Tuesday, February 10, 2015

Athletic Club Owners In Washington State Accused Of Embezzling More Than $500K From Workers

From the Washington State Attorney General's Office on 2/6/2015:

Washington State Attorney General Bob Ferguson has filed criminal charges in King County Superior Court against the owners and operators of West Seattle Athletic Club for stealing wages and evading taxes. In only the second wage theft criminal prosecution brought by the state, the Attorney General’s Office seeks justice for harmed workers and Washington taxpayers.

Defendants Sam Adams and Dana Sargent are alleged to have engaged in theft and fraud totaling over $500,000. The defendants allegedly failed to pay state taxes, withheld wages from workers, failed to pay workers’ insurance premiums, and failed to pay unemployment insurance.
The charging documents can be found here and here.

“Wage theft is a crime, and its victims are often among our most vulnerable residents. I won’t stand for violators who cheat working families out of their hard-earned wages,” said Attorney General Bob Ferguson. “My office will prosecute unscrupulous businesses that steal money out of the pockets of wage earners and taxpayers.”

Owned Two Athletic Clubs in Washington

According to the charging documents, the defendants owned and operated six athletic clubs, four in Oregon and two in Washington, between 2012 and 2014.

One Washington location, Lincoln Plaza Athletic Club LLC in Tacoma, closed in 2013 due to unpaid retail sales tax.

The other Washington location, West Seattle Athletic Club LLC, closed in 2013, after which West Seattle Club LLC opened at the same location. This operation closed in October 2014 after the landlord evicted the defendants for unpaid rent.

Allegations of Theft and Fraud

The AGO alleges the defendants:
  • Failed to pay the state approximately $446,000 in retail sales taxes that they collected for their Washington athletic clubs.
  • Failed to pay 11 employees wages they rightfully earned totaling $7,166.
  • Deducted insurance premium payments from employee paychecks, but failed to pay the insurance company, Aetna Healthcare. Aetna lost approximately $41,640 in unpaid medical and dental premiums, and workers were exposed to the risk of unpaid medical bills.
  • Failed to pay over $35,000 into state unemployment insurance.
Criminal Charges Filed, Restitution Sought

The AGO has charged Adams and Sargent with:
  • Five counts of Theft in the First Degree (Class B felony, 10-year maximum sentence);
  • Three counts of Theft in the Second Degree (Class C felony, 5-year maximum sentence);
  • Four counts of Filing a False or Fraudulent Tax Return (Class C felony, 5-year maximum sentence); and
  • Nine counts of Theft in the Third Degree (gross misdemeanor, 364-day maximum sentence).
Sentencing guidelines indicate a potential sentencing range for the charges of 43 to 57 months. The AGO has alleged that aggravating circumstances are present in this case, which could lead to an upward departure from that range.

The AGO is also seeking full restitution for all of the victims involved including the State of Washington, the individual employees, and Aetna Healthcare.

Arraignment is scheduled for Feb. 18, 2015 in King County Superior Court.

The charges contained in the charging documents are allegations only. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.


Read the whole press release here.

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