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Company owned by Smith late in paying employee taxes

Liens paid off; campaign assails recent mailings

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Derek Smith has a campaign ad that says he sold his truck to make sure his employees got paid.

"It takes sacrifice to make sure the bills are paid," the brochure quotes Smith as saying. "I've been there. I know what it takes. I once sold my truck to pay my employees."

But the 2nd Congressional District GOP candidate apparently ran out of trucks to sell to pay the state or federal governments on time for employee withholding taxes owed by one of Smith's early companies, Cambric.

Laurie Sullivan, Smith campaign spokeswoman, confirmed Monday that Cambric, which Smith started and headed in the early 1990s, did have tax liens placed against it for failure to pay employee withholding taxes. All the liens and taxes were eventually paid, usually in a rather short time, she said.

"I've heard Derek say that when it came down to paying his employees or paying the (Utah) tax commission, he chose to make sure his employees, some of whom were living paycheck to paycheck, got paid. And he'd make the same choice today," she said.

She added that in some cases the taxes came due at the same time Cambric was waiting to be paid by clients. When the clients paid up, the liens were satisfied, she said.

A political novice running for public office for the first time, Smith has touted his entrepreneurial skills, saying he has created hundreds of good-paying jobs for Utahns in a clean industry. He says he wants to bring those common- sense business skills to Congress.

The Utah State Tax Commission liens, amounting to tens of thousands of dollars, were mailed anonymously to the Deseret News. Sullivan said that mailing along with an anonymous flier, unconnected to the Smith campaign, that was dropped along the Wasatch Front over the weekend criticizing GOP Gov. Mike Leavitt show "the campaigns are getting ugly, and I think these tactics will backfire."

She added that Smith had nothing to hide in his business dealings. "All are a matter of public record," Sullivan said.

Besides the tax liens against Cambric, a company that aided engineering firms in developing three-dimensional graphic production, the company was sued nine times this decade, Sullivan said. Some of the material mailed to the newspaper cited several of those suits.

"In the regular day-to-day business world, you get into lawsuits with your subcontractors and suppliers," Sullivan said. The suits were settled out of court. The results of a number of them, including a $124,000 suit filed against Cambric by Mid-State Consultants Inc., are held under confidentiality agreements, which, Sullivan said, means Smith can't talk about them.

Smith faces Rep. Merrill Cook, R-Utah, in the June 27 Republican primary. Cook himself has had lawsuits filed against his companies in the past. This spring Cook lost a lawsuit filed against him by his 1996 campaign consultant, R.T. Nielson. A jury found Cook has to pay Nielson more than $170,000 for work on that campaign.

Cambric is no longer operating. It has become iEngineer, a firm run by Smith and a partner that helps engineering firms communicate via computers with clients and production staff.

iEngineer and associated businesses have made Smith a millionaire. Forms filed with the U.S. House by Smith show his net worth at between $5 million and $25 million. Up through the last reporting period Smith had spent $339,000 of his own money on his campaign. And when pre-primary Federal Election Commission reports come in later this month it's likely he will have contributed more of his own funds to his race. Smith has said he'll spend from his own funds what is necessary to win the seat.

Finally, the anonymous mailer criticizes Smith for doing business in Chile, where the South American employees were allegedly paid only 50 cents an hour. Sullivan said Smith's firms have had a contract with a firm called CDC in Valparaiso, Chile, for $10,000 to develop computer-aided design.

"I have no idea what (CDC's) employees were paid. Our contract was with the firm, not the employees. But it is well-known in South America that Cambric was a coveted job, a way up to bigger and better things," she said.


E-MAIL: bbjr@desnews.com