Hillsboro businessman convicted of tax evasion

Stephen Nagy ordered to pay IRS, spend 1.5 years in prison

Stephen Nagy, 53, shown in a jail booking photo. (Washington County Sheriff's Office)
Stephen Nagy, 53, shown in a jail booking photo. (Washington County Sheriff's Office)

PORTLAND, Ore. (KOIN 6) — A 53-year-old man was ordered by a federal judge to pay the Internal Revenue Service (IRS) close to $500,000 and spend a year and a half in federal prison after pleading guilty to federal tax evasion.

Stephen Gregory Nagy was the former president of Hillsboro-based S&S Drywall Assemblies. According to the United States Attorney’s Office, Nagy’s company produced drywall services from January 2005 through September 2011.

The IRS assessed the company $481,519 in federal employment taxes, penalties and interest for between June 2009 and September 2010. Nagy met with the IRS and committed to a plan to pay the past due payroll taxes for his company, but investigators said he decided not to comply with the payment play and engaged “in a variety of interrelated fraudulent schemes to evade the payment of the delinquent payroll taxes.”

Investigators learned that he started conducting extensive business transactions in order to hide funds from the IRS. He obtained cash by illegally hiring undocumented workers to work on prevailing wage jobs, paying them a small portion of the prevailing hourly rate and demanding that they kick back the largest part of their wages to him in cash, court documents state. Nagy failed to report the case to the IRS.

Some of his employees were forced by Nagy to file for unemployment benefits through the State of Oregon, investigators said. After the workers filed for the unemployment coverage, Nagy fraudulently insisted that they continue to work full-time for the company, government attorneys said.

“Nagy intimidated, manipulated, and threatened the loss of much needed jobs to gain the cooperation of his employees,” a spokesperson with the US Attorney’s Office said.

During the investigation, Nagy started putting business and personal assets in the names of others, officials said.

Special agents with the IRS learned that Nagy had eventually transferred all of S&S Drywall Assemblies income, contracts, receivables and asses to ASM Drywall Inc., a shell company he created and placed in his sister’s name.

“Stephen Nagy spent years planning and executing his scheme to steal from his employees and to cheat the IRS,” US Attorney Amanda Marshall said.

The Oregon Attorney General also prosecuted Nagy in 2011 on allegations of criminal anti-trust and racketeering.

Then-Attorney General John Kroger said the investigation stemmed from Nagy rigging the bid process on a $24 million condominium project in Portland’s Pearl District.

He was sentenced to 30 days in jail and five years of supervised probation. S&S Drywall Assemblies was ordered to close.

As part of his sentence in 2011, Nagy forfeit more than $50,000 in cash and more than $250,000 worth of assets to the state. He was also stripped of his license with the Oregon Construction Contractors Board and is not allowed to reapply for 20 years.

Nagy’s federal case concluded Friday when he was before US District Judge Michael W. Mosman.

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