Guilty Pleas by Two Florida Men in a $89 Million Concealed Payroll and Tax Scam without Government Recordings
In a significant development, Michael Mayorga and Francisco Alvarez have pleaded guilty to federal charges for their roles in a payroll scheme that involved the use of shell companies and the exploitation of undocumented labor in the construction industry.
The scheme, which operated through a network of shell companies, enabled the illegal employment of undocumented workers and resulted in nearly $10 million in tax losses. Specifically, Mayorga's actions caused a tax loss of $8,647,824 to the IRS, while Alvarez's role resulted in an additional $2,331,731 in lost tax revenue.
Alvarez handled the physical distribution of the cash to subcontractors, while Mayorga provided bookkeeping and tax preparation services to some of the shell companies. Alvarez "rented" this insurance coverage to subcontractors, enabling them to falsely claim valid insurance when bidding on construction jobs.
Approximately $89 million in checks from construction subcontractors were cashed through these shell entities. The charges against Alvarez and Mayorga carry a maximum penalty of five years in prison. The sentencing for both men will be determined by a federal district court judge and may include supervised release, restitution, and monetary fines.
The case is being prosecuted by Senior Litigation Counsel Sean Beaty, Trial Attorneys Kavitha Bondada and Rebecca A. Caruso of the Justice Department's Tax Division, and Assistant U.S. Attorney Amanda Daniels for the Middle District of Florida. The investigation into the payroll scheme was conducted by IRS Criminal Investigation and Homeland Security Investigations.
Many of the workers paid off the books were undocumented immigrants. Off-the-books payroll schemes in the construction industry, especially those involving shell companies and undocumented labor, are considered a not uncommon form of labor and tax evasion, but concrete statistics on their prevalence are difficult to ascertain from public recent data.
Industry history and enforcement patterns suggest they remain a notable issue. The competitive pressures and labor shortages in construction can contribute to the persistence of such illicit practices, but exact prevalence rates typically require investigative or regulatory reporting rather than statistical labor market analysis.
The efforts specifically target schemes that involve the use of shell companies and the exploitation of undocumented labor. The construction industry generally shows strong demand for labor with projected employment growth significantly above average, creating competitive and sometimes informal work arrangements. Wages in construction vary widely by region and trade, reflecting some underlying disparities that could incentivize off-the-books pay to reduce costs or evade taxes.
The U.S. Bureau of Labor Statistics (BLS) collects data on employment and earnings from payroll records, but its surveys inherently exclude off-the-books work, making it impossible to directly measure undeclared labor through official datasets. Construction is a sector historically known for labor law violations including undocumented employment and use of shell companies to conceal true employment and wage data; however, these practices are illegal, under continual scrutiny by labor departments and immigration enforcement.
Such schemes are neither rare nor unique to construction but tend to be more visible in labor-intensive, cash-heavy industries where the risk/reward calculation for enforcement may be complex.
In light of the payroll scheme's involvement in the construction industry, it is not uncommon for such illicit practices to occur in labor-intensive, cash-heavy businesses, even in the general-news sphere. The competitive demands and labor shortages in these industries can potentially lead to the use of shell companies for tax evasion and the exploitation of undocumented labor, resulting in significant financial losses. This case, in particular, involved Michael Mayorga and Francisco Alvarez, who have admitted their roles in a scheme that caused nearly $10 million in tax losses due to their actions.
