Stable owner Ron Paolucci was sentenced this
week to more than four years months in prison and ordered to pay back nearly
$39 million to the Internal Revenue Service, a federal prosecutor said Tuesday.

Paolucci, 55, whose Thoroughbred operation ranked second in race
wins in 2017 and 2018, pleaded guilty in February 2023 to a felony charge of conspiracy
to defraud the U.S. government and filing a false tax return. His 52-month
prison sentence Monday was pronounced by U.S. district judge Sam Lindsay in
Texas.

“We were proud to partner with IRS criminal investigation on
this important case,” U.S. attorney Leigha Simonton said. “We stand ready to
prosecute any employer who pockets employees’ payroll taxes and those who
otherwise refuse to meet their tax obligations.”

“(Paolucci’s) failure to remit withheld taxes is not only a
breach of trust but a serious crime with severe consequences,” IRS special
agent Chris Altemus Jr. said. “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.”

According to court documents, the American Management Staffing
company co-founded by Paolucci provided temporary staffing services to business
clients. Paolucci was employed by AMS from about 2011 through 2020 and had
control over the company’s business affairs including approving payments and
controlling AMS’s bank accounts.

The company was obligated to pay temporary employees and
withhold and pay all applicable taxes for them. Paolucci withheld payroll taxes
from the employees’ paychecks, including federal income taxes, Medicare and Social
Security taxes. AMS was required to make deposits of the payroll taxes to the
Internal Revenue Service on a periodic basis and to file quarterly tax forms.

Formerly based in Frisco, Texas, Paolucci agreed to continue to withhold payroll taxes from
the temporary employees but understood taxes would not be paid over to the
IRS. He continued to issue IRS W-2 forms to temporary employees. Those
forms are used to show employees and the IRS that AMS was withholding and
paying to the IRS payroll taxes.

From 2014 through 2020, AMS paid temporary employees and
withheld about $13 million in payroll taxes from its employees. It issued W-2
forms to document the withholding. However, AMS did not make any payments to
the IRS.

Assistant U.S. attorney Marty Basu prosecuted the case
working under the supervision of Texas-based U.S. attorney Leigha Simonton.