Former Owner Ron Paolucci Sentenced To 52 Months For Tax Fraud And Evasion

According to a press release issued by the U.S. Attorney's Office, Northern District of Texas, Ron Paolucci, once among the winningest owners in the sport, has been sentenced to 52 months in prison and ordered to pay more than $38.9 million in restitution to the IRS.

The story was first reported by the Blood-Horse.

Paolucci, the 55-year-old co-founder of American Management Staffing (AMS), was charged by felony information in January 2023 and pleaded guilty a month later to conspiracy to defraud the United States and making and subscribing a false tax return. He was sentenced Monday by U.S. District Judge Sam A, Lindsay. The prosecution alleged that–over a seven-year period–Paolucci failed to turn over more than $13 million to the Treasury Department that came from withholdings he took from employees for taxes, Medicare and Social Security taxes.

Paolucci's employees allegedly received false W-2 statements from Paolucci's companies that showed that taxes had been withheld from their pay and sent to the IRS. Instead, Paolucci pocketed the money.

“We are proud to partner with IRS-CI on this important case,” said U.S. Attorney Leigha Simonton. “We stand ready to prosecute any employer who pockets employees' payroll taxes and those who otherwise refuse to meet their tax obligations.”

According to court documents, AMS provided temporary staffing services to business clients. Paolucci was employed by AMS from approximately 2011 through 2020 and had control over the business's affairs, including, approving payments and controlling AMS bank accounts.

“Nearly 70% of total U.S. revenues collected by the IRS are collected through employment taxes. When the employer withholds the payroll taxes but fails to pay the taxes over to the IRS, they may be criminally investigated and prosecuted for failing to withhold, collect, and pay over the tax. This was the case with Mr. Paolucci, his failure to remit withheld taxes is not only a breach of trust but a serious crime with severe consequences,” said Christopher J. Altemus Jr., special agent in charge, IRS Criminal Investigation, Dallas Field Office. “In addition to failing to meet payroll tax obligations, Mr. Paolucci failed to report his personal compensation and was ordered to pay approximately $10 million in restitution for his personal tax obligations. Let this sentence serve as a stark reminder: tax compliance is not optional; it is the law.”

In February 2023, Paolucci pled guilty to two counts of tax fraud and tax evasion in a federal court in Texas. He could have been sentenced to as many as eight years in prison.

Paolucci's Loooch Racing Stables finished second nationally in wins in 2017 and 2018. The outfit operated from 2011 to 2018 and piled up hundreds of wins, many of them on the Ohio racing circuit. He had 160 victories in 2017 and 215 in 2018. Loooch won a total of 871 races. At times, Paolucci branched out and was a partner on a handful of top horses, among them Ria Antonia (Rockport Harbor), the winner via disqualification of the 2013 GI Breeders' Cup Juvenile Fillies.