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National Insurance Crime Bureau

Orlando Man Sentenced For Fraudulent Scheme To Evade Payroll Taxes And Workers’ Compensation Requirements In Construction Industry

Jacksonville, Florida – U.S. District Judge Marcia Morales Howard today sentenced Gregorio Jose Fuentes-Zelaya (27, Orlando) to 33 months in federal prison for conspiracy to commit wire fraud and conspiracy to commit tax fraud. The court also ordered Fuentes-Zelaya to pay restitution to the IRS in the amount of $5,766,286 and to an insurance company in the amount of $68,073. In addition, the court ordered Fuentes-Zelaya to forfeit his interest in $230,764 that was seized from two bank accounts. The court also entered a money judgment in the amount of $1,367,625, representing the proceeds of the wire fraud.

Fuentes-Zelaya had pleaded guilty on September 11, 2020. His co-defendant, Dennis Alexander Barahona, had pleaded guilty on March 29, 2021. His sentencing hearing has been scheduled for July 6, 2021.

According to court documents, Fuentes-Zelaya established shell companies that purported to be involved in the construction industry. He or his co-conspirators obtained workers’ compensation insurance policies in the name of the shell companies to cover a minimal payroll for a few purported employees. The conspirators then “rented” the workers’ compensation insurance to work crews who had obtained subcontracts with construction contractors on projects in various Florida counties. Fuentes-Zelaya or his co-conspirators sent the contractors a certificate as “proof” that the work crews had workers’ compensation insurance, as required by Florida law. By sending the certificate, the conspirators falsely represented that the work crews worked for their companies. Over the course of the scheme, Fuentes-Zelaya and his co-conspirators “rented” the certificates to hundreds of work crews.

The contractors issued payroll checks for the workers’ wages to the shell companies and the conspirators cashed these checks, then distributed the cash to the work crews after deducting their fee, which was typically about 6% of the payroll. During the period of the scheme, the conspirators cashed payroll checks totaling approximately $22,793,748, with their fees totaling approximately $1,367,625. Neither the shell companies nor the contractors reported to government authorities the wages that were paid to the workers, nor did they pay either the employees’ or the employers’ portion of payroll taxes – including Social Security, Medicare, and federal income tax. According to the IRS, the amount of payroll taxes due on wages totaling $22,793,748 was $5,766,286.

News article: https://www.justice.gov/usao-mdfl/pr/orlando-man-sentenced-fraudulent-scheme-evade-payroll-taxes-and-workers-compensation