Steven Carty has been in hair salon business for more than 30 years
A former Forest Lake business owner could face 10 years in prison and a fine of up to $20,000 if convicted on criminal charges that he diverted payroll deductions from employees that were intended for 401(k) accounts.
Steven A. Carty, 21733 Harrow Ave. N., will make his next appearance in Washington County District Court in Stillwater at 1 p.m., Wednesday, April 18, according to Steve Povolny, first assistant Washington County attorney.
Carty, 51, a barber and beauty shop owner here for more than 30 years, has been charged in district court by the U.S. Department of Labor on one count of felony theft, take/use/transfer movable property without consent.
The charge stems from a complaint made by a former employee of Carty’s who alleged she had money taken from her paycheck with the intention of depositing it into a 401(k) account, but Carty failed to do so, according to the complaint. That led to an investigation by the U.S. Department of Labor, Employee Benefits Security Administration.
The complaint alleges that between Oct. 21, 2005 and Dec. 31, 2008, Carty collected $13,669.17 through payroll deductions from eight employees with the understanding that he would deposit that money into the plan, but failed to do so. At no point did Carty receive permission from any of the employees to use the money other than as contributions to the plan, the complaint states.
At the time of the December 2009 complaint, Carty’s Rico Enterprises, Inc., 167 N. Lake St., was operating the City Looks hair salon franchise at 44 S. Lake St. He also was the owner of a Cost Cutters franchise at Northland Mall, 1432 S. Lake St. and would later be involved in the operation of a third salon, The Rage Hair Studio, 608 S. Lake St., according to the complaint.
According to the criminal complaint, the Rico Enterprises profit sharing plan was established on Jan. 1, 2000 and employee deductions were handled by a third party administrator, Haworth and Company, which deposited the money into a plan maintained by Paychex Incorporated. Haworth began its work in May of 2005.
The plan administrator said in May of 2007 it was locked out of the Paychex system and informed Carty that he needed to establish a new password in order for Haworth to continue administering the account, the complaint said. After a number of discussions with Carty in 2007 and failed attempts to secure new passwords and user names to continue their work, Haworth terminated their services on Dec. 31, 2008.
There was more trouble ahead for Carty after he closed the City Looks salon in March of 2010 and reopened as The Rage Hair Studio in Stev Stegner’s Rapid Press Building at 608 S. Lake St.
In October, Carty applied to the state Board of Cosmetologist Examiners for a salon name change and the new salon license location at 608 S. Lake St.
That request prompted the state board to contact the city of Forest Lake to verify, as part of the licensing requirement, that the salon was operating in a proper zoning district.
Keith Wille, city building official, said that the contact by the state agency late in 2010 was the city’s first notification of the business relocation. A city inspection found that Carty had moved ahead with remodeling and completed electrical and plumbing work without city permits, Wille said.
The state board monitored the salon over the first half of 2011 before issuing a violation order on June 30, 2011, stating that Carty was operating a unlicensed salon and has operated an unlicensed salon since March of 2010 which was in violation of two state laws.
The cease and desist order from the board of cosmetologist examiners in June of 2011 forced the salon to close and stated the salon may not operate until a salon license has been issued by the board.
“We did not fine him,” Wille said of any official action by the city against Carty. With the state stepping in, Wille said the matter was soon resolved in early 2011.
Building owner Stegner, who was mayor of the city at the time the studio operated in his building, said he was unaware that Carty proceeded with remodeling without obtaining city permits to do the work.
“I assumed he got all his permits,” Stegner said.
After The Rage Hair Studio closed, Stegner said he contracted a licensed plumber and obtained permits to redo the plumbing work in the commercial space which now has a new tenant.
At last report, Stegner said, Carty was cutting hair at a shop in Lino Lakes.
Carty was arraigned in district court on March 14 on the U.S. Department of Labor charge.