Bagel Company Owner Indicted for Stealing Withholding Taxes

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The owner of New York bagel maker H&H Bagels has been indicted and arrested for stealing withholding taxes and evading unemployment insurance tax in connection with his wholesale and retail bagel business.

Helmer Toro, 59, allegedly collected but failed to pay $369,318.77 that was withheld from the payroll of his employees between July 31, 2003 and April 24, 2009.

According to prosecutors, Toro filed New York State and New York City withholding tax returns under six different company names and 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 the withheld taxes. He is accused of transferring a large segment of his workforce from an existing business to one of the new shell companies for the purpose of obtaining a lower unemployment insurance tax rate. Although Toro would form a new company, many of the same workers were employed at the new company and he was thus able to obtain an advantageous rate for his unemployment insurance payments to the trust fund operated by the New York State Department of Labor.

“This case is a wake-up call to all employers who fail to fulfill their fiduciary obligation to pay over taxes withheld from their employee’s salaries,” said Manhattan District Attorney Robert Morgenthau in a statement. “It also demonstrates how tax evasion hurts our workers when an employer deliberately fails to contribute the appropriate amount into the unemployment insurance trust fund.”

The indictment marks the first prosecution of unemployment insurance tax rate manipulation under the New York State Unemployment Tax Act since it became effective on Jan. 1, 2006, according to the Labor Department. In the past three years, as the Labor Department enhanced its detection program, it found 354 employers who had failed to report transfers of employees properly. The employers collectively owed in excess of $20 million in taxes.

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