Lehigh Valley Trucking Company Owner Sentenced to 1 ½ Years in Prison for Tax Fraud Scheme

PHILADELPHIA – First Assistant United States Attorney Jennifer Arbittier Williams announced that Michael Gerstenberg, 51, of Emmaus, Pennsylvania was sentenced to 18 months’ imprisonment, 3 years’ supervised release, and ordered to pay full restitution in the amount of $750,427.36 by United States District Judge Jeffrey L. Schmehl for failing to collect, account for, and pay federal employment taxes for employees of the defendant’s company, A. E. Logistics Inc., and for his scheme to inflate the wages of his former girlfriend on Internal Revenue Service (IRS) forms and tax returns as a means to syphon additional funds from that company for his personal use.   

According to court documents, A.E. Logistics Inc. was a corporation created and controlled by the defendant doing business as a trucking company in Allentown, PA.  During the period January 2012 through December 2014, Gerstenberg caused A.E. Logistics to make thousands of dollars of expenditures for his personal benefit while, at the same time, failed to pay IRS payroll taxes which were withheld from his employees’ paychecks. For example, Gerstenberg caused A.E. Logistics to spend thousands of dollars to pay for a wide variety of extravagant personal expenses such as a Caribbean vacation and other travel, gambling, jewelry, fine dining, country club dues, nightclubs, and entertainment for himself, members of his family and his personal friends. 

The defendant also placed his former girlfriend on the company’s payroll and reported inflated wages for her on IRS forms and tax returns as a means to syphon additional funds from that company for his personal use.  Her “wages” were deposited into a joint account controlled by Gerstenberg, and he paid no income taxes on those wages when he prepared the couple’s tax returns. 

According to court documents, Gerstenberg had previously been convicted of failing to pay state employment taxes in Pennsylvania, and he violated the conditions of his state probation by committing the federal offenses for which he was sentenced today.      

“Business owners are required to follow and apply our tax laws just like everyone else, and they must accurately report their employees’ income so that everyone pays their fair share of federal taxes.  In fact, employees rely on their employers to do the right thing in this regard,” said First Assistant U.S. Attorney Williams.  “This defendant chose not to do that, instead enriching himself at the expense of his employees and the taxpayers.  Perhaps after this second tax conviction, the defendant will finally have learned his lesson that this type of crime is a serious crime and will be aggressively prosecuted.”

“Instead of paying over employment taxes withheld from his employees’ wages, Mr. Gerstenberg used the money to fund his lavish lifestyle,” said IRS Criminal Investigation Special Agent in Charge Guy Ficco. “He did so at the expense on his employees; robbing them of future social security and Medicare benefits. Let his sentence serve as a warning to those contemplating similar conduct.”

The case was investigated by IRS Criminal Investigations, and is being prosecuted by Assistant United States Attorney Eric L. Gibson.