Lincoln Container & Packaging Inc., of Spokane, has filed for Chapter 11 protection from creditors, a move that one of the companys co-owners says was caused by an employees failure to pay Lincolns federal employment taxes.


Unbeknownst to us, we had employee withholding taxes that were not paid, says Darrel Haugen, the co-owner. Lincoln Containers past-due federal tax bill, including penalties and interest, now totals about $634,000, and has been accruing since late 1998, according to documents filed in U.S. Bankruptcy Court here. Its Chapter 11 filing says that Lincolns assets fall within a range of about $1 million to $10 million, and that its debts fall within that same range.


Lincoln Container, located at 3038 E. Trent, makes and prints custom corrugated boxes. The company has been in business for nearly 20 years, and currently employs 20 people, Haugen says.


Haugen hasnt taken any legal action against the employee or the companys accountant, who failed to catch the oversight, and doesnt anticipate doing so, he says.


He claims that Lincoln is current on tax payments that have come due since he discovered last August that the company was in arrears on the withholding taxes.


The Internal Revenue Service filed a tax lien against Lincoln Container in April, at which point the companys primary lender, AmericanWest Bank, urged Haugen and co-owner Christopher Ingram to have the company file for Chapter 11 protection, Haugen says.


The bank claims in documents filed in connection with Lincolns Chapter 11 proceedings that the federal tax liens are junior to the security interests of AmericanWest, and are in a second priority position, subject to the senior security interests of AmericanWest.


AmericanWest is owed about $620,000 by Lincoln Container for business loans, the filing says.


Haugen says that despite the Chapter 11 filing, its been business as usual at Lincoln Container.


Our suppliers have us on open account, he says, adding that Lincoln Containers sales grew 35 percent last year compared with 2001, and that the company had its best month ever in May. Haugen declines to release sales figures.


Early last month, Lincoln Container sustained minor damage in a fire that published reports linked to a string of possible arson fires in industrial businesses here. Haugen says the fire didnt disrupt the companys operations.