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Payroll firm leaves bitter trail

Former clients say Professional Payroll Plus of Pasco kept money meant for the IRS, which is investigating.

By CHRISTINA REXRODE, Times Staff Writer
Published November 27, 2007

ADVERTISEMENT [Stephen J. Coddington | Times] Kim and Dale Bussey of Linex Markings Inc., a pavement marking company in Zephyrhills, say Professional Payroll Plus of Land O'Lakes cost them $52,000.

LAND O'LAKES

Six months ago, things started to unravel for a small payroll provider in Pasco County called Professional Payroll Plus.

On a single day in May, six local businesses filed complaints against it with the Hillsborough County Sheriff's Office, alleging fraud and theft. Now, Professional Payroll Plus has filed for bankruptcy and is no longer in business.PPP faces multiple lawsuits in Pasco and is under investigation by the FBI and the IRS.

And Ron and Elizabeth Mascitti, who ran the company, are already busy drumming up clients for their new business, Florida HR Solutions.

Here's how the trouble started: When PPP would process paychecks for other businesses, it would withhold money for federal taxes, then send that money to the IRS. That's a common practice among payroll providers. But earlier this year, lawsuits and former customers say, PPP started keeping that money for itself.

It isn't clear how many companies were hurt by the alleged scam, or how much they lost. Because no charges have been filed, government agencies declined to release much information. But one thing is certain: PPP's web encompassed many bay-area businesses. Its bankruptcy filings list 23 pages of creditors owed a combined $1.5-million.

The majority of the purported victims are small-time entrepreneurs. Most doubt they'll recover any of their money and are too swamped by the demands of keeping their businesses afloat to put up a fight.

"I should be retired by now," said a disheartened Ronnie Kendall, 61, who keeps going to work every day so he can pay the IRS the money that he says PPP never sent. Kendall runs a small stucco contracting firm in Miami.

The FBI says it is reviewing allegations against PPP. Like the IRS and state agencies, the FBI does not confirm or deny most open inquiries. But the Pasco Sheriff's Office (which inherited the case from the Hillsborough Sheriff's Office) confirmed that it turned the matter over to the FBI and the IRS, and numerous former PPP clients contacted by the St. Petersburg Times said they were interviewed by the FBI or the IRS or both.

The State Attorney General's Office said it has received a dozen complaints about the company, though it cannot comment on them.

The vice president

Ron Mascitti, a 42-year-old Ohio native, was PPP's vice president.

"A likeable guy," said Kendall, who hired the company about three years ago. "But the big bad wolf can act like a little sweet rabbit when he wants to."

Bonnie Leitch, who lives in Ohio near Cleveland, remembers Mascitti because, she says, he rented a furnished condo from her a few years ago. "He told me some sob story about something or other," she recalled. After about six months, Mascitti stopped paying his rent, Leitch said. When she went to the condo to ask him about it, he had moved out, and taken Leitch's new leather sofas, TVs and other furnishings with him, she said.

"I was floored," said Leitch, 57, who owns a travel agency.

That was August 2002, the same month that Ron Mascitti filed for bankruptcy in Tampa. Four months later, PPP was incorporated in Florida.

In 2005, Mascitti married Elizabeth McGeady, 11 days afterhe turned 40 and a couple of months before she turned 50. Another Ohio native, she is listed in state records as the company's president.

Patrick McGeady, Elizabeth's son, worked for PPP and another Mascitti company, Professional Group Benefit Corp., before resigning earlier this year.

"She's got the whole 'stand by your man' mentality," Patrick McGeady, 31, said of his mother, "and I've got the mentality, 'I think he's a scumbag.'"

Through their attorney, Anthony J. LaSpada of Tampa, the Mascittis declined to comment, except to deny any wrongdoing.

Companies dissolved

The Mascittis appear to have given up on Professional Payroll Plus. The company filed for bankruptcy in May. It and Professional Group Benefit were dissolved in September because they did not file annual reports with the state.

"A lot of companies in today's economic situation have filed bankruptcy," LaSpada said. "Nothing should be inferred from that."

