Search warrants follow revelations about unpaid taxes
[City Paper slideshow of federal agents at Sommet offices available here.]
Today's raid on the headquarters of former Nashville Predators' arena sponsor Sommet Group followed months of investigation that led government officials to believe the company and some of its principals were involved in "ongoing criminal activity."
This afternoon, the Middle Tennessee U.S. Attorney's office released an affidavit detailing the grounds it claimed in seeking a search warrant for the business-services outsourcing company's offices. J. Ken Runkle, a special agent with the Internal Revenue Service's Criminal Investigation Division, produced the affidavit, which is available at this link.
"Sommet — principally through its managing partner L. Brian Whitfield — obtained client money by representing that it would disburse that money in proper amounts for the clients' taxes, payroll checks, health-insurance plan, retirement plan, and other obligations," Runkle stated.
"But recurring nonpayment and late payment of obligations, ongoing investigation by the Department of Labor, dwindling account balances, and a growing number of resignations by high-ranking executives show that those representations were not true, that client money was fraudulently misdirected and misappropriated, and that material facts regarding clients' employee- and health-benefit programs were concealed."
The agent claims that Whitfield "routinely engaged in financial transactions with client money, knowing that that money was procured, in part, from his fraudulent misrepresentations or concealment of material facts." His affidavit says Whitfield's dealings often involved "amounts well in excess of $10,000."
The authorities are relying in part on what appears to be whistleblower testimony from a recently departed senior employee of Sommet. The version of the affidavit released to the public has been redacted to hide the identity of this informant, who gave investigators a detailed account of alleged irregularities at Sommet.
The document says the U.S. Department of Labor began investigating Sommet's handling of employee benefit issues in January 2010. By mid-June, DOL had found that "the amount of Sommet's unpaid medical and pharmacy claims had increased to $2.1 million."
One unnamed client had turned over $82,000 to Sommet to cover fourth quarter 2009 payroll taxes, but Sommet had still not paid that money to the IRS by last month.
Attempts to reach Whitfield and other Sommet representatives today have been to no avail.
[As originally posted, 10:55 a.m. Tuesday:]
Agents from the Federal Bureau of Investigation descended this morning on the Cool Springs offices of former Nashville Predators' arena sponsor Sommet Group, executing search warrants to seize company documents, NashvillePost.com has learned.
The employee-leasing firm has recently faced both federal and state tax liens related to its handling of payroll taxes for its client companies.
The Predators and Sommet ended their promotional relationship earlier this year after a dispute about payments. The downtown arena now has tiremaker Bridgestone as a name sponsor.
Efforts to reach Sommet officials this morning have so far been unsuccessful. NashvillePost.com will update this story today as more information becomes available.