Using payroll taxes of scores of entities, meant for the government, to buy houses, cars, boats and planes, and to run his business for four years, costs a Sea Isle City company owner five and a half years in prison.

Prison cell block

In federal court in Trenton, John Scholtz, 68, was also ordered to pay restitution amounting to $9,566,460.79 in exchange for his guilty pleas to wire fraud and transacting in criminal proceeds, according to the office of Acting New Jersey U.S. Attorney William E. Fitzpatrick.

Scholtz's firm, Innovative Payroll Services, (IPS) transacted payroll taxes for small and medium-sized companies, municipalities, and schools, inside and outside New Jersey. Among his most prominent clients was the city of Trenton, enrolled from July 2009 until January 2016.

IPS transmitted monthly payroll tax summaries to its clients, who deposited the amounts into a bank account held by IPS, whic were subsequently sent to taxing agencies. That changed between February 2012 and January 2016.

Scholtz admitted withdrawing client tax payments from IPS's tax impound accounts, or directing others to do so, and using them to pay operating expenses, pay off credit card bills, and pay toward high-end purchases including real estate and road, sea and air crafts.

Investigators said that many IPS clients wound up classified as delinquent with the Internal Revenue Service and state and local taxing agencies. IPS used incoming tax deposit funds to pay previous outstanding tax bills, penalties and interest, authorities said.

The arrangement cost at least 103 clients of Innovative Payroll Services (IPS) more than $8,400,000 of federal, state and local tax payments that never were transacted, and more than $578,000 in penalties and interest, investigators said.

Assistant U.S. Attorney Sarah M. Wolfe managed the government's case. Scholtz was represented by Assistant Federal Public Defender Brian Reilly. The investigation included agents if the FBI, IRS, and Mercer County Prosecutor's Officel

Source. New Jersey U.S. Attorney's Office

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