Forest City, IA – Darrell Smith, 60, of Forest City, Iowa, was sentenced to 13 months in federal prison in December 2016 for willfully failing to pay federal employment taxes, a crime uncovered during an investigation into the operations of Permeate Refining Inc., an ethanol production business in Hopkinton, Iowa. The case, prosecuted by the Department of Justice’s Tax Division and the U.S. Attorney’s Office for the Northern District of Iowa, highlights a pattern of financial misconduct at the ethanol plant that also involved environmental violations.
According to court documents, Smith admitted to collecting $85,267 in employment taxes from Permeate Refining Inc. employees during the second quarter of 2012 but intentionally failing to remit those funds to the Internal Revenue Service (IRS). This deliberate withholding constitutes a violation of federal law designed to ensure employees receive proper credit for Social Security, Medicare, and other tax obligations. The investigation revealed a larger scheme, with Smith’s co-defendant, Randy Less, the majority owner and general manager of Permeate Refining, accused of a significantly larger tax evasion totaling $654,921 between 2009 and 2012.
Environmental Crimes Linked to Tax Evasion
The probe into Permeate Refining’s finances also unearthed violations of the Clean Water Act. Less was found to have knowingly discharged ethanol, considered a pollutant, from the facility into a tributary of the Maquoketa River without the required permits. This illegal discharge demonstrates a disregard for environmental regulations and potentially caused harm to the local waterway. The connection between the tax evasion and the environmental crimes suggests a broader pattern of negligence and unlawful behavior within the company’s leadership.
Investigation and Prosecution
The case was a collaborative effort involving special agents from the IRS-Criminal Investigation, the FBI, the U.S. Postal Inspection Service, and the U.S. Environmental Protection Agency. Assistant U.S. Attorney Tim Vavricek and Trial Attorney Matthew Hoffman led the prosecution, presenting evidence that secured convictions against both Smith and Less. The multi-agency approach underscores the government’s commitment to tackling complex financial crimes with environmental implications.
Sentencing and Penalties
Randy Less received a harsher sentence of 15 months in federal prison, along with two years of supervised release and a $10,000 fine, reflecting the greater scope of his financial misdeeds and the accompanying environmental violation. In addition to his 13-month prison term, Smith was also ordered to pay $8,673.30 in costs of prosecution. The penalties levied against both men serve as a deterrent to others considering similar unlawful actions.
Key Facts
- Defendant: Darrell Smith
- Location: Hopkinton, Iowa
- Year of Offense: 2012 (tax evasion), 2017 (sentencing)
- Statutes Violated: 33 U.S.C. 1319(c)(2)(A), 26 U.S.C. 7202, 33 U.S.C. 1311(a)
- Tax Evasion Amount (Smith): $85,267
- Tax Evasion Amount (Less): $654,921
- Environmental Violation: Illegal discharge of ethanol into the Maquoketa River tributary
- Smith’s Sentence: 13 months imprisonment
- Less’s Sentence: 15 months imprisonment, $10,000 fine
This case serves as a stark reminder that willful failure to pay employment taxes is a serious federal crime with significant consequences. The inclusion of environmental violations further emphasizes the importance of responsible corporate citizenship and adherence to all applicable laws and regulations. GrimyTimes will continue to follow developments in environmental and financial crime cases across the nation.
Source: EPA ECHO Enforcement Case Database
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