Wallingford developer charged in federal tax case holds two city posts in Meriden

Wallingford developer charged in federal tax case holds two city posts in Meriden

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The Wallingford developer who pleaded guilty Friday to a federal tax charge serves on Meriden’s Aviation Commission and as an alternate on the Planning Commission. 

Meriden resident Donald Cariati Jr., 44, owner of Cariati Developers Inc. in Wallingford, pleaded guilty to one count of obstructing the Internal Revenue Service by not withholding income tax from the paychecks of employees, according to the U.S. Department of Justice.

The charge is considered a felony and carries a maximum three-year prison sentence. Cariati waived his right to be indicted. 

According to the plea agreement, the total tax loss to the IRS was estimated between $550,000 and $1.5 million. Sentencing is scheduled for June 4. 

Cariati could not be reached for comment Monday.

He has served on Meriden’s Aviation Commission since 2017 and as an alternate on the city’s Planning Commission since 2018, according to city records.

Although the city’s website states his term expired in January 2020, Mayor Kevin Scarpati notified all commission members early last month that his office, the City Council and law department are reviewing all boards and commissions.

Appointments under review

“We are looking at attendance, committee makeup, vacancies, and the possibility of combining agencies that might serve a dual purpose,” Scarpati said in a letter. “While we continue our review, you will continue to serve in your capacity as a member of your board or commission.”

Corporation Counsel Michael Quinn said the City Charter has no provision prohibiting someone with a felony conviction from serving on a board or commission, but it does have a procedure for removing a board member or commissioner convicted of a crime or malfeasance while in office.

Cariati is also disqualified if he loses his right to vote, then the “conviction eliminates the right to serve on a board,” Quinn said. “I believe the mayor will be reaching out to Mr. Cariati to discuss these things and he will see fit to retire.” 

Scarpati confirmed Monday that he had met with Quinn and said he would be discussing the issue with the City Council during Monday’s night’s scheduled meeting.

‘Off the books’

According to the plea agreement, Cariati hired a number of people to perform functions such as mechanic work, hauling, snow plowing and office work. Between 2013 and 2017, Cariati paid a number of these individuals with company checks, rather than through a payroll company, asserting that they were independent contractors or subcontractors.

“Cariati, knowing that many individuals he asserted were subcontractors were really appropriately employees, paid them with company checks in order to evade the responsibility to withhold the taxes discussed above, and to pay over such taxes,” according to the agreement. “Moreover, Cariati informed certain individuals that they were paid off the books, meaning that their pay was not reported to the IRS.” 

From 2013 through 2015, Cariati Developers Inc. failed to issue 1099 forms to those employees. Only during an IRS audit for 2013, 2014, and 2015, did Cariati produce 1099 forms to the IRS for 2013 and 2014.

During the course of the audit, agents found representatives for Cariati were creating false invoices to bolster the claims that the employees were subcontractors. 

Cigarette boat

The agreement stated that in 2016, Cariati’s accountant provided a false invoice to an IRS agent in connection with the purchase of products for a cigarette boat in 2014. The original invoice from the sales company was billed to "Donny Cariata," and used the defendant's home address as the "ship to" address, the plea deal states. 

“These falsities were designed to hide the fact that the purchase was for personal expenditures, and not a business expense,” according to the plea deal. In fact, Cariati Developers Inc. paid the invoice, and recorded the invoice as a business expense to prevent tax from being assessed, the plea deal stated.

Some employees who were issued 1099 forms in 2016 and 2017, may have reported their income on their tax returns and paid the equivalent amount of income tax and other taxes Cariati should have paid had they been classified as employees, according to the agreement.

In addition to repaying the IRS, the court may also impose restitution. 

Twitter: @Cconnbiz

Read Kevin Scarpati's letter to boards and commissions.
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