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IRS says the late Ralph Hughes and his concrete businesses owe $300 million in taxes and penalties

TAMPA — The late Ralph Hughes, a Republican businessman whose name was recently removed from Hillsborough County's Moral Courage Award, died owing almost $300 million in corporate and income taxes and penalties, the IRS said in a complaint filed Thursday.

The IRS also alleges that while his concrete firms were paying no income taxes, they distributed huge sums to shareholders "and/or their controlled companies.''

The concrete businesses transferred more than $61 million to Hughes, who was their director and majority shareholder, according to the suit.

The IRS says those transfers were "fraudulent'' under state law and designed "to hinder, delay or defraud creditors'' of Cast-Crete and Florida Engineered Construction Products Corp., like the IRS.

And the agency says Hughes tried to conceal them.

Hughes' estate has disputed the government's claim, which was filed against Wachovia Bank, which represents the estate.

"My dad paid taxes on every dime he took," Shea Hughes said Friday. "My dad's good name and reputation need to be restored. He never cheated the government, never cheated anybody." The family has tax returns to prove that, he added, noting that his father didn't do the bookkeeping.

Last May, the IRS put Hughes' tax debt at $69.3 million. But it raised the number based on more research, the suit says.

Hughes' construction product companies, Cast-Crete and FECP Corp., did not file federal corporate income tax returns or make any payments from 2003 to 2007, the government says.

For at least four years, the IRS says, it made repeated attempts to get the returns, determine the amount due and collect taxes. It has also requested information and communicated with the companies' president, employees and shareholders, it says.

Now, the IRS says further examination of records holds the companies liable for about $128 million in taxes, $117 million in penalties and $54 million in interest — for a grand total of more than $299 million.

The complaint also says that even though they weren't paying taxes, the companies were distributing essentially all their cash to shareholders and controlled companies. As of March 1, the complaint says, Hughes' companies had only $11 million to pay toward the tax debt.

The companies were rendered insolvent after those transfers, according to the complaint.

Of the $118 million in distributions, Hughes got more than $61 million. The complaint said that "in an apparent effort to conceal the nature and extent of the distributions," he failed to report $27.9 million on his personal income taxes and reported more than $16 million as interest payments by his companies where there was no underlying debt.

Because of the transfers, Hughes is liable for an additional $2.3 million in taxes, $464,000 in penalties and $792,000 in interest, the IRS says.

David H. Simmons, an attorney representing Hughes' beneficiaries, says the estate paid $17 million in taxes a few months ago. He says the numbers being cited by the IRS are incorrect.

"Wholly incorrect," Simmons said. "Completely incorrect. All the taxes have been paid."

Hughes was 77 when he died in June 2008. That fall, Hillsborough County Commissioner Jim Norman suggested honoring the lifelong advocate for development and smaller government by naming the Moral Courage Award for Hughes. Critics protested, saying Hughes bought government support for a pro-growth agenda.

In July, after news of Hughes' tax problems broke, his family asked the commission to remove his name from the award.

"My father would have been honored yet humbled to have his name associated with the Moral Courage Award," Shea Hughes wrote to Norman. "At the same time, he would not have wanted that association if it caused any dissension, controversy or embarrassment to his family."

IRS says the late Ralph Hughes and his concrete businesses owe $300 million in taxes and penalties 07/31/09 [Last modified: Tuesday, August 4, 2009 3:08pm]
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