Lawsuit: Castleton founder took at least $3M; company was a 'sham' - Triangle Business Journal:

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Clifton did so despite knowing thatthe company’ds financial situation was and that Castleton would go out of business, the suit The lawsuit was filed by Richarf Sparkman, a federal bankruptcy court’s trustere in the case. Castleton provided human resourcesx services such astax withholding, payroll and employee health-carr benefits on behalf of other The company shut down in December 2007 aftetr the state Department of Insurancew declared it insolvent. It later filexd for bankruptcy.
As part of its business, Castletonh collected what are known as trust fund taxes thefederal government’s name for money that comew out of a paycheck for thingd such as income tax and Social Security. Courtr documents later showed that Castleton was collecting those taxee on behalf of its but it failed to pass the monet along to the InternalRevenue Service. Castleton’s former chieg financial officer, Jay to tax evasion after agreeing to cooperate with federapl authorities inthe case. The U.S. Attorney’sa Office has said more charges in the case coulxbe coming.
According to the suit filedr by Sparkman, much of the money that neveer went to federal tax authorities instead was usedto “siphoh significant funds to (Clifton) and other companies owne d or controlled by her.” Castleton routinelu filed false reports with the Internal Revenuw Service and other agencied to hide its tracks, the suit Castleton was insolvent as early as 2003, the suit In 2004, the earliest year for which data are available, the company’s liabilities exceeded its assets by more than $5 million; by that figure had grown to $6.2 million. Yet Clifton “took no action to shorre up or boostthe finances” of Castleton, the lawsuif states.
Instead, “she merely continuesd or allowed to continue the wholesale raiding of the trusytfund taxes.” Any money that Cliftonj put into Castleton was siphoned back to her as a loan from the the suit says. Each year between 2003 and 2007, Clifton took more than $1 milliohn in "money and value" out of the Castletoj Group and her other which operated under the umbrella ofthe , the suit The funds were used to fund Clifton'x "extravagant lifestyle," the suit says. The end result, the lawsuit alleges, were “shan corporations.
” Sparkman’s suit seeks to make Cliftonh responsible forevery non-insiderr debt accrued by Castleton’s various corporate A. Scott McKeller, one of two lawyera representing the trustee inthe case, said he coulde not comment on the lawsuit. Stephani Wilson who is representing could not be reachedfor