FORMER TECH EXEC SENTENCED TO 30 MONTHS IN PRISON FOR FAILING TO PAY PAYROLL TAXES

FROM:  U.S. JUSTICE DEPARTMENT
Tuesday, May 5, 2015
Former District of Columbia Technology Executive Sentenced to Prison for Failing to Pay Over Nearly $1 Million in Payroll Taxes

A Washington, D.C., resident and businessman was sentenced to prison for failing to pay over nearly $1 million in employment taxes, announced Acting Deputy Assistant Attorney General Larry J. Wszalek for the Justice Department’s Tax Division.

Kevin Bertram, former CEO of the wireless technology firm Distributive Networks LLC, was sentenced to serve 30 months in prison to be followed by three years of supervised release, and ordered to pay $897,921 in restitution to the Internal Revenue Service (IRS).  On Feb. 10, Bertram pleaded guilty in the U.S. District Court for the District of Columbia to willfully failing to pay over more than $900,000 in employment taxes, including federal income taxes, as well as the social security and Medicare taxes of Distributive Networks’ employees.

According to court documents, Bertram operated Distributive Networks from 2004 through 2010.  Bertram’s company, which was named one of Washington, D.C.’s “Great Places to Work” by Washingtonian magazine in 2007, created technology that allowed cell phone users to participate in contests, download ringtones and receive content such as trivia and horoscopes.

According to court documents, Distributive Networks provided employee perks, such as free Starbucks coffee and gym memberships, and a 100 percent matching contribution to its employees’ 401(k) plans.  However, Bertram willfully failed to comply with Distributive Networks’ employment tax obligations.  For the quarterly tax periods in late 2007 through mid-2009, Bertram failed to file Distributive Networks’ required quarterly IRS Forms 941 (Employer’s Quarterly Federal Tax Returns) and failed to pay over $927,921.78 in employment taxes due to the IRS.  At the same time that Bertram was failing to pay the IRS income and other taxes withheld from employees’ paychecks, he spent hundreds of thousands of dollars of company funds on sporting event tickets and personal luxury goods.

Acting Deputy Assistant Attorney General Wszalek commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Melissa S. Siskind and Jeffrey A. McLellan of the Tax Division, who are prosecuting the case.  Wszalek also thanked the U.S. Attorney’s Office of the District of Columbia for their substantial assistance.