St. J Businessman Released From Jail After Denying Federal Tax Fraud Charges

Blake Jenkins painting at 33 Lewis Court, Saint Johnsbury, Vermont. (IRS Photo)

Don’t mess with the IRS.

Just ask St. Johnsbury businessman Blake Jenkins Sr. who just spent a night in jail after being accused by the Internal Revenue Service of tax fraud and identity theft.

Jenkins, 60, was arrested on Thursday by federal authorities and then taken across the state to a jail cell at Northwest State Correctional Facility in St. Albans to await his initial appearance in U.S. District Court on Friday.

According to court documents, the IRS has been conducting an extensive investigation of Blake Jenkins Painting Inc. (BJPI) including searches of its offices, bank records, safe deposit boxes and Jenkins’ day-to-day activities.

“I observed Jenkins pull his vehicle into the Union Bank parking lot at 325 Portland St., Saint Johnsbury, VT 05819,” wrote IRS Special Agent Anders J. Ostrum in his application for a search warrant filed in October of 2020. “I further observed Jenkins park then exit his vehicle and walk directly into Union Bank. Upon exiting Union Bank and getting back into his vehicle, I observed Jenkins carrying a bank cash bag.”

Agent Ostrum was also conducting surveillance of the company’s headquarters at 33 Lewis Court in St. Johnsbury.

“I drove by 33 Lewis Court on several occasions including as recently as September 18, 2020 and observed a large two-story cream-colored building with a first floor office and first floor garage,” wrote Agent Ostrum. “I walked along River Road, the public road directly behind 33 Lewis Court, and observed a woman typing on a computer which was visible through a window of the first-floor office. I also observed paint cans visible though the window of the first-floor garage.”

Jenkins was indicted by a federal grand jury on Oct. 5.

On Friday, Jenkins pleaded not guilty to seven federal charges and was released from detention by U.S. District Court Judge William K. Sessions III on the condition that he not discuss the case with several family members and employees who may be called as witnesses in the case.

“Off The Books”

The United States tax code requires employers to withhold federal taxes from employee wages and send that money to the IRS. The law also requires employers to pay their own share of the federal taxes on employee wages.

“Evidence developed in this investigation establishes probable cause to believe that Jenkins filed false income and payroll tax returns with the Internal Revenue Service for tax periods throughout 2015 to 2019,” wrote Agent Ostrum in the warrant application. “Jenkins engaged in a variety of affirmative acts designed to conceal income and off-books cash payroll from the IRS.”

Jenkins is accused in the first six counts of the indictment of avoiding federal social security and Medicare taxes by paying some of his employees in cash.

“Between July 2015 and October 2020, Jenkins paid or attempted to pay the wages of certain BJPI employees partially or entirely ‘off the books’ in cash,” reads the indictment made public on Thursday. “Jenkins obtained the cash to pay BJPI employees their wages ‘off the books’ by writing checks from BJPI’s business bank account made payable to various names.”

Jenkins is also accused of writing payroll checks that he labeled as non-wage expenses such as equipment repair, rental fees, maintenance, storage and materials.

“In BJPI’s books and records, and often on faces of these checks, Jenkins falsely denoted the checks as for non-wage expenses when, in fact, the checks, were for BJPI employee wages,” reads the indictment.

Count seven of the indictment alleges that Jenkins committed identity theft by using someone else’s identity as part of his alleged efforts to avoid paying federal taxes.

If convicted of all the charges Jenkins faces a maximum penalty of 35 years in prison $850,000 fines.

Pending State Charges

Jenkins is also facing state criminal charges pending in Caledonia Superior Court for allegedly setting his daughter’s car on fire in October of 2019.

He is accused of stealing Hailey Jenkins’ 2016 Subaru from a parking lot behind her St. Johnsbury residence at 438 Railroad St. and driving it to 136 Bay St. and setting it on fire.

According to police, Jenkins was identified as a suspect by security video from a camera mounted at Allen Lumber at 249 Bay St. near the so-called “honking tunnel.”

Police said the car was engulfed in flames when they arrived on the scene and Hailey Jenkins’ pocketbook containing $400 in cash — which was in the glove compartment — was badly burned by the fire.

Prior to gaining access to the security video, police interviewed Hailey Jenkins who told them that she suspected her father was involved with the incident because he does not like her boyfriend — identified by police as Brian Miles, 31.

Hailey Jenkins told police she believed that her father had paid one of his workers to burn the car because he did not want her to move to Virginia to live with Miles.

Jenkins’ defense attorney, Jody M. Frey, of Newport, has filed a motion to dismiss both state charges by arguing that the state doesn’t have enough direct evidence to convict Jenkins.

Frey’s motion is being opposed by state prosecutors.

“The state agrees that there is no direct, eyewitness evidence that defendant set his daughter’s car on fire,” wrote Deputy State’s Attorney Maria Byford in her opposition motion. “However, there is a plethora of circumstantial evidence.”

If convicted of both state charges, Jenkins faces a possible sentence of one to five years in prison and $1,500 in fines.

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