Michigan real estate developer accused of not giving employees' withheld taxes to IRS

EAST LANSING, Mich. (FOX 2) - A Michigan real estate developer pleaded guilty to tax evasion after authorities say he would withhold employee taxes but not pay the money to the IRS.

Scott Chappelle, 61, of Okemos and East Lansing, was an attorney and former certified public accountant who operated Terra Management Company, Strathmore Development Company Michigan LLC and Terra Holdings LLC. The businesses were involved in real estate development and property management in the East Lansing area, according to court records.

According to the Department of Justice, Chappelle admitted to not paying employee taxes to the IRS. When the IRS tried to collect the unpaid taxes, officials say Chappelle made false statements about his and his companies’ assets and income, concealed his vacation house on Lake Michigan, and purchased real property in nominee names instead of his own.

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He is also accused of telling the IRS that he couldn't afford to pay his debts while still paying for personal expenses, including mortgage payments on two houses and a condominium, college tuition for his children, personal credit card bills, life insurance premiums, car payments for himself and one of his children, and expenses associated with boats he owned.

Authorities say Chappelle lied to IRS investigators and told them he had not purchased property since the agency began collection activities. He hid where money used to buy an East Lansing condo came from, officials said.

The DOJ said Chappelle also filed a false employment tax return for Terra Holdings LLC on which he claimed the company had no employees and paid no wages during the time period covered by the return. However, he approved submissions to the company’s payroll provider during this time.

Chappelle also admitted to making false statements on a loan application when he refinanced the mortgage on his Lake Michigan vacation house in Harbor Springs, the DOJ said.

Chappelle is scheduled to be sentenced Aug. 2. He could spend a maximum of five years in prison for tax evasion. He also faces a period of supervised release, restitution and monetary penalties.