An Orlando man has been sentenced to one year and two months in federal prison for his role in a construction payroll scheme that defrauded the Internal Revenue Service and workers’ compensation insurers.
According to a press release from the U.S. Attorney’s Office for the Middle District of Florida, 32-year-old Santiago Humberto Erazo-Zelaya was sentenced by a U.S. district judge on Tuesday, months after he pleaded guilty to conspiracy to commit tax fraud and conspiracy to commit wire fraud charges.
In addition to his prison sentence, Erazo-Zelaya was ordered by the court to pay $765,446 in restitution to the IRS for unpaid payroll taxes, as well as $26,720.12 in restitution to an unspecified insurance company. A money judgment of $181,529 was also entered against him, which represents the proceeds of the wire fraud.
According to court records, Erazo-Zelaya established a shell company purporting to be involved in the construction industry. He then obtained a workers’ compensation insurance policy in the shell company’s name to cover a minimal payroll for a few purported employees.
Erazo-Zelaya and a co-defendant, identified as Gregorio Jose Fuentes-Zelaya, then reportedly “rented” the workers’ compensation insurance to work crews seeking subcontracts with construction contractors on projects in various counties throughout Florida.
Court records show that Erazo-Zelaya and his co-conspirator sent the contractors a certificate as proof of insurance, falsely representing that the work crews were employed by the shell company. The contractors then issued payroll checks for the workers’ wages to the shell company, which Erazo-Zelaya cashed.
The fraudulently obtained funds were then distributed by Erazo-Zelaya and his co-conspirator to the work crews after deducting a fee of approximately 6% of the payroll, according to the release.
During the scheme, the conspirators cashed payroll checks totaling approximately $3 million and collected roughly $181,500 in fees.
Neither the shell company nor the contractors reported the wages or paid payroll taxes. Federal officials stated that the scheme allowed contractors to avoid higher insurance costs, noting that a proper policy for a $3 million payroll would have cost approximately $587,000.
The minimal policy Erazo-Zelaya obtained was issued for an annual premium of just $19,526.
The U.S. Attorney’s Office noted that the scheme involving Erazo-Zelaya facilitated the employment of undocumented workers who were not legally authorized to work in the United States. In addition, federal officials stated that Erazo-Zelaya is a “citizen of Honduras who is illegally present in the United States,” adding that he will be subject to deportation after he serves his sentence.
The co-defendant in this case, Fuentes-Zelaya, was previously sentenced to 33 months in federal prison for his involvement.
Last month, two Orlando residents were sentenced to federal prison for their involvement in a $148 million construction payroll scheme.