Two Florida men, Michael Mayorga and Francisco Alvarez, pleaded guilty Friday for their involvement in a sophisticated, years-long payroll scheme that defrauded the Internal Revenue Service (IRS) of millions and facilitated the employment of undocumented workers.
According to court documents and statements made in court, Mayorga and Alvarez conspired with others from 2015 to 2022 to operate an illegal, “off-the-books” cash payroll system primarily for construction workers.
This elaborate operation was designed to evade employment taxes owed to the IRS and to defraud workers’ compensation insurance companies. The scheme also involved facilitating the employment of undocumented aliens working illegally in the United States.
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Prosecutors detailed how Alvarez, Mayorga, and their co-conspirators established a series of shell companies. These entities were used to run an unlicensed check-cashing and cash-courier business, which processed approximately $89 million in checks from various subcontractors within the construction industry.
The generated cash was then used by these subcontractors to pay their workers, circumventing legal payroll obligations.
Michael Mayorga’s role involved providing bookkeeping and tax preparation services for some of the shell companies. He also admitted to preparing false tax returns for these companies and for members of the conspiracy, which Alvarez and others subsequently filed.
The total tax loss attributed to Mayorga’s actions amounts to an estimated $8,647,824.
Francisco Alvarez was instrumental in facilitating the distribution of millions of dollars in cash to the subcontractors. He also caused the filing of false tax returns and tax documents on behalf of at least one of the shell companies. The tax loss directly caused by Alvarez is estimated at $2,331,731.
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Beyond the tax crimes, Alvarez was also charged with filing a false worker’s compensation insurance application.
This fraudulent application allowed the shell companies to obtain insurance coverage with significantly reduced premiums. Alvarez then “rented” this fraudulently obtained insurance to subcontractors, enabling them to falsely present proof of insurance when bidding for contracts. Mayorga further supported this aspect of the fraud by providing false documents to insurance companies during audits.
Both Mayorga and Alvarez face a maximum penalty of five years in prison, a period of supervised release, restitution payments, and monetary penalties. A federal district court judge will determine their sentences at a later date, taking into account the U.S. Sentencing Guidelines and other relevant statutory factors.
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