While most often used for legitimate business purposes like risk management and tax planning, shell companies are a main component of the underground economy due to the anonymity they provide by hiding the true ownership of assets. Pablo Isila Euceda-Hernandez established a shell company that purported to be involved in the construction industry. But Euceda-Hernandez established this shell company to only lend legitimacy to his workers’ compensation insurance policy scheme.
Under the name of his shell company, Euceda-Hernandez obtained a workers’ compensation insurance policy company that covered a minimal payroll for a few purported employees. He then “rented” the workers’ compensation insurance policy to work crews who had obtained subcontracts with construction contractors on projects in the area. Like the rental of a car, or a property, Euceda-Herandez rented out workers’ compensation insurance policies. But while a workers’ compensation policy is considered an asset on a company’s balance sheet, it is not rentable.
The hiring contractors would issue payroll checks for the workers’ wages to the shell companies. Euceda-Hernandez cashed these checks, then distributed the cash to the work crews after deducting his fee, which was typically about 6% of the payroll. And despite what construction contractors were told, Euceda-Hernandez hired undocumented illegal workers to be part of the work crew.
Proof of employee documentation and coverage wasn’t the only thing Euceda-Hernandez lied about. The policy that Euceda-Hernandez purchased and then “rented” out was for an estimated payroll of $169,400. The insurance company issued the policy for a premium of approximately $11,352. Had a workers’ compensation insurance policy been purchased for the actual payroll, approximately $5 million, the policy premium would have totaled $591,978.
On December 6, 2024, Euceda-Hernandez was sentenced to twenty-seven months for defrauding insurers.
Great job by the Internal Revenue Service-Criminal Investigation in this case.
Today’s Fraud of The Day is based on article “Honduran Man Sentenced for $5M Fraud Scheme in Florida” published by Newsbreak on December 6, 2024.
Pablo Isila Euceda-Hernandez, 36, a Honduran national illegally present in the United States, was sentenced to 27 months in federal prison for conspiracy to commit wire fraud and conspiracy to commit tax fraud, the U.S. Attorney’s Office, Middle District of Florida announced today.
U.S. District Judge Wendy W. Berger also ordered Euceda-Hernandez to pay $1,214,508 in restitution to the IRS, the department said.
