It’s Not The Onions Making The Bagel Shop Owner Cry – It’s The Tax Fraud Indictment

A few years ago, New York law was changed to prohibit unemployment insurance tax rate manipulation under the New York State Unemployment Tax Act.  In the past three years, the authorities have found 354 employers who failed to report transfers of employees properly – these employers collectively owed in excess of $20 million in taxes. 

Now, we have the first indictment and arrest under the law.
 
In what may be one of his final high profile cases before retiring after a long tenure, Manhattan District Attorney Robert M. Morgenthau has charged the owner of H & H Bagels with stealing withholding taxes and evading unemployment insurance tax in connection with his wholesale and retail bagel business. The defendant, Helmer Toro, was indicted on charges of grand larceny, offering a false instrument for filing and violating the labor law through unemployment insurance tax rate manipulation. The crimes charged in the indictment allegedly occurred between July 31, 2003 and April 24, 2009.
 
According to Morgenthau, the investigation leading to the indictment and arrest revealed that Toro collected but failed to pay $369,318.77 withheld from the payroll of the employees of his bagel business. Morgenthau also alleged that, during the period of this indictment, Toro filed state and city withholding tax returns under six successive company names; that Toro sporadically made nominal payments to the New York State Department of Taxation and Finance even though he knew he was obligated to turn over all withheld tax; that through shell companies, Toro committed unemployment insurance tax rate manipulation by transferring a large segment of his workforce from an existing business to a new business for the purpose of obtaining a lower unemployment insurance tax rate; and that although Toro formed a new company, many of the same workers were being employed at the new company and he was able to therefore obtain an advantageous rate for his unemployment insurance payments to the trust fund operated by the New York State Department of Labor.