Honduran Man Gets Eight Years in $40 Million Payroll Tax Fraud Case

Mario Flores, a Honduran national, was sentenced to eight years in prison Wednesday for his role in a payroll tax fraud scheme that defrauded the U.S. government of nearly $40 million, nypost.com reported. Flores conspired with Iris Villafranca and others to establish shell companies in Orlando, Florida.

Those companies operated unlicensed cash courier and check cashing services for construction contractors and subcontractors. Between 2015 and 2022 the companies cashed $89 million in checks for clients. The services allowed contractors to pay employees directly in cash without withholding or paying required payroll taxes to the IRS.

Flores admitted responsibility for at least $9.4 million in tax loss to the IRS. Flores pleaded guilty in March to one count of conspiring to defraud the United States and one count of conspiring to operate an unlicensed money transmitting business. Prosecutors stated in a sentencing memo that he provided fake receipt books to investigators and in response to grand jury subpoenas.

He also made false statements to IRS special agents about his and Villafranca's role in the scheme. Villafranca was sentenced to 17 years in prison in April and ordered to pay more than $38 million in restitution. Co-conspirator Osman Zapata received a four-year prison sentence and was ordered to pay $2.5 million in restitution.

Francisco Alvarez was sentenced to four years of probation and ordered to pay nearly $5 million in total restitution along with Zapata. Assistant Attorney General Colin McDonald said the case shows how payroll tax fraud harms American workers and taxpayers.