A scrap metal fortune goes untaxed

A Byron Center man was sentenced Tuesday to 20 months in federal prison after admitting he hid nearly $3.4 million in scrap metal sales from the IRS over 13 years.

James Philip Scholten, 51, pleaded guilty to tax evasion and was ordered to pay $868,707 in restitution. He also faces three years of supervised release after his prison term, according to court records and a release from the U.S. Attorney's Office for the Western District of Michigan.

How the scheme worked

Scholten stole valuable scrap material from his employer and sold it on the side, according to U.S. Attorney Timothy VerHey. He never told his accountant about the recycling income, meaning his tax returns reflected only his legitimate wages.

The gap between what Scholten reported and what he actually earned was staggering.

• In 2021, Scholten reported owing $2,465 in federal income tax
• He actually earned an additional $610,818 in taxable income that same year
• His true tax liability for 2021 was $172,618

Over the span of 2011 to 2024, Scholten failed to report nearly $3.4 million in scrap metal earnings, according to the U.S. Attorney's Office.

"Cheating on your taxes is not only illegal, it is also not worth the risk," U.S. Attorney Timothy VerHey said in a statement Tuesday.

The fallout

Scholten used the unreported proceeds to finance a lifestyle he could not otherwise afford, according to the U.S. Attorney's release. The scheme ended when the IRS uncovered the discrepancy between his reported income and the actual money flowing through his scrap metal sales.

Scholten entered his guilty plea in January. The 20-month sentence and restitution order were handed down Tuesday in federal court in Grand Rapids.

The case is one of the largest individual tax evasion sentences in the Western District of Michigan in recent years, according to court records.