CANTON — The owner of a Canton company that makes American flags and supplies them to veteran organizations will spend two years in prison for failing to pay $162,000 in payroll taxes.
At a hearing in federal court Monday, Richard Spencer, 52, also was ordered to pay $197,040 in restitution. Spencer had previously pleaded guilty to failure to account for, collect and pay employment taxes.
Spencer owned and controlled RS Sewing on Clarendon Avenue SW, which manufactures American flags. Spencer oversaw production, source materials, paperwork and the company’s financial operations, according to documents filed in U.S. District Court in Cleveland.
Spencer was sentenced by Judge Patricia Gaughan.
The company’s website says the business is the largest supplier of American-made stick flags in the United States. Flags are 100 percent made in the United States, including the wooden dowels, according to the website. RS Sewing supplies many veteran organizations and large retailers throughout the country, the website touts.
"This defendant benefited from being able to say that his flags were made in America, but he failed to meet his obligations to his employees and the American taxpayer," Justin Herdman, U.S. attorney for the Northern District of Ohio, said in a news release.
William Cheung, acting special agent in charge for the IRS’s Cincinnati Field Office, echoed those sentiments.
"Richard Spencer did not have any problems with earning income from manufacturing the American flag, but he did have problems with paying employment taxes to the IRS that he withheld from his employees," Cheung said in the press release.
Spencer had been made aware of an IRS audit that found Spencer improperly treated employees as contractors, but he continued to mislabel his workers and continued to fail to pay the employment taxes, Cheung said.
Beginning around 2008, Spencer reclassified some of his workers from employees to independent contractors. Following the 2011 audit, a penalty was assessed against Spencer but he continued to misclassify some employees and failed to pay employment taxes, court records said.
All RS Sewing employees were required to clock in and out, were paid hourly wages, provided materials to manufacture flags by RS Sewing and were otherwise treated the same by managers, the news release said.
An email message seeking comment was sent to Spencer’s attorney, Terrence A. Grady, late Monday afternoon.
Overall, Spencer failed to collect, account for and pay roughly $162,000 in federal employment taxes, according to federal prosecutors.
Spencer will begin serving his sentence in 60 days, said Michael Tobin, a spokesman for Herdman’s office. Following release from prison, Spencer will be under three years of supervised release.