Franklin enters plea in embezzlement case
COLUMBUS — The former comptroller of the Diocese of Steubenville has admitted to embezzling nearly $300,000 during a nine-year period beginning in 2008.
David A. Franklin, who now lives in Kentucky, also admitted Tuesday in federal court in Columbus he had failed to turn over payroll taxes he’d collected from employees of the diocese, the Office of Social Ministry and the Mount Calvary Cemetery Association, costing the diocese an additional $999,713 in interest and penalties that were assessed by the Internal Revenue Service when it covered the nearly $2.8 million payroll tax debt plus the employer portion of the tax.
David M. DeVillers, U.S. attorney for the Southern District of Ohio, said Franklin entered guilty pleas Tuesday to one count of willful failure to account for and pay employment tax, one count of wire fraud and one count of filing a false income tax return.
The plea agreement requires Franklin to pay $299,500 in restitution to the diocese for the money he embezzled. The court also could order restitution for the tax loss, interest and penalties sustained by the diocese, DeVillers said.
DeVillers said records showed Franklin had withheld payroll taxes from the diocese and office of ministry from 2004 through 2016 but did not give that money to the IRS. He also withheld payroll taxes for Mount Calvary employees from 2013 through 2016, but never turned that money over, either.
As a result, the diocesan entities had to pay the IRS $2,778,462.68 to cover the payroll taxes that were withheld but never turned over and the employer portion of the employment taxes that Franklin should have paid on their behalf.
“While he was failing to truthfully account for and pay over payroll taxes, Franklin also embezzled $299,500 from the diocesan entities by preparing fraudulent checks to be issued to himself,” DeVillers said. “For four tax years, Franklin also filed false personal income tax returns.”
DeVillers said Franklin owed the IRS $33,672.25.
“The actions of David Franklin were egregious and caused significant financial harm to the Catholic Diocese of Steubenville and the Mount Calvary Cemetery Association who (trusted) him to provide sound accounting and financial reporting services, not to divert monies for his own personal use,” said Bryant Jackson, the special agent in charge of IRS criminal investigation in the Cincinnati Field Office.
“Bringing to justice those who prey on their employers for their personal financial gain has been and will continue to be a top priority for IRS criminal investigation.”
Bishop Jeffrey Monforton said the diocese is “grateful to the work of all of the public officials who were involved in this complex investigation.”
“David Franklin greatly compromised the diocese’s ability to exercise its compassion of service including assisting our brothers and sisters in need,” Monforton said. “We also want to thank our parishioners, priests, deacons and all our religious as well as chancery staff for their patience during this two-year investigation.”
Franklin faces up to five years in prison for willful failure to account for and pay over employment taxes, up to three years for filing a false income tax return and up to 20 years for wire fraud. DeVillers said the court will determine an appropriate punishment according to federal sentencing guidelines and other relevant factors.
Franklin had served as the diocese comptroller from 1985 until 2017, when he retired. The diocese claims it discovered “irregularities” in Franklin’s accounting records and financial reports after he left their employ, and an independent accounting firm subsequently determined the payroll taxes had never been turned over to the IRS. The diocese had to liquidate unrestricted investments in order to cover the tax debt.
The diocese filed suit in January to recover $339,000 in performance bonuses Franklin had been paid as well as the interest they’d paid to the IRS on the payroll tax debt, plus accounting and attorney fees.
The civil suit claimed Franklin’s records “falsely indicated payroll tax liabilities had been paid” and alleges the diocese was unaware of the omission until 2018. Franklin wouldn’t have received performance bonuses if it had been aware of the the unpaid taxes or “the true financial condition of the diocese,” a statement released by the diocese indicated.
In May, Jefferson County Common Pleas Judge Michelle Miller granted a defense motion for a 180-day stay after Franklin’s attorney argued his client couldn’t “properly defend himself” against a federal criminal investigation and the lawsuit simultaneously.
Peter K. Glenn-Applegate, an assistant U.S. attorney, and Jefferson County Prosecutor Jane Hanlin, who also serves as a special assistant U.S. attorney, represented the government in the federal proceedings.