Company failed to pass on pension deductions, court told

There must be some deterrent to prevent employers from failing to remit pension deductions taken from the wages of their workers to the Pension Authority and leaving them and their families at risk without life insurance cover, according to Circuit Court Judge Pauline Codd.
A South Kilkenny company in voluntary liquidation, Spectron M&D Engineering Ltd, and Thomas Walsh (35) of Mountneil, Carrigeen, Mooncoin, pleaded guilty to six sample counts of failing to pass on €148,000 in pension deductions to the trustees of the pension Authority between 2008 and 2011.
The Circuit Criminal Court heard that the company came under financial pressure on losing €400,000 on an electrical contract at Terminal Two at Dublin Airport, with pension deductions were recycled to keep the company afloat.
Father of six Thomas Walsh was given a suspended three-month prison sentence on condition that he repaid €10,270 to the Pension Authority and kept the peace and was of good behaviour for three years. He was also given 150 hours of community service in lieu of 18 months in prison.
John Shanahan of the Pensions Authority said concerns were raised on March 3rd, 2011 that the company was not remitting pension deductions.
Contact was made with Thomas Walsh seeking pay roll details between January 2008 and March 2011. Shortly after that the company went into voluntary liquidation on April 4th, 2011.
The Liquidator provided the pay roll details and on analysis it was found that €148,000 had been deducted from employees and was not passed on. The number of employees varied between 105 and 130.
A statutory scheme was in place to ‘plug’ the shortfall and the fund was reimbursed at the cost of €68,804 to the exchequer.
The State was at that loss and workers on reaching retirement would have found a deficit in their pensions.
The employees and their families were put at risk as there was a life insurance element in the scheme. If an employee died during the three year period their family would not have been covered and would be at a loss.
In November 2012 the defendant went to the Pensions Authority with his accountant and admitted his liability and was very forthright when questioned. He started the company with two employees and this increased to over 100 with a pay roll of up to €90,000.
The money from the Terminal Two contract never materialised and the company suffered a substantial loss. The pension contributions were used to keep the company afloat.
Chartered Accountant Donal O’Boyle, who appeared for the defendant, said the company provided electrical services as sub-contractors. The company was very similar to a large number of Irish companies that were under capitalised.
In the early days profits financed the next contract. But as soon as the cash flow stopped or there was a delay in payment by the contractor, the sub-contractor was in a very serious situation. This was very common in small businesses.
The Terminal Two contract was worth €900,000 to the defendant company but instead they made a loss of €400,000 or perhaps more.
The Celtic Tiger was in difficulty and the main contractor was in difficulty and the profit for the defendant was to come in the “final count”. The delay was just too much to bear. The company also made another loss of E100,000 and both deficits were too much. The pension deductions were re-cycled within the company to pay wages.
The defendant also guaranteed a loan of €70,000 and he was still making repayments on this. Currently he was working as an electrical engineer with gross earning of €45,000. He had put aside €150 a week and now had the sum of €10,278 in court.

Barrister Shane Costello, SC., defending, said his client’s partner had written a heart felt letter to the court setting out what the family had gone through since the offending.
Two former employees, who were victims of the offending, were in court and they described the defendant as an “honest, hardworking, decent man and a good boss”.
The business stated at a time when the crash was looming and the payroll demand was €80,000 a week. It was a huge business in the local community and the company was now in ruins.
The defendant was remorseful and mortified at his present predicament and was deeply sorry for bringing this situation about. It was not a case of simple criminality but one of keeping his employees in work.
Judge Pauline Codd said the offences took place over a three year period and this was a significant aggravating factor. The deductions were not used to lead an extravagant life style but to finance the company. The defendant did not take holidays or weekends away.
She said that there must be some deterrent as employers seemed to think they could use the money of their employees and expose them to risk. It must be understood that pension deductions did not belong to employers.
The Judge took into consideration the defendant’s co-operation at an early stage and his guilty plea and the fact he saved some money to repay the Pensions Authority. He had no assets and lived in rented accommodation and he was not in a position to repay the money in full but something had to be repaid to the community.
The case was adjourned for the preparation of a probation report on the defendant’s suitability for community service.

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