Illegal Alien from Honduras Sentenced for $89 Million Off-the-Books Payroll Tax Fraud Scheme Employing Illegal Aliens

An illegal alien from Honduras was sentenced yesterday to 96 months in prison for his role in operating a years-long off-the-books cash payroll scheme that facilitated the employment of illegal aliens working in the United States. The scheme caused a total loss to the United States of more than $38 million.

According to court documents and statements made in court, from 2015 to 2022, Mario Flores, of Honduras, an illegal alien, conspired with others to create a series of shell companies to run an unlicensed check cashing and cash courier service business. These shell companies cashed approximately $89 million in checks from subcontractors in the construction industry, charging them a percentage of the dollar amount of the checks they cashed as a fee for this service. Through this scheme, construction contractors and subcontractors paid their workers in cash without withholding and paying required payroll taxes, allowing them to operate without regard to the workers' legal authority to work in the United States. Flores also caused the filing of false tax documents with the IRS to conceal the scheme.

"Today, we held an illegal alien from Honduras accountable for a brazen scheme that stole more than $38 million from American taxpayers to facilitate the employment of illegal aliens," said Assistant Attorney General Colin M. McDonald of the Justice Department's National Fraud Enforcement Division. "This case exposes how unchecked illegal immigration fuels widespread payroll tax fraud and underground economies that harm American workers and taxpayers. This sentence sends a strong message: those who exploit our open borders, cheat the U.S. Treasury, and violate federal laws will face justice."

"Homeland Security Investigations is committed to protecting the integrity of our financial system and enforcing our nation's laws. Those who orchestrate large-scale payroll tax fraud and facilitate the illegal employment of unauthorized workers will be held accountable," said HSI Acting Executive Associate Director John Condon. "HSI, alongside IRS Criminal Investigation and our federal, state, and local partners, remains dedicated to dismantling schemes that defraud the United States and undermine the integrity of our workforce."

In addition, Flores and his conspirators defrauded workers' compensation insurance companies by leasing their certificates of insurance to contractors and by providing false and fraudulent information to the insurers about, among other things, the number of workers covered by the insurance and the amount workers were paid.

Flores pleaded guilty to one count of conspiracy to defraud the United States and one count of conspiracy to operate an unlicensed money transmitting business.

Iris Villafranca, Osman Zapata, and Francisco Alvarez, who conspired with Flores, were previously sentenced. Villafranca was sentenced to 17 years in prison. She was ordered to pay more than $38 million in restitution to the United States and forfeit $89 million of criminal proceeds from the scheme. Zapata was sentenced to more than four years in prison and was ordered to pay more than $2.5 million in restitution to the United States. Francisco Alvarez was sentenced to four years of probation and ordered to pay more than $2.3 million in restitution. Conspirator Michael Mayorga awaits sentencing.

Assistant Attorney General Colin McDonald of the Justice Department's National Fraud Enforcement Division and U.S. Attorney Gregory W. Kehoe of the Middle District of Florida made the announcement.

IRS Criminal Investigation is investigating the case, with assistance from Homeland Security Investigations. ICE ERO Miami (Orlando sub-office), Florida Highway Patrol, Customs and Border Protection, U.S. Marshals Service, State Department, and the Florida Department of Law Enforcement have assisted in arrest operations.

Senior Litigation Counsel Sean Beaty and Trial Attorney Kavitha Bondada of the Criminal Division's Tax Section and Assistant U.S. Attorney Diane Hu of the Middle District of Florida are prosecuting the case.

On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division. The core mission of the Fraud Division is to zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars. Department of Justice efforts to combat fraud support President Trump's Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.