Jacksonville, FL – United States Attorney Maria Chapa Lopez recently announced announced the return of an indictment charging three Honduran nationals, Gregorio Fuentes-Zelaya, Santiago Erazo-Zelaya, and Dennis Barahona with conspiracy to commit wire fraud. Fuentes-Zelaya is also charged with one count of conspiracy to commit tax fraud, five counts of wire fraud, and two counts of tax fraud. Additional charges against Erazo-Zelaya include one count of conspiracy to commit tax fraud, one count of wire fraud and one count of tax fraud. Barahona is also charged with one count of wire fraud.
Each wire fraud count carries a maximum penalty of 20 years in federal prison and each tax fraud count carries a maximum penalty of 5 years’ imprisonment. The indictment also notifies the defendants that the United States intends to seek forfeiture of a total of $1,367,625, the approximate amount obtained as a result of the wire fraud offenses, as well as a 2014 Land Rover, and two bank accounts (totaling $230,764) that were utilized during the scheme.
Fuentes-Zelaya and Erazo-Zelaya are Honduran citizens who are illegally present in the United States. On May 8, 2019, an immigration judge ordered Erazo-Zelaya to be deported to Honduras. Barahona is a naturalized U.S. citizen from Honduras.
According to the indictment, the three men established shell companies that purported to be the employers of construction work crews that were mostly made up of illegal aliens. The shell companies entered into agreements with construction contractors in which the shell companies purported to be subcontractors. The workers then performed construction work as directed by the contractors, but were paid through the shell companies. By obtaining and paying the workers through the shell companies, the contractors avoided responsibility for ensuring that the workers were legally authorized to work in the United States, that required state and federal payroll taxes were paid, and that adequate workers’ compensation insurance was provided.
Florida law requires any business that engages in construction work to secure and maintain workers’ compensation insurance. The defendants applied for workers’ compensation insurance policies to cover a few employees and a minimal payroll. The defendants then “rented” those insurance policies to numerous construction work crews employing hundreds of workers. The contractors wrote payroll checks to the shell companies for work performed by the work crews and then deposited those payroll checks into a bank and distributed the payroll to the work crew leaders, who in turn paid the workers. The defendants kept at least 6% of the amount of each payroll check as a fee.
During the period of the scheme, the defendants cashed payroll checks totaling approximately $22,793,748, and their fees totaled approximately $1,367,625. Had workers’ compensation policies been purchased for the payroll amount, the policy premiums would have totaled approximately $3.6 million. The policies purchased and then “rented” out by the defendants were for estimated payrolls of $80,800 to $100,800, and the insurance company issued those policies for annual premiums ranging from $15,206 to $31,268.
Although a total of almost $23 million of payroll passed through the shell companies, neither the defendants nor the contractors remitted payroll taxes to the IRS. According to the IRS, the estimated amount of payroll taxes due on the total wages is approximately $5.3 million.
An indictment is merely a formal charge that a defendant has violated one or more of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.
This case was investigated by Homeland Security Investigations and the Internal Revenue Service – Criminal Investigation. It will be prosecuted by Assistant United States Attorney Arnold B. Corsmeier.
Source: US Attorney’s Office