Alex and Tonja Oria - Page 5

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          The $248,524 Omission                                                       
               Medico made salary payments to Mr. Oria by check.  Mr. Oria            
          signed those checks for Medico.  Mr. Loeser advised Mr. Oria                
          that, whenever, on Medico’s behalf, he wrote a salary check to              
          himself, he should write a second check on Medico’s behalf to               
          cover applicable withholding and employment taxes.                          
               Mr. Loeser or a member of his staff would record salary                
          payments to Mr. Oria in the general ledger in one of two ways.              
          Generally, if a corresponding tax deposit had been made, the                
          payment would be recorded as a salary expense (i.e., debited to             
          an account labeled “Officer Salaries”).  If Medico lacked                   
          sufficient funds both to pay Mr. Oria’s salary and to make the              
          necessary tax deposit, the payment would be recorded as an amount           
          due from Mr. Oria (i.e., debited to an account labeled “Due from            
          Officer” (sometimes, Mr. Oria’s drawing account)).  The amounts             
          debited to Mr. Oria’s drawing account were not true loans, but              
          were only classified as due from him to give cover to Medico’s              
          failure to make adequate tax deposits.  The expectation was that,           
          when sufficient funds became available, and Medico made the                 
          delinquent tax deposits, the improper classification would be               
          corrected; i.e., the Due from Officer account would be credited,            
          and the Officer Salaries Account would be debited, to properly              
          reflect all of the payments to Mr. Oria as salary.  No such                 
          corrections were made, however.                                             
               Bayliwix, Inc. (Bayliwix), is a corporation owned by Mr.               
          Loeser.  The following are unincorporated businesses or trade               

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Last modified: November 10, 2007