Nelsonville City Hall

Nelsonville City Hall

After months of negotiations, the Internal Revenue Service has relieved the City of Nelsonville's nearly $400,000 debt stemming from the former deputy auditor’s theft in office.

The IRS agreed to relieve the city of $382,761.11 in penalties and interest the city incurred by former Deputy Auditor Stephanie Wilson’s scheme to steal hundreds of thousands of dollars from the city, City Auditor Taylor Sappington said Monday.

“[The negotiations] involved numerous hours of phone calls, conference calls, sitting on hold, tons and tons and stacks of paperwork — I’ve got a whole drawer full of it,” he said.

Shortly after Sappington took office as Nelsonville city auditor in January 2020, discovered "irregularities in the payroll and direct deposit reports” that he reported to Athens County Prosecuting Attorney Keller Blackburn. Wilson, of Stewart, was indicted in February 2020 on felony charges of tampering with records, forgery, telecommunications fraud and theft in office for criminal activity between January 2016 and February 2020. She pleaded guilty to those charges in December 2020; in April of this year, Athens County Common Pleas Court Judge George McCarthy sentenced her to four years and 11 months in prison and ordered to pay nearly $214,000 in restitution to the city. 

In March 2021, Wilson was indicted on additional felony charges of theft in office and engaging in a pattern of corrupt activity between January 2012 and December 2020. According to the indictment, Wilson filed and processed inaccurate tax returns for her husband's business, Wilson Construction; created fake businesses to serve as collection accounts for fraudulent tax returns from Nelsonville; and collected unearned pay by creating fake city employees and authorizing overtime for herself for hours she did not actually work. That case is still pending in Athens County's common pleas court.

Former Nelsonville Auditor Garry Dickerson has said he did not notice anything wrong with Wilson's handling of the city payroll as deputy auditor.

To cover up the crime, Wilson did not send required payroll documentation to the IRS and Ohio Department of Taxation, Sappington said. He said he found a drawer filled with unsubmitted documents such as W-2 forms and payroll withholding information — some of which dated to 2012, when Wilson became deputy auditor.

The IRS levied fines and penalties for the unfiled documents, but Wilson concealed evidence of the mounting liens, with the most recent liens placed against this city totaling $26,257.01, which the city paid off in total.

“She was sifting through the mail and screening phone calls so that information was not getting through,” Sappington said.

The city negotiated with the Ohio Department of Taxation to pay only $50 to the state, Sappington said. However, he said the IRS seemed more intent on receiving the money from the penalties negotiating with the city for well over 20 months. At one point, Sappington said he believed there was a plan to seize city property in compensation for the penalties.

“That generated the nightmare scenario of the IRS taking fire trucks and police cruisers from the city parking lot,” Sappington said.

The city's position was that it should pay nothing to the IRS because it would place the burden of the “deputy auditor’s scheme and thievery” on the taxpayers of Nelsonville, Sappington said.

While negotiations were underway, the city continued to pay toward the tax debt during negotiations with the expectation that the funds could be returned when the procedings concluded. In total, the city paid $29,432.18 in penalties and liens to the IRS, and $20,000 to the Ohio Department of Taxation (although the state has refunded the payments).

“That’s a huge debt burden for a Nelsonville tax code,” Sappington said. “That's a lot of money per person that's just a debt liability to the feds.”

On Monday, Nelsonville received a notice that the IRS was relieving the city of the penalties except what was already paid.

“We've had a good few weeks — a lot of work we've been doing for a long time is paying off — literally,” Sappington said.

Nelsonville City Manager Scott Frank said the negotiations began when he first started his job with the city. He said people in the government then said they were not confident the city would be successful without an attorney.

"I'm glad we didn't spend money on an attorney," Frank said.

A spokesperson for the IRS declined to comment for the story.

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