ST. LOUIS—Three top executives of Dobbs Tire and Auto Centers, including its Chairman, Donald W. Dobbs, his son David W. Dobbs and son-in-law Jack F. Killoren, pleaded guilty Feb. 25 to evading federal taxes on more than $500,000 in unreported personal income. Authorities charged that the three diverted company funds to their own use, writing off as business expense such personal expenditures as room additions and landscaping improvements to their Fenton, Mo., homes.
According to a news release issued by the office of Edward L. Dowd Jr., U.S. attorney for the Eastern District of Missouri, Donald Dobbs, who founded the High Ridge, Mo., dealership two decades ago and served as president of the National Tire Dealers & Retreaders Association in 1992-93, could face jail time and substantial fines in the case.
The same may be true for Mr. Dobb's son-in-law, Mr. Killoren, who is construction superintendent for the 30-store retail chain, as well as David Dobbs.
According to the release, the elder Mr. Dobbs and Mr. Killoren pleaded guilty to evading taxes for the years 1990 and 1991. David Dobbs, vice president and general manager of the family-owned business, plead guilty to failing to report such income for 1990.
Each defendant agreed to coop-erate with the Internal Revenue Service in determining all back taxes owed and to pay the taxes, interest and penalties due. Their amended returns already have been filed, according to the U.S. Attorney's office.
In addition, Dobbs Tire Controller James I. Bernardini has entered into a pretrial agreement, admitting responsibility for failing to notify authorities of misstatements in the Dobbs Tire financial records. Mr. Bernardini has agreed to have an audit conducted of the company's books and records and to institute the internal controls required to assure that corporate funds will not be used improperly for personal purposes.
``People have to realize that if they cheat on their taxes, the IRS will catch them and the U.S. Attorney's office will put them in jail,'' Mr. Dowd said.
In sentencing, scheduled for May 30, Donald Dobbs and Mr. Killoren face maximum sentences of 10 years in jail and fines of up to $500,000. David Dobbs faces a maximum five-year sentence and a $250,000 fine. However, the defendants are hoping for more lenient sentences under a plea-bargaining agreement.
Contacted at his office by telephone, Donald Dobbs acknowledged that he made ``mistakes'' in taking advantage of personal perks that were later to be interpreted as tax evasion.
``We certainly didn't intend to evade taxes when we were doing it, but we realize that's what has occurred. And while these are not any new ideas, it certainly is not any excuse for doing it,'' Mr. Dobbs said, adding that the defendants are anxious to put the matter behind them.
``We're hoping by our guilty plea and stepping up to the fact that we—or I—made a mistake in how we expensed or charged items of that nature, that the government will look favorably on it and we can go forward.''
Federal prosecutors and the IRS developed the case with the help of Donald Dobb's younger brother, Dennis Dobbs, a former company employee and stockholder.
Dennis Dobbs also is suing his relatives in St. Louis County Circuit Court for alleged breach of fiduciary duty.
The lawsuit was filed in January 1995, a few days after Dennis Dobbs was fired as the company's marketing director. The case is expected to go to trial April 14.
Donald Dobb's attorney, Arthur Margulis, called the case ``an unfortunate family situation'' and said the perks enjoyed by the three Dobbs Tire executives were ``a case of vendors providing personal services not reported as income for tax purposes.''
According to both Messrs. Dobbs and Margulis, Dennis Dobbs had been seeking a buyout of his share of the company, but the two brothers were unable to agree on an amount. Dennis Dobbs became disgruntled and went to the authorities to turn in his brother and other family members.
TIRE BUSINESS was unable to contact Dennis Dobbs, and his attorney in the civil case declined to comment on the matter.
At a news conference, U.S. Attorney Dowd described the defendants as ``stand-up'' men who have admitted their wrongdoing, and he offered assurances that the dealership remains strong and viable, the St. Louis Post-Dispatch reported.