Jul.07, 2010

As the Sommet Group spent thousands to keep its name atop the Predators' hockey arena, it failed to pay its clients' payroll taxes, medical claims and 401(k) contributions, according to a federal affidavit unsealed Tuesday.

The Sommet Group, a Franklin-based business that managed payroll, human resources, employee benefits and other administrative services for companies, is under investigation for misappropriating hundreds of thousands of dollars, according to a joint investigation by the FBI, U.S. Department of Labor and IRS.

Agents are investigating possible wire fraud, money laundering, embezzlement and false health-care statements, according to the affidavit.

The affidavit says that Sommet's own employees and some of the company's 52 clients were affected by the mishandling of money, though it doesn't say how many clients.

As of June, Sommet had not paid $2.1 million in medical claims, the affidavit said. The company tried to make payments in late June as its medical provider threatened to sever ties, but the $250,000 check bounced.

The problems also affected employees' and clients' retirement funds. In May and June, authorities say, Sommet didn't forward any of workers' contributions to designated 401(k) plans.

Clients were being told they were delinquent on payroll taxes even though they sent the funds to Sommet. Paychecks bounced.

Alex Cavnar, a 27-year-old software developer, worked at Sommet for four months before being fired in 2009. He said the company told him it couldn't afford him because of his medical condition at the time.

Cavnar said the company then blocked his unemployment benefits, claiming he had an attendance problem.

The problems continued in 2010, even though he hasn't worked for the company for nearly a year.

"I haven't been able to file my taxes because I still haven't gotten my W-2 from them," Cavnar said.

The company's managing partner, Brian Whitfield, could not be reached for comment, and no employees were in the business Tuesday. No arrests had been made.

The U.S. Attorney's Office declined to comment.

More than a dozen FBI agents Tuesday morning raided the company's Cool Springs Boulevard headquarters, seizing documents and occupying the company's third-floor office.

The FBI raid of the company is a far cry from 2007, when the Sommet name graced what is now known as Bridgestone Arena. The Sommet Center's naming rights didn't come cheap — between $2 million and $4 million a year by some estimates.

Low-Profile Roots

Sommet was founded in 2003 by Whitfield and his father-in-law, Ed Todd. It kept a low profile for years as it quietly built a small client base of small to mid-size companies looking to outsource payroll functions. Its first public move was bold: In 2007, seemingly out of nowhere, the company purchased the exclusive naming rights to the Predators' hockey arena.

The naming deal became a linchpin in fans' efforts to keep the Predators in Nashville when the team was sold in 2007. The company also increased its profile by increasing its participation in local events over the next two years. But the company's good fortune ended in mid-2009 as complaints from clients surfaced.

Federal regulators first stepped in around October 2009, when the IRS filed a $337,161 tax lien against the company. Sommet officials, at the time, said the firm was "absolutely not" in financial trouble.

A month later, the naming deal with the Predators fell apart when Sommet didn't make its regularly scheduled payment. Whitfield blamed the Predators at the time, saying they didn't meet their end of the bargain.

In a growing war of words, Whitfield also revealed that the Predators' co-owner, David Freeman, had a $3.3 million tax lien against him by the IRS. That lien remains in place today.

Adding to the company's woes is a lien filed last week by the Tennessee Department of Labor. The company failed to pay $17,622 in unemployment taxes on behalf of itself and its clients for the first quarter of this year, department spokesman Jeff Hentschel said. He said the companies that Sommet serviced may now be held responsible.