Florida employer scam involving illegal workers

Workcompcentral, a subscription based news service, reported today on a conviction of a $17 million payroll scam by a Florida construction contractor. It paid its workers in cash to avoid paying federal taxes. Besides this scam, it appears to have cheated on its workers compensation insurance. We see here again the toxic cocktail of employers using undocumented workers and cheating on tax and insurance obligations. Florida’s Department of Financial Services and California’s Insurance Commission Fraud Assessment Commission have both focused in a serious way to uncover these abuses.
The full article:
Fla. Contractor Underreported Payroll by $17 Million: Top [11/27/07]
A West Palm Beach, Fla. contractor accused of using check cashers as phony subcontractors was convicted by a federal jury last week of underreporting payrolls by more than $17 million over more than a decade.
Lucky Mata, 47, the owner of Kodiak Construction and Management, was convicted last Wednesday on ten counts of conspiracy, filing false payroll tax returns and obstructing a federal grand jury inquiry following a nine-day trial in Miami.
The case is part of an ongoing investigation into payments of cash to undocumented construction crews by contractors seeking to avoid the payment of benefits, including workers’ compensation premiums.
The Mata case, which stems from a June 15, 2006, indictment by a grand jury in Miami, did not result in charges involving workers’ compensation insurance.

Mata’s attorney said in an interview some of those involved in the scheme secured workers’ compensation for some members of construction crews at inadequate levels.
Prosecutors alleged Mata underreported payrolls to the Internal Revenue Service (IRS) and used a network of confederates to cash checks through banks and check-cashing stores without disclosing the role of Kodiak in the transactions.
The federal indictment alleged Mata operated the network to avoid paying federal payroll taxes and to avoid disclosure of major cash transactions by Kodiak under the federal Currency Transaction Report (CTR), which requires detailed alerts to federal regulators involving more than $10,000 in cash.
Cash from the checks was returned to Kodiak, minus a fee paid to the check cashers, and then paid to crews of undocumented immigrants, prosecutors said.
Mata also was convicted of falsifying subcontractor invoices during the federal grand jury investigation.
A series of cases investigated by the International Revenue Service and the Florida Department of Financial Services (DFS) during the past two years has targeted the use of undocumented workers not covered by workers’ compensation.
Those charges were not contained in the indictment.
Nina Bannister, DFS spokeswoman, said the agency was not involved in the Mata investigation.
James L. Eisenberg, Mata’s attorney, said the investigation focused in part on workers’ compensation but determined the arrangement involved a licensed insurance agent and legitimate policies.
“There were people that were listed as subcontractors, and one big check was written to them,” Eisenberg said Monday. “They were supposed to take out the money for withholding from their workers.
“There was testimony they did get workers’ compensation coverage for the workers, but it covered only a few people and they were listed as inside workers when, for example, they should have been covered at roofing rates,” Eisenberg said. “There was workers’ compensation coverage. It just wasn’t substantial enough.”
Eisenberg said Mata will appeal the conviction, based on a prosecutorial error that triggered a mistrial in the first of two trials in the case. He said the second trial constitutes double jeopardy in the case.
Prosecutors said Mata ran the check-cashing scheme using Kodiak from 1994 through 2005. He faces more than 90 years in prison if sentenced on all charges.
–By Michael Whiteley, WorkCompCentral Eastern Bureau Chief