But in March, the Mascittis launched another Land O'Lakes company, Florida HR Solutions Inc. Its Web site, www.flhrs.com, indicates it is accepting clients. The buzz among PPP's former clients is that the Mascittis have been looking for customers in the New Orleans area.

Dale Bussey, who with his wife runs a pavement marking company in Zephyrhills called Linex Markings Inc., had his secretary call Florida HR Solutions around March, shortly after he got a letter from the IRS inquiring about his unpaid taxes. Emily Evans, a former employee of PPP, called back and said she was in Louisiana, then stopped returning the secretary's calls, according to Bussey.

"I'm sure some other poor saps are going to get hit, too," said Bussey, 49. He estimates PPP took him for $52,000.

Employees laid off

Richard Jump, who runs a consulting firm called CSJ Development from his home in Wesley Chapel, saidthat he lost about $50,000 to PPP.

Because of the loss, Jump has laid off four of his six employees. He rarely collects a paycheck for himself any more, he said, so he's eating through his savings.

"They seemed to be nice people," recalled Jump, a grandfather of two. "Their price was right."

Jump went to one of the creditors meetings in bankruptcy court and couldn't sleep afterward.

He said his doctor told him not to go to any more of the meetings.

Christina Rexrode can be reached at crexrode@sptimes.com or (727) 893-8318.

The company

Professional Payroll Plus, a small payroll processing company in Pasco County, started in 2002. It was run by Ron and Elizabeth Mascitti, a husband and wife team from Ohio.

The allegations

PPP withheld money for taxes when it processed paychecks - then, this year, started keeping that money instead of sending it to the IRS, according to lawsuits and ex-clients.

The victims

Victims include a number of small businesses in the bay area. Kim and Dale Bussey, above, run Linex Markings Inc. in Zephyrhills. They estimate that PPP took them for $52,000.

What's happening

PPP is no longer in business, but the Mascittis are running a new company. The FBI and the IRS are investigating Professional Payroll Plus. No charges have been filed.

What businesses can do to protect themselves

The American Payroll Association and others offer these tips to help small businesses protect themselves when they are using a third-party provider:

-Regularly check eftps.gov, the Electronic Federal Tax Payment System, to verify that your taxes have been filed.

-Ask the payroll provider for references from other clients.

-Ask your payroll provider to set up your accounts to funnel tax payments from your company straight to the IRS. "I don't touch the payroll taxes," said Crystal Thibodeaux, who runs Right on the Numbers in New Port Richey.

-If your payroll company does pay employment taxes from a master fund, as many do, make sure the company is using its own tax ID number, not yours, said Johnathan Herold, CEO of Herold Home Services in Lutz.

He estimates that Professional Payroll Plus took $50,000 from him. He spent another $10,000 on lawyers' fees before deciding it wasn't worth it.

Payroll firms unregulated

Florida regulates auctioneers, boxers and barbers, but not payroll providers. The federal government doesn't regulate them, either, and Maine is the only state that attempts to do so.

But payroll service is by no means a fringe industry: Payroll providers process the paychecks for 35-million U.S. workers - more than one-third of the private work force - according to the National Payroll Reporting Consortium.

In short, payroll service is a big business with little oversight. And Professional Payroll Plus is not the only provider accused of stiffing the IRS and leaving its clients on the hook for it.

Just this month, a 68-year-old Clearwater man named Robert Dromm was sent to prison after admitting to a scheme that is virtually identical to what PPP is accused of.

"Yes," said Norm Meadows, spokesman for the Tampa field office of IRS criminal investigations, "the problem is particularly bad in Florida."

That's partly because the state's transient and immigrant workers are desirable prey for such scams, since they're less likely to fight them, Meadows said.

In Maine, payroll companies must be backed by a bonding agency. U.S. Senate Bill 1773, which has been sitting in committee since Maine's senior senator introduced it in July, would require the same across the nation.

Scott Mezistrano, senior manager of government relations for the American Payroll Association, doesn't think the bond requirement is an effective regulation. "Does it really prove that you're not going to abscond with clients' money?" he said.

[Last modified November 27, 2007, 07:20:55]