Jacksonville, Florida – In a brazen scheme to evade payroll taxes and workers’ compensation requirements in the construction industry, U.S. District Judge Marcia Morales Howard has sentenced Dennis Alexander Barahona, 38, of Chelsea, Massachusetts, to 18 months in federal prison for conspiracy to commit wire fraud and conspiracy to commit tax fraud.
In addition to the prison sentence, the court ordered Barahona to pay restitution to the IRS in the amount of $1,110,257 and to an insurance company in the amount of $41,352.91. The court also ordered Barahona to forfeit his interest in $230,764 that was seized from two bank accounts. Furthermore, the court entered a money judgment against Barahona in the amount of $263,302, representing the proceeds of the wire fraud.
Barahona had pleaded guilty on March 29, 2021, and his co-defendant, Gregorio Jose Fuentes-Zelaya, was sentenced on May 10, 2021, to 33 months in federal prison. According to court documents, Barahona established a shell company that purported to be involved in the construction industry and obtained a workers’ compensation insurance policy in the name of the shell company to cover a minimal payroll for a few purported employees.
Barahona then ‘rented’ the workers’ compensation insurance to work crews who had obtained subcontracts with construction contractors on projects in various Florida counties. He sent the contractors a certificate as ‘proof’ that the work crews had workers’ compensation insurance, as required by Florida law. By sending the certificate, Barahona falsely represented that the work crews worked for his company. Over the course of the scheme, Barahona ‘rented’ the certificates to dozens of work crews.
As part of the scheme, the contractors issued payroll checks for the workers’ wages to the shell company, and Barahona or a co-conspirator 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 scheme, the conspirators cashed payroll checks totaling approximately $4,388,371, with their fees totaling approximately $263,302.
Neither the shell company nor the contractors reported to government authorities the wages that were paid to the workers, nor did they pay either the employees’ or the employer’s 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 $4,388,371 was approximately $1,110,257.
The scheme also facilitated the avoidance of the higher cost of obtaining adequate workers’ compensation insurance for the numerous workers on the work crews to whom Barahona ‘rented’ the workers’ compensation insurance. The policy that Barahona purchased and then ‘rented’ out was for an estimated payroll of $91,000, and the insurance company issued the policy for a premium of $15,206. Had a workers’ compensation insurance policy been purchased for a payroll totaling $4,388,371, the policy premium would have totaled about $728,030.
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Key Facts
- State: Florida
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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