Federal prosecutors have won guilty pleas from a dozen people involved in South Carolina’s construction industry who hired illegal immigrants and paid them using unlicensed check cashers in order to shield the payments from the IRS.
The pleas are the first in what prosecutors called an “expansive” undercover investigation along the South Carolina coast. The Justice Department said the schemes cost the IRS “tens of millions of dollars” in taxes that should have been paid on the workers.
The unscrupulous businesses also were able to undercut other construction companies that were following the law, authorities said.
“The biggest misconception about labor exploitation is that it’s a victimless crime and that couldn’t be further from the truth,” said Ronnie Martinez, special agent in charge at Homeland Security Investigations in the Carolinas. “This case is shedding light on a crime that has happened in the shadows for too long.”
According to court documents, the construction businesses used unlicensed check cashers to avoid having their financial dealings reported to the government.
The two parties would meet in parking lots and the construction company executive would turn over a check, and the casher would provide cash, minus a 3% fee, as well as paperwork claiming employees were covered by worker’s compensation insurance. In fact, there was no insurance coverage, the government says.
The construction executives would use the cash to pay employees outside of the company’s payroll system, avoiding withholding and paying the combined federal payroll tax of 15.3%. The arrangement also shielded personal income from the IRS, prosecutors charged.
Duran Masonry, for example, bilked the feds out of more than $975,000 over four years beginning in 2016, according to the plea agreement reached by Walter Duran.
Duran pleaded guilty to one felony count of conspiracy to defraud the U.S. and one misdemeanor count of employing an illegal immigrant. Eleven other defendants, spread across seven companies, have reached similar plea deals.
Federal agents embedded themselves in the community and recorded some of the parking lot transactions, helping build the case.
“Those who steal from the government, and by extension the American taxpayers, will not find refuge in South Carolina,” said M. Rhett DeHart, acting U.S. attorney for South Carolina. “By evading millions of dollars in taxes and falsely claiming their workers had insurance, these defendants made it harder for honest business owners to compete in the construction industry along South Carolina’s coast and they left their workers exposed to injury without insurance.”
The court documents did not say what happened to the illegal immigrant workers holding the jobs.