Jacksonville man sent to prison for 'off the books' pay scheme - Insurance News | InsuranceNewsNet

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December 14, 2022 Regulation News
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Jacksonville man sent to prison for ‘off the books’ pay scheme

Justice Department Documents & Publications
Jacksonville, Florida -- U.S. District Judge Brian J. Davis today sentenced Oscar Molina-Avila to four years and four months in federal prison for conspiracy to commit wire fraud and conspiracy to defraud the United States for the purpose of impeding the lawful functions of the Internal Revenue Service.

As part of his sentence, the court ordered Molina-Avila to pay more than $5.4 million in restitution to his victims, specifically, $2,111,151 to a workers' compensation insurance company and $3,330,596.42 to the IRS. The court also entered an order of forfeiture in the amount of $2,111,151, the proceeds of the wire fraud conspiracy. Molina-Avila had pleaded guilty on February 3, 2021.

According to court documents, between 2016 and 2020, Molina-Avila conspired with others to facilitate the payment of construction workers "off the books" in order to avoid paying premiums for workers' compensation insurance and payroll taxes. Construction contractors and subcontractors entered arrangements with Molina-Avila and his co-conspirators, through which shell companies facilitated both the distribution of proof of insurance and the payment of workers with cash.

In exchange for 6% to 8% of the contractors' and subcontractors' payroll, Molina-Avila and others caused the distribution of certificates of liability insurance in the names of the shell companies, which contractors and subcontractors then used as nominal proof that they were supposedly insured. In reality, the shell companies' insurance policies were issued based on fraudulent applications that never disclosed that contractors and subcontractors would be employing workers who were ostensibly insured under the shell companies' barebones insurance policies. As a result of contractors and subcontractors using the shell companies' proof of insurance but never paying any insurance premiums, insurers were defrauded out more than $10 million.

Molina-Avila and others also facilitated the deposit of checks into the shell companies' bank accounts, as well as the withdrawal of cash to be paid to the employees of the contractors and subcontractors -- all without withholding, or paying over, payroll taxes to the IRS. Through these arrangements with Molina-Avila, the construction contractors and subcontractors could disclaim responsibility for withholding and paying payroll taxes to the IRS or ensuring that the workers were legally authorized to work in the United States. By facilitating the payment of workers of more than $49 million without payroll taxes being withheld, Molina-Avila and his co-conspirators caused the U.S. Treasury to lose more than $12 million in tax receipts.

The shell companies used in the scheme included All National Remodeling, El Boqueron Construction, La Fuente Construction, Goyos Construction Services, and Universal Florida Construction.

"Payroll taxes are an integral source of funding for government programs such as Social Security and Medicare. Today's sentencing proves that those who shamefully choose to perpetrate payroll tax schemes will be thwarted and brought to justice," said Ronald A. Loecker IRS-CI Acting Special Agent in Charge. "IRS-CI actively investigates these schemes to ensure cheaters do not gain a competitive edge over those who comply with our nation's tax laws."

"This criminal evaded workers' compensation premiums, avoided paying employment taxes, and brokered bulk-cash drops, through fraud against the government, private industry, and America's workforce, resulting in illicit profits and proceeds in the millions of dollars" said Homeland Security Investigations (HSI) Jacksonville Assistant Special Agent in Charge K. Jim Phillips. "Thanks to the dedication of HSI special agents, the Internal Revenue Service -- Criminal Investigations, and the Florida Department of Financial Services, this criminal will now be held accountable for his complete disregard of U.S. laws."

This case was investigated by Internal Revenue Service - Criminal Investigation, Homeland Security Investigations (HSI), and the Florida Department of Financial Services. It was prosecuted by Assistant United States Attorney Michael J. Coolican. The forfeiture is being handled by Assistant United States Attorney Mai Tran.

Updated December 12, 2022

 

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