Raleigh’s The Castleton Group: Two years after closing, questions remain

For Raleigh’s business community, December marks a dubious anniversary: Two years ago, this month, the human-relations outsourcing firm The Castleton Group closed shop. The move followed a ruling by the state Department of Insurance that declared the company insolvent.

This wasn’t just any company, either. In 2007, The Castleton Group had landed on Inc magazine’s list of the 5,000 fastest-growing private companies in the U.S. That same year, it was also ranked the number one woman-owned business by Triangle Business Journal. But then, everything unraveled. Within months of closing shop, James McLamb, the company’s finance chief, was charged with tax conspiracy. According to authorities, from January, 2005 to January, 2008, McLamb collected and withheld federal taxes from individual employers on behalf of employees, then prepared false and fraudulent documents to mislead the IRS.

The fall-out? Devastating. The state Department of Insurance later determined The Castleton Group’s  liabilities exceeded its assets by $6 million. Meanwhile, at least $8 million in payroll taxes from client companies were never paid to the IRS. Translated into human terms: Approximately, 3,500 employees were left without health insurance coverage, and the companies who used Castleton’s services were left on the hook for unpaid taxes.

A few months ago, McLamb was finally sentenced to 2.5 years in federal prison and $8 million in restitution. McLamb may be behind bars, but questions remain — questions that demand answers. How is that Castleton’s owner, Suzanne Clifton — an entrepreneur who’d been named Enterprising Woman of the Year in 2007 — had no knowledge of this massive defalcation taking place? (Sidenote: Clifton has been sued by the company’s bankruptcy trustee who’s seeking to repay missing creditors by recouping money: $3 million that she reportedly withdrew as the firm fell into bankruptcy.)

I’m not saying Clifton knew anything about McLamb’s actions. But if you’re the CEO and president of a company don’t you at least have an ethical responsibility to have your finger on the pulse of your own company? With the two-year anniversary of The Castleton Group’s closing upon us, a moment of reflection wouldn’t hurt.

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7 Responses to Raleigh’s The Castleton Group: Two years after closing, questions remain

  1. Anon says:

    Many of the people that know the internal operations of the company are well aware that Jay McLamb never did anything without the full knowledge of Suzanne Clifton. When you consider the lavish lifestyle that she was living, it is very obvious where the money went — to her pockets.

    It seems as though the financial transactions between her multiple companies are so complicated that it has been difficult to find the “smoking gun” to put her in jail as well.

    Those of us who follow the case feel as though McLamb was given a pretty heavy sentence because it was so difficult to hold Clifton accountable as well.

  2. Ramey says:

    Heavy sentence? I agree that he most likely didn’t act alone, but regardless, he did commit a crime and 2.5 years is a slap on the wrist. They know they will never see the 8 million that he was fined. We’ll see what happens to Clifton soon I would think.

  3. Bill says:

    Yea, most inside theft (embezzlement) is not even a slap on the wrist and this isn’t even a slap on the wrist. McLamb’s was $3.2M per year; $8M for 2.5 years (30 months). Good behavior time and he’ll be out in 10 months or less!

    Wife’s cousin got nailed for $500K from his employer and ended up doing three months actual time. Just as this case it took place over a period of two to three years and he lived pretty high on the hog during those years. Trips to NY for Broadway plays, cruises, and daily flower deliveries all paid by the employer who didn’t have a clue until an outside auditor caught it in his third audit! Even our other cousin who is an attorney said, “you’ve really got to think about it; he traded three months for $500K.”

  4. Phyllis Keeton says:

    When will we be able to get outr 401k out.

    Please advise.

    Thank you.

  5. Beth Johnson says:

    I was also wondering about the 401(k). My old employer used the Castleton Group as well. I called TransAmerica almost two years ago (a couple months after Castleton closed shop)to try to withdraw mine (or at least roll it over) and they said I had to go through Suzanne Clifton. I tried to explain the situation, but got nowhere.

  6. Unfortunately, companies like this put a black eye on the entire industry. Having represented more than 200 PEO’s in the past 7 years (fortunately, no clients of mine signed on with Castleton), I can attest to the good, bad and ugly.

    Too bad as this model of HR outsourcing saves small businesses thousands annually in benefits and workers compensation insurance.

  7. CEO Space North East…

    Raleigh’s The Castleton Group: Two years after closing, questions remain « Motivational Speaker – Chuck Gallagher Business Ethics and Choices Expert…

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