For Immediate Release - July 02, 2009

Former President of Collection Company Pleads Guilty, Sentenced to Serve 18 Months in Jail for Stealing $2.7 Million From the City of Boston

Defendant Must Also Pay $1.9 Million in Restitution to the City of Boston

BOSTON - Today, a Beverly man pled guilty in Suffolk Superior Court for stealing millions of dollars worth of excise taxes from the City of Boston. Stephen Colahan, age 53, pled guilty to the charges of Larceny over $250 by Continuous Scheme and Procurement Fraud. Immediately after the plea was entered, Superior Court Judge Carol Ball sentenced Colahan to two and a half years in the House of Correction, with 18 months to serve, and the balance of that sentence will be suspended for a 10-year probationary period. As a condition of his probation, Judge Ball ordered that Colahan pay $1.9 million in restitution back to the City of Boston. Previously, Colahan made $800,000 in repayments to the City account.

In October 2007, the Attorney General's Office began an investigation after the matter had been referred by the Boston Police Department and the City of Boston (the City). From 1995 until June 2007 Colahan's company, Walker Associates, Inc., was under contract with the City of Boston to collect delinquent motor vehicle excise taxes from Boston residents. Under the terms of the contract, Walker was required to pay over to the City 100% of the taxes and statutory fees collected; the City would then pay Walker Associates a percentage of the fees the company had collected. Each week, Walker Associates was required to pay over to the City the amount of the previous week's cash payments and cleared checks, and to provide a paper and electronic report detailing the amounts collected from each taxpayer and the date of collection.

Beginning in June 2001, Colahan began taking money out of the bank account into which his company deposited all of the City's tax and fee collections, and using that money to cover Walker's business expenses. For the next five years, Colahan repeatedly stole from the City's account. From June 2001 through August 2006, Colahan transferred over $2.7 million to his own company account. At various points throughout that time period, Colahan made $800,000 in repayments to the City account. To conceal the fact that money had been taken, Colahan caused misleading records to be submitted to the City. In late 2006, the City demanded that Walker turn over to it a complete copy of its computer data related to all excise tax bills presented to it for collection. At Colahan's direction, Walker Associates instead produced to the City misleading data that omitted taxpayer payments that had actually been made but that had never been reported or paid over to the City. At the end of Walker's contract in June 2007, the company, at Colahan's direction, turned over similar falsified information to the City's new vendor.

Indictments were returned against Colahan on May 5, 2009. He was arraigned in Suffolk Superior Court on May 12, 2009, at which time he entered a plea of not guilty and was released on personal recognizance. Today, Colahan pled guilty and was sentenced.

The case was prosecuted by Assistant Attorney General Margaret Parks of Attorney General Martha Coakley's Corruption and Fraud Division, and was investigated Massachusetts State Police assigned to the Attorney General's Office with assistance from Financial Investigators Davin Lee and Mark Pulli. Sergeant Detective John Conroy and other officers of the Boston Police Anti-Corruption Unit assisted with the investigation.

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