SPOTSWOOD — The borough is believed to be the victim of a scam that may have cost it $40,000.
The town is among numerous public and private entities in New Jersey seeking to recoup money lost to investment firms whose owner-managers have been accused of running a fraudulent scheme. Authorities alleged that the North Jersey-based firms used withholding taxes for purposes other than satisfying their clients’ tax liabilities.
According to Borough Council President Curtis Stollen, the town may be out $40,000 that was supposed to be paid to the IRS.
Charged in the scheme are Paul G. Bultmeyer, 68, of Upper Saddle River, and Arthur J. Piacentini, 48, of Saddle Brook, both in Bergen County, who authorities said have since 2004 operated investment firms Sherbourne Capital Management and Sherbourne Financial. The two also operate Ameripay, a payroll services company in Rochelle Park that works with numerous towns, school districts and small businesses. Bultmeyer is also CEO of Equitair, a charter aviation company.
According to the U.S. Securities and Exchange Commission, Sherbourne Financial offered investors “prime certificates of participation” and claimed it would use the proceeds to invest in private placement debt, high-grade corporate bonds, preferred stock and government securities. However, Sherbourne did not invest in those resources, instead transferring more than $900,000 to Ameripay, Bultmeyer, Piacentini and Equitair, according to a press release from the SEC.
The two men have been charged with securities fraud and have had their assets frozen.
“We’re just out of the money so far,” Stollen said. “We’re working on what will happen and how to recover it.”
Stollen said the borough’s finance director, Barbara Petren, runs “a really tight ship, and is beside herself” over the alleged scam. Other officials, he said, are also in shock over the involvement of the town’s money.
He said officials are waiting to see if the town’s insurance carrier will cover the loss, though it is possible the money will come from the companies involved in the alleged scam. In the meantime, the borough has contacted U.S. Rep. Rush Holt (D-12th District) to ask that he work with the IRS to help the town avoid “unreasonable penalties” for being late with payments, Stollen said.
Local officials had “no clue” that the borough’s payroll taxes were not being paid, because the IRS did not notify it, he said.
“On the date of payroll, they take out the taxes due and submit it,” Stollen said of the companies that handle payroll. “This company took the money but did not remit it.”
“It’s quite a shock,” he noted. Ameripay, named as a relief defendant in the case, was considered a reputable company, Stollen said, adding that the firm had a booth at the New Jersey State League of Municipalities convention.
During its meeting in late June, the Spotswood council passed a resolution changing payroll companies. At the time, officials knew Ameripay was tied to the alleged scheme, and learned later that the IRS had not received payments from Spotswood.
“The word came down shortly afterward that one deposit was not made to the IRS,” Stollen said.
Stollen expressed frustration over the complexity of payroll taxes and laws, saying the state and federal governments have made it nearly impossible for towns to do the work inhouse.
“It doesn’t pay to do it on your own,” he said. Because the SEC and attorney general are already involved, the town has not had any discussion about taking legal action of its own, he said.