TOPSHAM (AP) – Carol Palesky, leader of a statewide tax cap referendum that failed at the polls, faces up to 16 months in prison after pleading guilty to a felony charge of theft by misapplication.

The 66-year-old accountant from Topsham was indicted in December, accused of stealing about $41,000 from D.S. Stoddard Inc., a Topsham area painting and maintenance company.

“The money would be deposited in her account the checks from Stoddard then rather than turn the money over to the state and federal government as she was obligated to do, she used it as her own funds,” Assistant Attorney General William Baghdoyan said.

Palesky entered her guilty plea Thursday, less than a month before her case was to go to trial in Sagadahoc County Superior Court.

Palesky served a year in federal prison for embezzlement from a Brunswick law firm, where she worked as a bookkeeper. She was later found guilty of falsifying petition signatures during a 1997 drive to place a cap on Maine’s income tax and was sentenced to five years, with all but nine months suspended.

For her latest brush with the law, Baghdoyan has recommended a three-year sentence with all but 16 months suspended, along with three years’ probation and restitution.

“If she had no prior convictions, her sentencing position would be significantly different,” Baghdoyan said. “But she’s got those two prior felony convictions and that puts her in a more serious category.”

Defense lawyser J.P. DeGrinney of Portland said he plans to request leniency, in part because of Palesky’s health problems. She has been diagnosed with a neuropathy, an illness that affects the nervous system, the lawyer said.

“It doesn’t make sense for someone who is as frail as she is to be in custody,” he said, adding that he plans to look into a possible alternative sentence that could include home monitoring or community service.

DeGrinney also said Palesky intends to pay restitution and will give Stoddard about $20,000 when she is sentenced in late August.

The company learned of its bookkeeping irregularities when an employee laid off during the winter applied for unemployment benefits and discovered that no payments had been made to the state’s unemployment fund.

Palesky has long been known for her work as a tax-reform crusader. Most recently, she led the unsuccessful 2004 Maine Taxpayer Action Network effort to have voters impose a 1 percent cap on property taxes.

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