IRS takes a look at Subvets

In this Dec. 26, 2001, file photo, John Carcioppolo, right, of Gales Ferry, Subvets Groton Base commander, talks with Billy Kitchens of Groton, a life associate Subvets member and retired master diver in the Navy, at the end of the bar in the Subvets clubhouse in Groton.
Tim Martin/Day file photo In this Dec. 26, 2001, file photo, John Carcioppolo, right, of Gales Ferry, Subvets Groton Base commander, talks with Billy Kitchens of Groton, a life associate Subvets member and retired master diver in the Navy, at the end of the bar in the Subvets clubhouse in Groton.

Groton - In a controversy that has pitted submarine veterans against each other, the head of the U.S. Submarine Veterans Groton Base has resigned amid allegations he mismanaged clubhouse finances and risked an Internal Revenue Service seizure of Subvets assets nationwide.

The national organization, United States Submarine Veterans Inc., began investigating after John Carcioppolo, commander of the Groton group, sent a letter to members in January asking for tax-deductible donations so back taxes and penalties owed to the IRS could be paid.

A life member of the Groton Base, T. Michael Bircumshaw, who is the national commander, was among those who received the letter.

Bircumshaw, who lives in California, said in an interview that for years the Groton base had said it was operating its clubhouse and bar at 40 School St. as a corporation, separate from the tax-exempt veterans' organization. Donations to for-profit corporations are not tax-deductible.

The IRS issued a statement of intent to "levy" - or seize - U.S. Submarine Veterans property because taxes had not been properly withheld for clubhouse employees since 2009. About $5,700 was owed, plus penalties and fines, for a total of $12,000 to $15,000, Carcioppolo said in his letter to members.

The national organization asked for copies of the clubhouse's incorporation documents, which Carcioppolo could not produce.

When the national group concluded the clubhouse was not a separate corporation but rather a part of Subvets, it was concerned that it could be liable if the IRS decided to seize assets. Not only were the property and bank accounts in Groton in jeopardy, Bircumshaw said, but so too were the $1 million in the national accounts and about $1 million held by more than 160 bases across the country.

The national commander was so alarmed he convened a disciplinary committee, which found Carcioppolo at fault for the fiscal mess and kicked off a furor online over the practices in Groton and the national organization's response.

More than $30,000 raised

The national organization had its beginnings in Groton in 1964, and for about four years that was its only site in the country. Groton is the only group that operates a clubhouse and bar, which offers food and drinks and serves as a gathering place for members and their families.

In 2000, the national headquarters shifted from Groton to Silverdale, Wash. There are more than 13,000 members and the national organization oversees the local groups, including Groton.

The disciplinary committee consisted of three submarine veterans who have led other bases and regions. Their investigation is complete, and no outside organization is investigating. No criminal charges are pending.

Nevertheless, Bircumshaw said he still questions why Carcioppolo sought donations in the first place, since the Groton Base had more than $209,000 in cash assets in January.

Carcioppolo said in an interview this week that some of the group's assets were tied up in certificates of deposits and other donations were restricted to specific causes, such as scholarships. He said he doesn't think the national organization's assets could have been seized because the Groton base has its own tax identification number.

More than $30,000 in donations was collected in response to Carcioppolo's letter.

"If I hadn't said they were tax-deductible donations, I would've been fine," Carcioppolo said. "I know we're a war veterans' organization and donations to a war veterans' organization are tax-deductible. I didn't know that to do what we were trying to do was not tax-deductible."

The bills were paid, Carcioppolo said, but the IRS has not yet finished its review. An IRS spokesman said by law he could not comment on an individual taxpayer's situation.

Carcioppolo also said that since the group collected more money than it owed the IRS, the additional funds were set aside to pay some clubhouse bills. Seven people work in the clubhouse, he said.

Carcioppolo said he takes ownership of their problems. "I was the base commander so I was responsible," he said.

Dispute moves to Internet

Carcioppolo, who led the base from 1998 to 2007 and starting again in 2009, stepped down on June 29 after he was given a choice of resigning and not running for office in the future or being removed with the right to appeal. He said this week he feared that if he did not resign, the national organization would stop backing the club's liquor license.

"And I didn't want it to continue going on and on and on," he said.

In his resignation letter to Groton base members, however, Carcioppolo questioned the motives of the national organization. He slammed the report and accused its leaders of trying to harm the base and damage his reputation.

Carcioppolo's letter was published on an Internet bulletin board frequented by submarine veterans. Supporters and opponents commented at length on the board and on Facebook. A Facebook page was created in July to call for Bircumshaw's removal.

In response to the online debate, Bircumshaw issued a public statement on July 9 and a summary of the disciplinary committee's findings.

Ten people were interviewed in Groton, including Carcioppolo. Some of them said Carcioppolo was reimbursed for household items he purchased for his own use while shopping for groceries for the club and did not ring up all of the sales while working as a bartender at the club.

The report raised the issue of whether Carcioppolo should legally have worked as a bartender while serving as an officer of the organization.

"There were reports of cash stashed in paper bags; past receipts delivered in two plastic bags. This seemed unconscionable to the Committee, particularly considering the amount of money that flowed through the bar. It was the Base Commander's responsibility to correct this," the summary read.

Carcioppolo said he would not comment on those findings. Bircumshaw did not release the full report, saying it is an "internal document."

Carcioppolo, who said he appreciates the support he has received from fellow veterans, plans to stay involved with the Groton Base.

Stan Mathis, who was the vice commander in Groton and is now the commander, said some local members are upset with the way things were handled.

"We're just going to forge ahead," Mathis said. "If we hit a bump in the road, we're going to go around it, go over it, but somehow or another we're just going to continue with the way the Groton base has always been and try to support our community."

The national organization has appointed a liaison to the Groton base, wants a change in the accounting system in Groton, and is reviewing the liability insurance coverage, Bircumshaw said.

The Groton base has the full support and backing of the national board of directors, Bircumshaw said, adding that it is "incredibly unfortunate" the incident has had such an negative impact.

He also responded to the critics who have called for his removal. "Should I fall on my sword? I don't think so," he said. "You just keep going. Based on all the evidence, we've done exactly the right thing, and if I had to do it again, I would."

j.mcdermott@theday.com

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