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UPSIDE DOWN: Gazette Packet CEO Peter Labovitz Pleads Guilty to Failing to Pay IRS $940,000
Jul 20,2011


Two Alexandria papers may be upside down with its commitments to the IRS and to printers.
Two Alexandria papers may be upside down with its commitments to the
IRS and to printers.

ALEXANDRIA, VA. - Peter Labovitz of Alexandria pleaded guilty to two counts of failing to pay employment taxes to the Internal Revenue Service (IRS), the Justice Department and IRS announced Tuesday.  
 
Specifically, Labovitz pleaded guilty 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 LLC, a Northern Virginia newspaper publisher that currently publishes 15 community newspapers throughout Northern Virginia and Maryland, including The Gazette Packet in Alexandria, which began publishing in the late 1700s and is the oldest continuously published weekly in the United States. It also owns the Arlington Connection and Fairfax Connection newspapers.
 

The Gazette Packet in Alexandria is the oldest continuously published weekly in the United States.
The Gazette Packet in Alexandria is the oldest
continuously published weekly in the United States.

The paper has declared bankruptcy several times in the past, according to Court records.
 
Labovitz, who has led the publishing company for 20 years, blamed a slump in revenue after the 9/11 terrorist attacks and again during the most recent recession in an apology to readers in a statement on the company’s website.

“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 wrote.

“As president and chief executive officer of Connection Newspapers, I take personal responsibility for this significant failure in oversight and in the organization’s management systems. I am deeply sorry this happened.”

Labovitz said that he is personally making arrangements to pay the most recent shortfalls in full.

The Old Town-based Connection Newspapers publishes several suburban papers, including the Alexandria Gazette Packet, Arlington Connection and Fairfax Connection.

Local Kicks has also learned that the Gazette Packet's competitor The Alexandria Times, may also be upside down. That paper is owned principally by Old Town multi-millionaire investors Will and Denise Dunbar and The Ariail family (descendents of John H. Ariail, Jr.), and partially by its former publisher Matt Danielson.
 
According to Alexandria court records, the paper has been sued by its former Associate Publisher Jeanne Theismann for unpaid back wages, and is reportedly in litigation with its former printer, Gannett Offset for more than $65,000 in printing bills.  Danielson has claimed publicly that he's owed more than $100,000 for design and other services to the paper, including loans to meet payroll.
 
Labovitz and his wife Sharon have been fixtures in the Alexandria business and philantropic communities for more than four decades, living in a 20-room mansion off Wolfe Street.
 
Between 2002 and 2008, Labovitz ran Connection Newspapers’ day-to-day operations, directed employees, approved payments by the company 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 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.
 
Labovitz faces up to one year in prison, a $100,000 fine and up to one year of supervised release for each count of conviction.  
 
Magistrate Judge John F. Anderson scheduled sentencing for Sept. 27, 2011, at 10 a.m.
 
The case was investigated by the IRS-Criminal Investigation Division and prosecuted by Assistant U.S. Attorney Tim Belevetz and Justice Department‘s Tax Division Trial Attorney Caryn Finley.

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