SC Johnson accused of racketeering; Ex-employee claims company covered up $5 million in illegal tax credits

SC Johnson knowingly committed international tax fraud and retaliated against an accountant who attempted to bring the fraud to light, according to a lawsuit filed in federal court on Feb. 5.

Michael DeGuelle, a tax accountant fired from SC Johnson, makes the allegations in a 49-page complaint against top SCJ executives and the company itself. The case was filed in Wisconsin Eastern District Court.

Kelly Semrau, SCJ's vice president of global public affairs and communications, said Thursday in a written statement that DeGuelle's claims "have no legal merit." Here's her full statement:

"Mr. DeGuelle’s federal conspiracy and racketeering claims have no legal merit and we will ask the court to dismiss the complaint. This new federal complaint is based on the same allegations Mr. DeGuelle has made -- and the company has denied -- in the company's lawsuit against him in Racine County. We continue to be extraordinarily determined to continue with our defamation, replevin, conversion and breach of contract lawsuits against Mr. DeGuelle in Racine County and look forward to our day in court.

"We don’t believe that any of the claims against the individuals have any merit."

DeGuelle, who managed the company's state taxes, claims SC Johnson illegally took foreign tax credits totaling $5,082,048 between 1998 and 2000, according to the lawsuit. The credits involved SCJ's foreign subsidiaries in Spain, Holland and Canada.

DeGuelle accuses SC Johnson executives with forcing him to destroy paperwork to cover up the illegal tax credits and eventually firing him for attempting to blow the whistle on the credits. At one point, the lawsuit says DeGuelle was inpsired to come forward with the allegations after hearing a speech from SC Johnson CEO Fisk Johnson about "doing the right thing."

The lawsuit explains how DeGuelle, who worked on domestic taxes, got involved with the international taxes. The foreign tax credits required revisions to the company's domestic taxes, which he worked on. But the lawsuit also claims SC Johnson executives encouraged him to secretly locate the incriminating international tax files at night and on weekends, so no one would know he was compiling the information.

The lawsuit also alleges SC Johnson initially received one of the tax credits by mistake, but then filed additional revisions to its taxes to exploit the mistake for further gain.

DeGuelle claims he was fired from his job over his effort to bring the illegal tax credits to light, first to company officials and later to the Department of Labor, which investigates allegations of illegal accounting methods under the Sarbanes-Oxley Act.

After firing DeGuelle, SC Johnson filed a defamation suit against him for taking confidential documents from the company. The case is ongoing before Judge Emily Mueller in Racine County Circuit Court.

The federal lawsuit, filed by attorneys Janet Heins and James Walcheske, lays out a detailed look at the alleged tax violations and DeGuelle's allegations of harassment, and firing, over his efforts to be a "whistleblower" on the alleged illegal activities.

DeGuelle filed the lawsuit against: Kristin Camilli, SCJ's head of human resources, Vice President and Chief Information Officer Mark Eckhardt, Executive Vice President Gayle Kosterman, Donald Pappenfuss, VP of Corporate Tax Robert Randleman, Global Tax Counsel Daniel Wenzel and SC Johnson.

As an interesting legal aside, DeGuelle is suing SC Johnson under the federal RICO Act, which was passed in 1970 as a tool to fight the Mafia. The lawsuit accuses SC Johnson of a conspiracy to silence DeGuelle, which the lawsuit describes as "racketeering."

Read the full lawsuit here.

Earlier stories HERE and HERE.

SCJ: DeGuelle is not a 'whistleblower'

SC Johnson responded to our story this week about a former SCJ employee who claims he was fired for reporting alleged corporate misconduct to the U.S. Department of Labor.

SCJ is suing Michael DeGuelle, the company's former state tax manager, for stealing company materials. DeGuelle says the lawsuit is in response to a "whistleblower" report he sent to the Labor Department.

SCJ Spokeswoman Kelly Semrau said the company did not retaliate against DeGuelle and filed the lawsuit to force DeGuelle to return the materials he took from the company (her full statement is printed below). DeGuelle said in an interview with RacinePost that he doesn't have any SCJ materials.

Here's Semrau's statement:

"We’re very disappointed with the allegations and are sorry that Mr. DeGuelle chose to bring this to the press," SC Johnson Spokeswoman Kelly Semrau wrote.

I can confirm that Mr. DeGuelle is no longer employed by S.C. Johnson & Son, Inc. and that we have filed suit requesting return of SC Johnson materials. We believe, in this circumstance, we needed to take legal action to protect our rights.

SC Johnson adamantly denies that Mr. DeGuelle was a whistle blower and that he was retaliated against. When he complained in fall 2008 that he had been retaliated against, we reviewed his claim and concluded that retaliation had not occurred.

We welcome every opportunity to respond to Mr. DeGuelle in court but will refrain from answering any further questions related to Mr. DeGuelle in the press, pending the ongoing court proceedings. Once again, we are disappointed with the allegations. We look forward to our day in court and intend to vigorously defend ourselves.

Ex-SC Johnson employee claims he's a 'whistleblower'

The Caledonia resident SC Johnson is suing for taking company property is planning to fight back.

Michael DeGuelle, SCJ's former state tax manager, said in an interview Tuesday he was fired on April 10 for reporting confidential company information to the U.S. Department of Labor.

DeGuelle, who worked for SCJ for 12 years, says he was acting as a "whistleblower," who reported potential corporate fraud to federal investigators. He believes his actions are protected under the laws put in place after corruption was uncovered at Enron and other major corporations.

He said he intends to lay out his case in court as early as June 1.

"I would suggest people stay tuned," DeGuelle said in a phone interview. "It's going to get a lot more interesting."

SC Johnson Spokeswoman Kelly Semrau did not respond to our attempt to contact her Tuesday. But she told The Journal Times in a May 5 article that DeGuelle's allegations of fraud are "completely and patently false."

SC Johnson is suing DeGuelle for allegedly trying to shake down the company. A lawsuit filed April 28 alleges DeGuelle attempted to trade confidential company documents for money and other benefits.

DeGuelle denied the charges. He said he routinely emailed documents home to work after business hours. He also said he deleted all company documents in his possession.

"I regularly sent work home to work on them," DeGuelle said. "We were allowed to send them from work to home."

"When they terminated me," he added, "I didn’t have anything at home. I certainly had documents on work computer. I worked on all kinds of confidential things there."

DeGuelle said he took the confidential information to the Department of Labor presuming he would be protected by the Sarbanes-Oxley Act, which was passed in 2002 to prevent corporate fraud.

He also said he brought his allegations, which he declined to reveal in detail, to company officials prior to being fired.

"I have no SCJ documents," DeGuelle said. "The only knowledge I have is in my head."

Intrigue over Doyle executive order benefitting SC Johnson

An interesting story is brewing (or steeping, if you prefer tea) around this executive order Gov. Jim Doyle issued on Jan. 10, 2008. The order seems innocuous enough. It declares SC Johnson's Administration Building and Research Tower, both in Racine, historic landmarks.

But the award may come with more than a plaque. This state law suggests the designation could remove the Frank Lloyd Wright buildings from the property tax rolls. We offer that suggestion with a caveat: We're not property lawyers and we weren't able to track down the "manual" referenced in the state law.

But there's a lot of chatter about the executive order and possible benefits to SC Johnson. The JT is reportedly working on follow-up story tied to this story by Bridget Thoreson. SCJ is suing former employee Michael DeGuelle over confidential documents DeGuelle allegedly took from the company.

No one is alleging any impropriety by SCJ, but the situation has a lot of people talking.