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Indianapolis payroll tax executive pleads guilty in $9.4 million scheme

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Posted at 8:27 PM, Aug 30, 2019
and last updated 2019-08-30 20:29:53-04

ST. LOUIS — A former Indianapolis payroll tax executive pleaded guilty Friday to charges of running a scheme that defrauded clients of his payroll service and the Internal Revenue Service of more than $9 million.

David L. Downey ran a payroll services business called Time Payroll from 2013 to 2017 in Indianapolis, according to a release from the United States Attorney's Office of the Eastern District of Missouri. He pleaded guilty to wire fraud, federal employment tax evasion and passport fraud.

Downey admitted in court that he sent money from his clients' accounts to his Charles Schwab brokerage accounts. He did not pay substantial amounts of those client funds to the IRS for the clients' employment taxes.

Downey was found to have funneled $20 million into his day-trading accounts at Charles Schwab and returned $11 million of those funds to the IRS for employment taxes. The loss to his clients and the IRS was $9,428,160, according to the court.

"Downey in effect ran a Ponzi scheme using his clients’ money," the release said.

In 2017, Downey closed his business and cashed out his remaining brokerage and bank accounts. He moved to California and attempted to get a U.S. passport using his brother's name and a California's driver's license showing his brother's name and Downey's photo.

Special agents from the IRS Criminal Investigation unit in St. Louis arrested Downey on Nov. 16, 2018, in Huntington Beach, Calif. He will be sentenced Dec. 13, and faces up to six years in prison along with a fine of up to $750,000 and restitution to his clients and the IRS.