U.S. Attorney Charges Five with $30M 'Under-the-Table' Payroll Fraud
The Law News Network -- Five individuals have been charged in federal court with participating in a massive tax and insurance fraud scheme in connection with their operation of temporary employment agencies in Southeastern Massachusetts. They are accused of paying employees over $30 million in cash "under-the-table" in order to evade millions of dollars in payroll taxes and workers compensation premiums for their businesses.
United States Attorney Michael J. Sullivan; Joseph A. Galasso, Special Agent in Charge of the U.S. Internal Revenue Service, Criminal Investigation; Kenneth W. Kaiser, Special Agent in Charge of the Federal Bureau of Investigation in New England; and Daniel L. Skelly, Chief of Investigations for Insurance Fraud Bureau of Massachusetts, announced last week that Daniel W. McElroy, age 53, of Sharon, Aimee J. King McElroy, age 47, of Sharon, and Xieu Van Son, age 47, of Lowell, have been indicted by a federal grand. In addition, Charles J. Wallace, age 53, of East Bridgewater, and Dich Trieu, age 56, formerly of Lowell, now living in Utica, New York, have been charged in an Information.
The Indictment charges McElroy, his wife, King McElroy, and Van Son with conspiracy to defraud the United States and to commit mail fraud by deceiving workers compensation insurers regarding the size and payroll of their business. In addition, McElroy and King McElroy are charged with 3 counts of mail fraud in connection with the workers compensation insurance scheme and with 14 counts of procuring false tax returns. Van Son is alsocharged with willful failure to supply tax information, specifically social security numbers for workers that were hired by the McElroy organization.
It is alleged that from January 1993 through June 2001, in order to avoid employment taxes, such as Social Security and Medicare, and in order to fraudulently reduce the businesses' insurance premiums for workers compensation insurance, the defendants arranged to pay a large share of the businesses' payroll in cash. It is alleged that in excess of $30 million in cash was paid out to employees as a result of the scheme.
It is also alleged that when filing tax returns, the defendants disclosed only the portion of their payroll that was paid by check, thereby concealing additional millions of dollars in wages that had been paid in cash.
Additionally it is alleged that when reporting payroll to their workers compensation insurers, McElroy and Wallace prepared forged federal tax forms, which showed an even smaller portion of their actual payroll - causing a fraudulent reduction in the workers compensation insurance premiums they were required to pay.
McElroy and King McElroy owned and operated the temporary employment businesses, with Wallace providing accounting and bookkeeping services.
According to the Information, Trieu was formally listed as doing business under the name Pro Temp Company but actually exercised little or no control over that business, which in actuality functioned as an arm of McElroy and King McElroy’s business. Similarly, as alleged in the Indictment, Van Son was formally listed as the President of Precission Temp Corp, but he also exercised no real control over that entity.
"This is one of the largest operations of its kind that we have prosecuted," stated U.S. Attorney Sullivan. "By evading millions of dollars in taxes as alleged, the defendants not only harmed the United States and the insurance companies, they also put themselves in a position to underbid responsible employers who pay their fair share into the system."
If convicted, the defendants face the following maximum penalties: On the charge of Conspiracy, each face up to 5 years in prison, to be followed by 3 years of supervised release, and a fine of $250,000. For each of the three counts of the mail fraud with which they are charged, the McElroy’s face maximum sentences of 5 years in prison, to be followed by 3 years of supervised release, and a fine of $250,000. For each of the fourteen counts charging procuring false tax returns, the McElroy’s face maximum sentences of 3 years in prison, to be followed by 3 years of supervised release, and a fine of $250,000.
For the charges of willful failure to supply tax information, Van Son and Trieu each face a maximum of 1 year in prison, to be followed by 1 year of supervised release, and a fine of $100,000.
The case was investigated by Special Agents of the U.S. Internal Revenue Service, Criminal Investigation and the Federal Bureau of Investigation, with extensive assistance from the Insurance Fraud Bureau of Massachusetts. It is being prosecuted by Assistant U.S. Attorneys Paul G. Levenson and Seth Berman in Sullivan's Economic Crimes Unit.
The details contained in the Indictment and Information are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.