NCJ Number
56820
Journal
Fortune Volume: 99 Issue: 2 Dated: (JANUARY 29, 1979) Pages: 32-35
Date Published
1979
Length
3 pages
Annotation
THIS ARTICLE TELLS THE STORY OF TWO TOP EXECUTIVES OF THE FRUEHAUF CORPORATION (MANUFACTURERS OF TRUCK TRAILERS AND AUTOMOTIVE PARTS) WHO WERE CONVICTED ON FELONY CHARGES OF DEFRAUDING THE U.S. GOVERNMENT OF EXCISE TAXES.
Abstract
THE TWO CONVICTED PARTIES CONSPIRED TO CONTINUE WITH A SCHEME FOR AVOIDING EXCISE TAXES BY ALLOCATING A PORTION OF THE COST OF CERTAIN SERVICES IN SUPPORT OF DISTRIBUTORS AND DEALERS (ADVERTISING, MANAGEMENT, AND SALES ASSISTANCE) TO EACH TRAILER SOLD, AND BILLING SEPARATELY FOR THAT AMOUNT. THE SAME AMOUNT WAS THEN DEDUCTED FROM THE PRICE CHARGED THE DISTRIBUTOR--REDUCING THE EXCISE-TAX BASE, AND THEREFORE THE TAX DUE. THE GROSS ON EACH TRAILER FOR FRUEHAUF REMAINED THE SAME WHILE THE TAX SAVING WAS HANDED DOWN TO THE DISTRIBUTOR GIVING FRUEHAUF AN EDGE OVER ITS COMPETITORS. IN 1974, THE CASE WENT TO CRIMINAL COURT, WITH THE TWO EXECUTIVES NAMED AS COCONSPIRATORS, AND AFTER 10 WEEKS OF TESTIMONY, RESULTED IN A GUILTY VERDICT AND SENTENCES OF 6 MONTHS FOR EACH DEFENDANT AS WELL AS A $10,000 FINE. THE SENTENCE WAS LATER COMMUTED AND THE TWO MEN WERE PUT ON PROBATION AND INSTRUCTED TO DO COMMUNITY WORK AT LOCAL HIGH SCHOOLS. (DAG)