CLEARFIELD – On Friday the former president of the Kephart Trucking Company was sentenced to a minimum of eight years to a maximum of 32 years in prison and ordered to pay back more than $40,000 to his employees by Clearfield County President Judge Fredric Ammerman.
Timothy Lee Kephart, 56, of Morrisdale was accused of stealing funds from his employees’ 401K plans and medical insurance premiums between June of 2010 and the closure of the Kephart Trucking Company in late 2013. Kephart was supposed to go to trial July 20; however, he signed a plea agreement in June.
During Kephart’s restitution hearing held prior to his sentencing, several of his long-time employees addressed the court. Employees said the trucking company started out as “family-oriented” and one they were all proud to work for. However, employees said when Kephart took over for his father it became “a terrible place to work.”
Employees said they experienced significant financial stresses from not being paid and losing their medical insurance coverage. Employees spoke about how it became extremely difficult to pay their every day bills and to put food on the table while also facing unexpected medical bills that they became responsible for.
Employees said they experienced additional stress when they started to receive phone calls from collection agencies. “[Kephart] left many lives in shambles,” one employee said. Employees said they didn’t believe Kephart felt any regret or remorse for what he had done to them over the years.
Ammerman said he also received 32 letters from former Kephart Trucking Company employees or family members on their behalf. He said many expressed the same themes of showing loyalty to the trucking company and having Kephart leaving them dealing with financial stresses and depression.
In one of the letters he received through the Victim Witness Office, Ammerman referenced a widow who wrote about her late husband’s life that had “spiraled out of control.” She said that he ended up taking his own life, which she blamed on the stress inflicted upon him and their lives by Kephart’s actions.
During the hearing, District Attorney William A. Shaw Jr. said that the commonwealth was seeking more than $40,000 in restitution in regards to employees’ medical bills. He pointed out that total restitution exceeded $300,000 for the case; however, Kephart had voluntarily surrendered his own 401K to pay back his employees.
Shaw asked Ammerman to consider that the trucking company’s employees’ work and sweat only benefited Kephart. He said that many employees who wanted to attend were unable to, as they didn’t want to risk missing their new employment.
When Kephart testified at the hearing, he disputed that he owed his employees any restitution for medical bills. He said that his employees’ medical insurance included a $3,000 deductible; despite their coverage being cancelled, his employees’ medical bills weren’t more than the deductible.
Shaw countered, arguing that Kephart allowed employees to believe they still had medical insurance coverage when in fact they did not. He also said Kephart didn’t notify his employees that their medical insurance was cancelled until September of 2013.
Prior to sentencing, defense attorney Chris Pentz addressed the court, saying he was shocked by the recommended sentence. He said Kephart could have committed more serious crimes, such as rape or attempted murder, and received less than that recommended to the court.
Pentz said he thought the recommended sentence was “exaggerated,” saying Kephart was addicted to taking business risks. He said that Kephart wasn’t trying to steal from his employees to gain more wealth for himself, and it was a matter of Kephart’s business efforts not resulting in profits.
Kephart also addressed the court, saying they all worked hard at the third-generation trucking company that was started by his grandfather. Over his 40 years with the company, he said they were more like a family, and they all took immense pride in the “ship.”
Kephart said when he took over the company he didn’t want to disappoint his father. When the company fell under financial distress he was under pressure and tried to press on, which “drove him to the wrong choices.” He said it was then that he fell behind on the 401ks. Kephart pointed out that he voluntarily released funds from his own 401K to pay back his employees.
“I’m not here to offer an excuse but an explanation,” said Kephart. He asked Ammerman to consider the time he’s already spent in prison and not to delay his return to his wife and children, so he can support them, teach them God’s way and about community.
Shaw said that he believed Kephart’s sentence of eight to 32 years in prison was appropriate. “I think the people were very happy with it,” he said. “He’s getting a meaningful punishment versus a slap on the wrist.”
Shaw said it was offensive for Kephart to claim in court that he didn’t owe any restitution to his employees for medical bills when they were allowed to believe they had coverage.
“Think about the stress that must have caused them, and some had significant illness. It was large amounts of money, and it wasn’t fair to them,” said Shaw. He noted he was proud of the Pennsylvania State Police for stepping up and taking on the investigation.
According to the affidavit of probable cause, Kephart was the president of the Kephart Trucking Company and handled its daily operations. While he was the company’s president, his employees’ paychecks indicated funds were being withheld for 401Ks and medical insurance.
However, these withholdings were held in the trucking company’s checking account and instead used for other expenses. This, in turn, caused a shortage in the individual 401K funds, as well as a break in the payment of medical insurance premiums.
More specifically, 401K plans were behind and not funded by Kephart from November of 2011 through February of 2012. Because Kephart neglected to pay medical insurance premiums, the insurance company cancelled his employees’ coverage retroactively, and numerous employees became responsible for unexpected medical bills.
Also, employees told police that Kephart hadn’t paid some for days of service and vacation pay. After the completion of an extensive investigation, police determined 131 victims were affected by Kephart’s actions.
According to the affidavit of probable cause, the victims told police that Kephart had admitted funds were missing and promised that he’d pay them all back.
In spring of 2012, the Kephart Trucking Company needed funds and utilized an investor group based in Lancaster. Representatives for the investor group told police that they had put more than $6 million into the Kephart Trucking Company with specific funds to cover employees’ 401Ks, which were short.
A contractor also told police that Kephart made personal checks out for a $300,000 barn behind Kephart’s residence to house his horses. At times Kephart’s checks would bounce, and he’d directly transfer money. However, the contractor indicated to police that he wasn’t certain from which account Kephart transferred payment out of.
Kephart is currently serving a 46-month federal sentence for his involvement in a $3.6 million check-kiting scheme against a bank in Huntingdon, Ohio.
