President of Connection Newspapers Sentenced to Prison

Peter Labovitz of Alexandria has been sentenced to six months in prison for failing to pay employment taxes to the Internal Revenue Service (IRS), the Justice Department and IRS announced.   Labovitz pleaded guilty on July 19, 2011, to willfully failing to pay over to the IRS the federal income taxes and Federal Insurance Contributions Act (FICA) taxes due and owing to the United States for Connections Newspapers LLC for the quarters ending Sept. 30, 2007, and Dec. 31, 2007.

According to the plea agreement and statement of facts, Labovitz was the president of Connection Newspapers, a Northern Virginia newspaper publisher that currently publishes approximately 15 community newspapers throughout Northern Virginia and Maryland.

Between 2002 and 2008, Labovitz ran Connection Newspapers’ day-to-day operations, directed employees, approved payments and made financial decisions on behalf of the company.   Labovitz admitted that between 2002 and 2008, he caused to be deducted and collected from the total taxable wages of his employees’ federal income taxes and FICA taxes.   However, Labovitz failed to timely pay over to the IRS more than $940,000 in federal income taxes and FICA taxes withheld and due and owing to the United States, despite the fact that he was required to do so by law.

In a statement on the company’s Web site, Labovitz takes responsibility for the payment shortfalls, which he attribute to economic conditions.

“After the 9/11 terrorist attacks, when the country came to a virtual standstill, our revenues temporarily plummeted. And when the severe recession began in 2007, our revenues plunged again, often failing to cover our operating costs,” he said. “During these two periods of great financial duress, our organization filed all of our required tax returns but did not pay all of its federal payroll taxes in full. We initially fell behind after 9/11. Most of the payroll taxes in this period were paid, but some balances remained due. For several quarters in 2007-2008, we again fell short.”

Labovitz, who has been president of the comapny for more than 20 years, said he hoped to continue to serve in that capacity.

“I am committed to doing whatever I can to ensure the Connection Newspapers adapt to these very difficult and challenging times and continue serving our communities for years to come,” he said.

In addition to the term of imprisonment, Magistrate Judge John F. Anderson sentenced Labovitz to serve one year of supervised release of home confinement and to pay $647,510 in restitution to the IRS.

The case was investigated by the IRS-Criminal Investigation Division and prosecuted by Assistant U.S. Attorney for Eastern District of Virginia Tim Belevetz and Justice Department‘s Tax Division Trial Attorney Caryn Finley.

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Truman Lewis
A former reporter and bureau chief, Truman Lewis has covered presidential campaigns, state politics and stories ranging from organized crime to environmental and consumer protection.