Benefits firm executive pleads guilty to tax fraud

James McLamb, 41, of Raleigh, pleaded guilty to conspiring to defraud the U.S. government. He will be sentenced later.

McLamb was the finance chief for Castleton Group, which administered payroll and benefits for about 100 small and mid-size companies in the Triangle. Castleton shut down suddenly in mid-December amid state and federal investigations into the company's finances.

Federal authorities said McLamb collected federal withholding taxes from employees of the Castleton's clients and then provided the Internal Revenue Service with phony information so Castleton could keep the money.

The state Department of Insurance determined the company's liabilities exceeded its assets by $6 million and that at least $8 million in payroll taxes from client companies were never paid to the IRS.

The company's closure left about 3,500 area employees, whose health benefits Castleton handled, without insurance coverage and the companies that contracted with Castleton on the hook for the unpaid taxes.

During a February hearing in bankruptcy court, Castleton owner Suzanne Clifton blamed McLamb for the company's troubles.