The dominoes continue to fall in the wake of the “scrapgate” scandal, with an owner of Serlin Iron & Metal Co. admitting to receiving and cashing millions of dollars in fictitious checks, underreporting the company’s income, paying employees in cash and destroying evidence that included scale tickets.
Mitchell N. Kalter, who was brought up on charges last month, is facing three years in jail when he’s sentenced on Sept. 7 after doing an about-face and pleading guilty to impairing and impeding the Internal Revenue Service, according to a plea agreement filed in U.S. District Court in northern Illinois on May 17. Kalter originally pleaded not guilty.
Kalter, in operating Serlin Iron, admitted to receiving $369,033 in checks and $1,641,618 in cash from a Chicago metals recycler between January 2010 and December 2013, with only the check payments recorded on the company’s books.
In his relationship with a second Chicago recycler, Kalter directed Tower Alloys Inc. to draft checks to Serlin Iron as well as to fictitious individuals, according to his plea agreement.
Between 2009 and 2012, Serlin Iron allegedly received checks totaling $4,461,469 from Tower. Of this amount, 702 checks totaling $3,265,476 were allegedly drafted to fictitious people and failed to be included on the company’s books. In an effort to shield the income, all weigh tickets and invoices to Tower Alloys were allegedly destroyed.
Stuart A. Muller, owner and president of Chicago-based Tower Alloys, was sentenced last year. He served a four-month prison term and was ordered to pay $285,185 in restitution. Tower Alloys forfeited $407,911 that was seized from a bank account, and paid a $250,000 fine.
Kalter also admitted that the company wrote 747 fictitious checks in amounts of less than $10,000 each to avoid federal reporting requirements, in all amounting to $5,538,865. These checks were cashed at an unidentified currency exchange.
Kalter allowed the company to pay customers in cash or a combination of cash and checks, according to the plea agreement, which noted that, from 2012 to 2013 he made nearly $747,359 in cash payments to industrial accounts that included a gun range as well as demolition and manufacturing companies.
Employees were paid via cash and check, but cash payments were not reported to the Internal Revenue Service. Between 2009 and 2013, Serlin Iron allegedly paid cash wages of more than $211,000 a year to at least 18 workers. From Aug. 22, 2013, through Oct. 31, 2015, no less than $459,333 in cash wages were distributed to employees, the plea agreement states.
In a separate filing on the same day, the company itself pleaded guilty to similar charges and has agreed to forfeit about $367,304.
Serlin Iron had been named in a search warrant in a 2013 raid on a Chicago currency exchange.
Overall, the government estimated its tax loss at $1,896,816.