Newspaper CEO pleads guilty to fraud


Peter Labovitz, an Alexandria resident and president and CEO of Connection Newspapers, pleaded guilty to two counts of failing to pay employment taxes to the Internal Revenue Service on July 19. 
Between 2002 and 2008, Labovitz collected federal income taxes and FICA taxes from employees at the local newspaper chain, which includes the Alexandria Gazette Packet. He did not pay those taxes to the IRS and failed also to pay the employer’s matching portion. Connection owed more than $940,000 to the government when all was said and done. 
Because of a plea bargain, Labovitzs charges apply only to the quarters ending September 30, 2007 and December 31, 2007. 
During the six years Labovitz ran the Connections day-to-day operations and finances, his actions were willfull, said Department of Justice officials. Labovitz was tried in U.S. District Court in Alexandria. 
Labovitz took responsibility for his actions in a statement on the companys website.
I am personally making arrangements to pay the most recent shortfalls in full, Labovitz wrote. We have changed our organizations processes to ensure that nothing like this happens again. We have been current on our payroll taxes for more than three years. No employee of Connection Newspapers has suffered any financial loss whatsoever because of this.
Labovitz blamed the post-9/11 economic downturn and the recent recession for the missing taxes. Company revenues dropped and failed to cover operating costs, he said. The company first fell behind in its taxes following the terrorist attacks and then again from 2007 to 2008, he said.
Labovitz faces up to a year of jail time for the misdemeanor, a $100,000 fine and potentially a year of supervised release for each count. He will be sentenced September 27.