Puppy mill owners plead guilty to tax evasion

INDIANAPOLIS -- The owner of a commercial dog-breeding operation the state shut down pleaded guilty Friday to felony tax-evasion charges and will have to spend part of her sentence cleaning animal cages.

Indiana Attorney General Greg Zoeller said he would next seek to collect a tax judgment of $193,700 that she owes the state.

In Marion County Superior Criminal Court 15 Friday, Tammy Gilchrist pleaded guilty to two Class D felonies -- failure to remit or collect sales tax and failure to permit examination of sales-tax records.

Under the plea agreement with the State of Indiana, Gilchrist was sentenced to two years, suspended. As part of her probation, Gilchrist must perform 40 hours of community service at the Animal Welfare League of Montgomery County, where she will not directly handle pets, but must clean animal cages.

"Hoosiers can be doubly harmed by scam artists who not only defraud consumers but the state through tax evasion," said deputy attorney general Andrew Swain, chief counsel of the Attorney General's Revenue Division. "The Attorney General's Office is combating these unscrupulous acts on two fronts, through consumer protection mechanisms and through tax laws to ensure businesses are meeting both state and consumer obligations."

Gilchrist and co-owner Walter Workman operated a commercial dog-breeding business known by various names, including Kritter Heaven in Cloverdale, which was the subject of numerous consumer complaints. In March 2006, then-Attorney General Steve Carter filed a consumer-fraud lawsuit against Gilchrist and her company, alleging Gilchrist failed to deliver puppies customers had paid for or delivered diseased puppies that were misrepresented as being healthy. The lawsuit seeking consumer restitution is ongoing; a hearing on the state's default judgment is set for next month.

Alleging that Gilchrist failed to collect or remit approximately $193,000 in sales tax owed from her puppy transactions, the Attorney General's Office on Dec. 23, 2008, served a warrant at Gilchrist's puppy mill and seized 74 dogs and puppies that were caged in squalid conditions, as well as four horses.

Gilchrist's retail merchant license later was revoked and the Attorney General's Office obtained an injunction prohibiting her from selling dogs.

Under the Attorney General's legal authority to bring criminal charges of sales-tax evasion on behalf of the Department of Revenue, Zoeller's office later charged Gilchrist with five Class D felony counts and two misdemeanors. Charges were filed in Marion County because Indianapolis is the seat of state government.

Also charged with similar counts were Workman and Gilchrist's employee Julie Herrick. In October 2009, Herrick pleaded guilty to failing to remit or collect sales tax, was sentenced to probation and agreed to testify against Gilchrist if Gilchrist's case went to trial.

Friday's guilty plea by Gilchrist to two felony charges, with the remaining counts dismissed, resolves her criminal case. The Attorney General's Office previously obtained a tax judgment in Owen County against Gilchrist for the unpaid sales tax, plus interest, which as of Dec. 23, 2009, totaled $193,700. In collecting the tax amount owed, the State can garnishee wages or seize property.

Workman also pleaded guilty Friday to one count of failure to remit or collect sales tax and was sentenced to one year of probation. Gilchrist, Workman and Herrick are forbidden from selling or breeding dogs while on probation.

Since the December 2008 enforcement action against Gilchrist's puppy mill, the Attorney General's Office has filed sales-tax evasion charges against the operators of two other businesses: an Elkhart merchant who sold poor-quality stereo equipment out of parking lots without collecting sales tax and a Harrison County puppy mill that sold puppies without collecting sales tax. The stereo case ended in a guilty plea; the dog-breeders' case is ongoing.

Friday's guilty pleas by Gilchrist and Workman come as a new state law regulating puppy mills went into full effect Jan. 1.

The new law passed last April by the Indiana General Assembly, House Enrolled Act 1468, gives county prosecutors greater ability to file criminal charges for animal neglect and animal cruelty. The law sets basic requirements for dog breeders to provide food, water and exercise to their dogs.

It created a new registry of commercial dog breeders and dog brokers through the State Board of Animal Health (SBoA), and requires breeders and brokers to register annually and pay registration fees, based on the number of unaltered dogs they own.

The Attorney General's Office enforces a provision of the new law with SBoA. If breeders or brokers fail to register or misrepresent the number of dogs they own, then the Attorney General's Office can seek civil penalties of between $500 and $5,000 or seek a court injunction to require violators to stop selling dogs. Those who fail to pay registration fees could be required to pay double, under the new law.