll Processing, which also revoked Zakarian’s accreditation when the allegations against him surfaced, had both been in the process of trying to get him to remove their logos from his website, which has since been closed down.
Chuck Freeburger, past president of the trade group, said Zakarian’s alleged conduct reflects badly on the whole industry.
“The shame of it is 98 or 99 percent of the industry is doing it the right way,” Freeburger said. “Unfortunately, there are those who are unscrupulous.”
United Property Management also is trying to evict Zakarian’s now-shuttered company from office space he had rented in Lorain. Police searched those offices as well as Zakarian’s Vermilion Township home in August, according to court records.
United owner Jon Veard said he wasn’t there when the search took place, but he’s since changed the locks because some of Zakarian’s former employees, who he said didn’t receive their final paychecks, were going in and out of the offices.
Veard said he’s known Zakarian since the tax consultant came to Lorain County from New York years ago and found him likable. He said Zakarian always had a smile on his face and a “casual manner.”
“It’s unfortunate,” Veard said. “He was well respected and very intelligent. I don’t know what happened.”
He said he ran into Zakarian at Midway Mall a few months ago. Zakarian was with his wife and was carrying his infant son, he said.
“Last time I saw him, I said, ‘Richard, you’re a happy man, you can see it in your face,’ ” Veard said. “He said, ‘Yeah, life is good.’ ”
Contact Brad Dicken at 329-7147 or firstname.lastname@example.org.