MultiFest co-founder pleads guilty to tax fraud
CHARLESTON, W.Va. -- One of the founders of the Charleston MultiFest festival pleaded guilty to income tax fraud Friday morning in federal court, after admitting that she embezzled more than $300,000 from the nonprofit organization.
Deborah Starks, 55, of Cross Lanes admitted to embezzling $306,872 from the MultiCultural Festival of WV Inc. -- group that runs MultiFest -- between 2005 and 2010.
Starks also admitted to lying on her income tax returns by not reporting more than $506,000 in income during that five-year period. That included the embezzled money, as well as nearly $200,000 in unrelated income she received over that time.
Prosecutors said an investigation into the festival's finances found that Starks, who served as the organization's treasurer, made ATM cash withdrawals and wrote checks from festival accounts to herself and others to whom she owed money.
"The funds were used in large part to support Ms. Starks' gambling addiction," said assistant U.S. Attorney Eumi Choi.
The annual festival has received assistance from state, county and city organizations for many years.
Members of the Kanawha County Commission have scrutinized the festival's finances for some time and expressed concern with Starks' plea.
"The community and MultiFest deserve better," Commission president Kent Carper said in a statement.
"If MultiFest is able to continue and wishes to receive funding in the future from the Kanawha County Commission, those running MultiFest will have to be strictly accountable and there must be honest people in charge," Carper said.
Starks and her husband Stephen have organized the annual multicultural festival since 1989.
In court, she said her husband had no knowledge of her crimes.
"I take full responsibility for my actions," she said, "and I am very, very sorry."
For the felony count of tax fraud, Starks faces up to three years in prison to be followed by a year of supervised release, plus a $250,000 fine.
She will also have to pay full restitution to MultiFest, as well as $128,626 in back taxes to the IRS.
Judge John Copenhaver scheduled a sentencing hearing for April 2 and released Starks on $10,000.
But prior to setting that bond, Copenhaver took note of a string of worthless check misdemeanor convictions against Starks, which dated back to the 1980s.
He gave her a stern warning to abide by the law until she is sentenced.
"If there is a single worthless check written by you while you are on bond, it will be revoked," Copenhaver said.
"This is a very thorough history of writing worthless checks, and let me be clear to you, it will not be tolerated," he said.
The case was handled West Virginia's Small Business Protection Initiative, a special project U.S. Attorney Booth Goodwin began in November 2010 to focus on the prosecuting individuals who defraud small West Virginia businesses.
Goodwin said he hoped Starks' plea will send a message to those who prey on business owners and nonprofits.
"Three hundred thousand dollars is significant to any business, large or small, but it's especially significant to a small business or charity, like the one that puts on MultiFest," he said.
"That's why my office focuses on incidents like this -- to protect small businesses and charities and send a clear message that it won't be tolerated."
While Starks could have been charged with embezzlement at the state level, Goodwin said the federal tax fraud charge was more appropriate in this case because of the $200,000 in extra income Starks had hidden.
"The tax charge fully encapsulated her crime," Goodwin said.
Federal probation officers will conduct a pre-sentence investigation in the case and report their findings to Copenhaver.
Copenhaver said he will use that report to determine the appropriate sentencing guidelines in the case.
Attorneys will also work to determine an appropriate restitution pay schedule, as well as how those payments would be divided between MultiFest and the IRS.
Contact writer Jared Hunt at email@example.com or 304-348-5148.