Raleigh, N.C. (March 26, 2004) -- The North Carolina Employment Security Commission has subpoenaed Deloitte & Touche as part of an investigation into whether the firm helped any of its clients avoid paying their share of unemployment taxes to the state.

"We're asking them for information that will help us determine whether Deloitte & Touche helped any of their clients break the law by SUTA dumping in North Carolina," Andrew James, director of public information for the ESC, told WebCPA. "We were given information that led us to Deloitte and to ask questions."

SUTA dumping refers to a scheme by which corporations avoid paying their full share of state unemployment insurance taxes, typically by setting up a separate business under their corporate structure and transferring one or all of their employees to that entity to get a lower tax rate, according to James. Since the amount of unemployment insurance taxes that companies pay is experience-based (companies who have laid off workers pay higher taxes) -- new businesses typically pay a lower-than-average rate of 1.2 percent on taxable wages until they establish an experience rating, James explained.

The firm has until March 30 to produce the requested documents. "They seem to be cooperating and they say they're going to," James said. He said that, in North Carolina, SUTA dumping is a Class C felony.

Deloitte spokeswoman Deborah Harrington said, "Deloitte & Touche has been fully cooperating with the state of North Carolina and we will continue to cooperate with any appropriate requests."

The crackdown on SUTA dumping, which James said costs North Carolina millions, comes as the state's unemployment insurance trust fund, which pays benefits to laid off workers, nears zero, drained by the recession. The ESC has had to borrow from the federal government to pay unemployment insurance tax benefits.

James said the ESC has collected $4.7 million from companies so far, and is investigating up to 150 companies and accounting firms.

-- Melissa Klein Aguilar

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