The former owner of a vending company that supplied video gambling machines to bars and restaurants, including a Middleton bowling alley, was sentenced Friday to a year in federal prison for income tax evasion for failing to report cash he skimmed from the machines.
U.S. District Judge James Peterson said he was “appalled” that Thomas Laugen, 69, of Sun Prairie, thought he needed to cheat in order to make any money in his business, Global Vending LLC.
“The idea that there is this environment in which people think it’s OK to steal and to cheat on their taxes, I just have to say I’m appalled by it,” Peterson said. “There are so many citizens in this country that don’t have the opportunity to skim the money away from their tax obligations because their taxes are withheld when they get paid.”
The idea of a different set of rules for the service industry, where payments are made in cash, Peterson said, “is just outrageous.”
According to court documents, Laugen split cash profits generated by video gambling machines with tavern owners. He received 25% of the profits, while the tavern owners got the remaining 75%.
From his cut, Laugen skimmed cash and did not report the skimmed portion on his state or federal tax returns. In addition to spending a year in prison, Laugen was also ordered to pay restitution of $548,416, of which he has paid $76,740.
An undercover IRS agent posed as a potential buyer of the Middleton Sport Bowl, which was listed for sale in 2017. The agent met with owners Dudley and Cherie Hellenbrand, along with Laugen, and Laugen told the agent about skimming cash from all of his clients’ video gambling machines and described how he did it and hid those proceeds.
According to the investigator, Laugen said, “You got to steal in this business or you ain’t going to make any money.”
Laugen, along with the Hellenbrands, pleaded guilty in the matter nearly a year ago, but the investigation has continued and their sentencing hearings were delayed. The Hellenbrands are scheduled to be sentenced by Peterson next week.
As part of the investigation, Assistant U.S. Attorney Dan Graber said in court that Laugen testified before a grand jury about his business partner. Laugen’s attorney, Mark Eisenberg, said it was incredibly hard for Laugen to do because the man had once saved Laugen’s life by getting help while Laugen was having a stroke.
But Laugen testified, Eisenberg said, “because he was between a rock and a hard place.”
Eisenberg asked that Laugen be sentenced to probation and house arrest.
Laugen told Peterson he made “a bad decision.”
“I got caught up in something,” he said. “I feel terrible. I hurt my wife. She got caught up in all this; she didn’t know what was going on.”
He said he had a good business selling air purifiers, but the statewide smoking ban in bars “kind of killed that so I had to find something to do so I could pay my bills. The situation materialized and I made a wrong decision.”
Like Laugen, the Hellenbrands have admitted to skimming cash receipts from video gambling machine receipts at the Middleton Sport Bowl and not reporting the income on their tax returns. At the time of their plea hearing last year, the stated tax loss was $268,852.