Falmouth man convicted of tax fraud at Yarmouth business

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PORTLAND — A Cumberland County jury has found a 66-year-old Falmouth man guilty of multiple counts related to tax evasion, crimes he committed as president of a former poker chip manufacturing company based in Yarmouth.

John M. Kendall remains free on bail pending sentencing, according to a release from Maine Attorney General Janet Mills. He faces up to 10 years in prison and payment of $55,000 in restitution.

As president of Chipco International, Kendall diverted funds withheld from employees as income tax to pay for business and personal expenses, including the mortgage on his Falmouth home, legal fees for his personal bankruptcy, and dues and expenses at the two country clubs to which he and his wife belonged, according to the release.

Kendall also conspired with an employee to evade payment of withholding taxes by paying certain management employees “off the books” and thus concealing the company’s tax obligation. He also underreported his actual income on a 2009 Maine income tax return.

Six other employees of the company pleaded guilty to theft of unemployment benefits or tax evasion as a result of Kendall facilitating payment of the employees “off the books” between 2009 and 2011.

Assistant Attorney General Gregg Bernstein told the Bangor Daily News that those employees were Joseph London, Cindy Croy, Marc Leblond, Ralph Smith, Judith Nevers and Tina Nydam. All are from southern and central Maine.

Kendall used the unemployment benefits to maintain payroll for the employees when the company’s cash flow was disrupted, in part by many debts to various creditors and vendors, according to the release.

The employees allegedly were encouraged to apply for unemployment benefits while they continued to work at Chipco and were paid an additional amount “off the books.”

The employees cooperated with the state and paid back approximately $47,100 in restitution pursuant to continued payment plans, according to the release.

Maine Revenue Services recovered approximately $110,000 of the $165,000 in Maine state withholding taxes Chipco withheld from its employees but failed to pay the state from 2007 to 2012.

Kendall was found guilty Tuesday, March 24, of theft by misapplication of withholding taxes, conspiracy to commit withholding tax evasion, failure to truthfully collect, account, or pay over withholding taxes, and making a false statement in a Maine income tax return.

Sentencing before Cumberland County Superior Court Justice Thomas D. Warren is expected in 30 to 45 days, according to the release.

Mills praised the work of Bernstein, who prosecuted the case, and collaboration with the Maine Revenue Service and the Maine Department of Labor.

“Employers are entrusted with the obligation to deduct withholding taxes from their employees and to turn those taxes over to the IRS or Maine Revenue Services. The employer’s responsibility to handle these funds truthfully and responsibly is crucial to the financial operation of our state,” Mills said in the release.

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