A Pennsylvania trucking company owner was sentenced to 18 months in prison for orchestrating an elaborate $750,000 tax fraud scheme, according to prosecutors.
Michael Gerstenberg, 51, of Emmaus, Pennsylvania, was sentenced in U.S. District Court in Philadelphia on Dec. 13, after previously pleading guilty to willful failure to pay taxes and making false statements on July 3.
He must serve three years of supervised release once he finishes his prison sentence. He also has been ordered to repay more than $750,000 in employee payroll taxes he failed to turn over to the Internal Revenue Service.
“Instead of paying over employment taxes withheld from his employees’ wages, Mr. Gerstenberg used the money to fund his lavish lifestyle,” said Guy Ficco, IRS criminal investigation special agent in charge, in a statement. “He did so at the expense of his employees, robbing them of future Social Security and Medicare benefits.”
Gerstenberg declined to comment about his tax fraud conviction on Dec. 18 when contacted by FreightWaves. He’s currently working at a family-owned trucking company, Mid Atlantic Xpress of Hackettstown, New Jersey. The carrier has 24 trucks and the same number of drivers, according to the Federal Motor Carrier Safety Administration SAFER website.
Gerstenberg started A.E. Logistics of Allentown, Pennsylvania, in 2009. The now-defunct company, which once had six trucks and eight drivers, had its operating authority revoked in October 2018, according to FMCSA.
Court documents alleged that starting in 2010 through 2015, tax payments were withheld from company employees’ paychecks, but that A.E. Logistics and Gerstenberg failed to make consistent payments to the IRS and neglected to file annual employment tax returns with the IRS.
Instead, federal prosecutors alleged that Gerstenberg spent the money he withheld from his employees’ paychecks on extravagant personal expenses, including a Caribbean vacation and other travel, gambling, jewelry, fine dining, country club dues, nightclubs and entertainment for himself, members of his family and his friends.
Gerstenberg also placed his former girlfriend on the company’s payroll and reported inflated wages for her on IRS forms and tax returns “as a means to siphon additional funds from that company for his own personal use,” prosecutors alleged.
Court filings claim her wages were deposited into a joint account controlled by Gerstenberg, who paid no income taxes on the money when preparing the couple’s tax returns.
Prior to owning A.E. Logistics, Gerstenberg co-owned another trucking company, Damar Transportation Inc., also located in Allentown, in 1996. That company shut down shortly after Gerstenberg was charged and eventually pleaded guilty to eight counts of failure to collect and pay employment taxes for Damar Transportation to the state of Pennsylvania in August 2010.
At that time, Gerstenberg was placed on probation and was ordered to pay more than $384,000 in unpaid trust fund taxes after failing to pay state employment taxes from 2008 to 2010.
It was around that time, prosecutors claimed, Gerstenberg started a new trucking company, A.E. Logistics, with many of the same employees.
Prosecutors claimed he “violated the conditions of his state probation by committing the federal offenses for which he was sentenced” on Dec. 13.
Gerstenberg has been ordered to report to prison on Jan. 24.