Businessman avoids jail in 'under the table' payroll scheme

Jun. 11—WENHAM — Moments after being told that sending a 72-year-old businessman to prison for tax evasion "could end up being a death sentence," and that it would throw as many as 400 people out of work, a federal judge on Thursday instead sentenced Ralph Caruso to three years of probation.

Caruso, of Wenham, pleaded guilty last fall to tax and mail fraud charges stemming from a yearslong scheme to pay workers "under the table" at some of the companies he owns, resulting in more than $500,000 in taxes not paid over an eight-year period.

In Caruso's corner, however, were at least 94 people, including Boston developer Jay Cashman, comedian Lenny Clarke, several retired Greater Boston officers and a retired state trooper, and several notable North Shore figures, among them Salem District Court Clerk Magistrate Brian Lawlor and Swampscott Select Board member Don Hause, all of whom wrote character letters submitted to the judge by Caruso's lawyer.

The letters spoke of long friendships, times Caruso helped them in their business or personal lives, and of his support of charitable events.

Caruso, who ran a variety of businesses based out of Revere, failed to report more than $2.2 million in wages, resulting in a loss of more than $546,000 in tax revenue and Social Security and Medicare contributions — not including any additional unpaid taxes the workers themselves might have owed, prosecutor Victor Wild told Judge George O'Toole during the sentencing hearing Thursday in U.S. District Court.

On top of that, his under-reporting of how many employees he had resulted in him paying more than $93,000 less than he would have for workers compensation insurance.

Wild asked the judge to impose a year in federal prison — saying that it would serve as a deterrent to others tempted to try the same thing. The prosecutor said that recommendation, which is "substantially" below recommended sentencing guidelines, takes into account Caruso's health and his need for heart surgery.

"He stole from taxpayers," Wild said. "He's stolen from competitors," who had to compete with Caruso for contracts at a disadvantage.

"People need to be forewarned, 'don't do this, there is a consequence if you do,'" Wild argued.

Wild said he also was willing to agree to a delay in Caruso's sentence so he could have the heart surgery.

But Caruso's lawyer, Michael Connolly, while acknowledging the seriousness of the case, said similarly-situated defendants in recent years have avoided jail time, including the much younger Gennaro Angiulo, 49, who was sentenced in March to 42 months of probation in a similar "under-the-table" payroll scheme that defrauded the government of $3.3 million while running GJ Towing.

"He fully accepts responsibility," said Connolly, who said Caruso feels "great remorse" for the scheme.

Caruso spoke briefly, telling O'Toole he wanted to "express my most sincere sorrow" and regret.

"I have no words to express how sorry I am for my very bad judgment and the acts I have committed," Caruso told the judge. "I love my job, my companies and all my employees." And, he said, he loves his country. "The thought that I have let down my country is painful to me."

Connolly said Caruso is in need of heart surgery and suffers from other medical conditions, including prostate cancer.

"There is a very real and dire risk that it could end up being a death sentence," Connolly told the judge.

Connolly said at any given point, Caruso employs 100-400 people at each of his multiple businesses, which according to court records includes providing snow plowing, heavy equipment rentals, construction services, and more recently, companies that provide rental equipment for the film industry.

"He is critical to the ongoing viability of those businesses," said Connolly. Those employees "would lose their jobs," Connolly said.

Connolly also said that any incarceration would likely lead his lenders to call in outstanding loans, pointing to a letter he received from Brookline Bank after his case became public last fall.

It was the argument about Caruso's failing health that convinced O'Toole not to impose jail time.

"I do not think the other grounds are convincing," said O'Toole. But for his medical issues, the judge said, "I could easily imagine a sentence within the guidelines would be appropriate."

Those guidelines would have called for Caruso to spent at least 22 months in custody.

Instead, O'Toole placed him on three years of probation, with the first year of that time on home confinement.

He also ordered him to pay a total of $640,750 in restitution, including $546,320 to the U.S. Treasury and another $93,430 to his workers compensation provider.

Wild told the judge that five employees who benefitted significantly — one of them who was paid more than $240,000 — could not be prosecuted because their crimes fell outside the statute of limitations.

And he said that the full extent of unreported wages may never be known.

Many of the workers were paid in cash. According to Wild's sentencing memorandum, Caruso maintained a separate account at a credit union to give some workers checks that did not appear on the payroll, which was kept in a different bank. But the prosecutor said in his memo that Caruso also had some employees cash checks at their own banks, bring back the cash and then paid workers with that — including snow plow operators.

Courts reporter Julie Manganis can be reached at 978-338-2521, jmanganis@gloucestertimes.com or on Twitter at @SNJulieManganis.