RCN had been receiving funding from the Ministry for the Environment as a part of the TV Take Back programme.
The scheme was designed to deal with a surge in discarded old television sets as broadcasters shifted to digital technology.
The court heard that part of the company's financial strife stemmed from the fact it was charging $19 for each TV when it would cost the company $25 to process each one.
In an interview Capizzi said the reason for non payment of PAYE was that the "government wasn't paying us" and he stated that if he had known the government was going to stop paying he would have "pulled the plug on the companies sooner".
He acknowledged that payment arrangements with IRD had been repeatedly defaulted on and that it was his responsibility to pay it.
However, in the three final months of operation he choose to pay personal loans and living expenses instead of IRD because he deemed them to be a higher priority.
In his interview, Capizzi said he believed that the level of drawings he took from his company was "pretty low" as he was running a multimillion dollar operation.
During the offending he had been receiving in excess of $300,000 in salary, drawings and benefits.
The Herald understood he had been billing costs of running his 2001 Ferrari 360 sports car back to RCN.
A report commissioned by the Ministry for the Environment would describe both his salary and motor-vehicle costs as excessive.
Today in the Auckland District Court, Judge Josephine Bouchier said Capizzi had a previously "unblemished record", good character references and he had entered a guilty plea at the earliest possible opportunity.
"Apart from this offending the defendant is a person who was well thought of by all of those who have submitted references to the court.
"He is unlikely to offend in this way again."
Capizzi, his family, and trust, had poured $2.68m back into the company during the offending, and a further $3m after the charges were laid, she said.
He had tried to keep the company solvent and had offered a "humble" reparation of $10,000 to be repaid at $100 per week after his sentence ends.
That was not a significant mitigating factor because of "the difference between what is owed and what is offered".
Judge Bouchier did not make an order on the reparation but said it was expected.
There had been stress placed on the family, she said.
"He has lost everything as a result, also his wife and her medical issues are referred to."
The aggravating factors included the fact it was premeditated offending and that it harmed two victims in the wider sense of both the public and his employees, she said.
After its failure, liquidators said the main RCN "asset" was 100,000 old television sets that were spread across the country awaiting recycling in various depots.
These would be sold to the Ministry for a nominal $1, with the Government paying another $2m more for the disposed.
The failure of both of Capizzi's companies to pay due dates had resulted in the misapplication of $966,317.36 held in trust on behalf of employees.
Late payments, credit transfers and sums received by way of forced deduction amounting to $580,726.76 were received from the companies leaving a total of $385,590.60 excluding penalties and interest outstanding.
After late payments and credit transfers, the loss to the Commissioner from the offending was $296,854.63.
