Poorly Constructed Fraud Gets Razed

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hand holding American dollar currency isolated on blurred blackground injured woman with broken hand and green cast on arm, insurance health concept.

Gregorio Jose Fuentes-Zelaya and Dennis Alexander Barahona of Jacksonville,
Fla., concocted a scheme that included payroll tax evasion and workers’ compensation fraud. They established phony shell construction companies and obtained workers’ compensation insurance policies for a few fake employees. They then “rented” the insurance to work crews with subcontracts on construction projects across Florida. (Points for creativity, perhaps, but, seriously, no one was going to figure this out?)

According to the Department of Justice, the schemers falsely claimed the crews worked for the shell companies. By renting insurance certificates to hundreds of work crews, employers avoided about $3.6 million in insurance premiums. (Never mind that the work crews actually weren’t covered for job-related injuries.)

The contractors issued payroll checks for the workers’ wages to the shell companies. Fuentes-Zelaya and Barahona cashed checks totaling $22.8 million, skimming off more than $1.36 million and paying the work crews in cash. Of course, neither the contractors nor the shell company crooks reported the wages to the government—or paid any of the estimated $5.76 million in payroll taxes. (Oops, I did it again?)

Fuentes-Zelaya pleaded guilty to five counts of wire fraud and two counts of tax fraud, while Barahona pleaded guilty to one count each on the two charges. They face up to 20 years in prison for each wire fraud count, and up to 5 years for each tax fraud count. The government wants the fraudsters to forfeit $1.4 million in proceeds and more than $230K from bank accounts used in the scheme—and pay about $5.8 million in restitution for the tax fraud.

Today’s Fraud of the Day comes from a ConstructionDive article, “2 men plead guilty in Florida plot to evade payroll taxes, workers’ comp requirements,” dated April 9, 2021.

Two men pleaded guilty last week to a fraudulent scheme to avoid payroll taxes and construction industry workers’ compensation requirements in Jacksonville, Florida, according to an announcement from the U.S. Department of Justice.

Gregorio Jose Fuentes-Zelaya, 27, and Dennis Alexander Barahona, 38, pled guilty to charges that they established shell companies purported to be involved in the construction industry, then obtained workers’ compensation insurance policies to cover a minimal payroll for fake employees. According to the DOJ, they then “rented” the insurance to work crews who had obtained subcontracts with contractors on projects across Florida.

 

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.