A Falmouth man who paid the employees of his now-closed poker chip manufacturing company off the books and misused the money intended for income tax has been convicted on eight charges related to tax evasion.

John Kendall, 66, the former president of Chipco International in Falmouth, was found guilty Tuesday by a jury after a six-day trial in the Cumberland County Courthouse in Portland of all charges against him – three felony counts of theft by misapplication of withholding taxes, one felony count of conspiracy to commit tax evasion, three misdemeanor counts of failure to account for or pay over withholding tax, and one misdemeanor count of making a false statement on a state income tax return.

Kendall withheld state and federal income taxes from employees’ wages from late 2007 to the end of 2012, diverting the funds to pay for business and personal expenses. He used the money for the mortgage of his Falmouth home, legal fees for his personal bankruptcy and for member dues and expenses at two country clubs among other expenses, according to Tim Feeley, a spokesman for the Attorney General Janet Mills.

Kendall also conspired with one of his finance employees to withhold taxes from some management employees and underreported his own income in his 2009 Maine income tax return, Feeley said in a written statement.

Six other former Chipco International employees had previously pleaded guilty to theft of unemployment benefits or tax evasion, he said.

“Kendall used the unemployment benefits to maintain payroll for these employees when the company’s cash flow was disrupted in part by the many debts it owed to various creditors and vendors. The employees were encouraged to apply for unemployment benefits while in fact they continued to work at Chipco and were paid ‘off the books’ an additional amount,” Feeley said in the written statement.

Kendall faces up to 10 years in prison at a yet to be scheduled sentencing hearing before Justice Thomas Warren. He is also expected to be ordered to pay restitution for the money still owed to the state. He remains free on bail until sentencing.

Much of the $165,000 in withheld Chipco employee taxes has been recovered. Maine Revenue Services recouped about $110,000, of which about $47,000 has been paid back through restitution by former employees. The state intends to seek the rest from Kendall in restitution.

“Employers are entrusted with the obligation to deduct withholding taxes from their employees and to turn those taxes over to the IRS or Maine Revenue services. The employer’s responsibility to handle these funds truthfully and responsibly is crucial to the financial operation of our State,” Mills said in a written statement. “My office will vigorously prosecute those individuals who would abuse this trust by illegally diverting the taxes to enrich themselves or finance their business operations.”

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