Honduran Citizen Receives Sentence for $14+ Million Payroll Scheme to Defraud IRS, Workers’ Compensation Insurance Provider
A Mexican national has been sentenced to over two years in prison and has been ordered to pay restitution of more than $3.5 million to the Internal Revenue Service (IRS). This sentence comes as a result of their involvement in a conspiracy to commit wire fraud and defraud the United States. The investigation was carried out by Homeland Security Investigations (HSI) in Jacksonville, Florida.
Jose Molina-Herrera, a 27-year-old individual from Honduras, has been sentenced to 27 months in federal prison. Additionally, the court has mandated that Molina-Herrera forfeit $867,005, which represents the proceeds from the wire fraud offense. Furthermore, Molina-Herrera has been ordered to make restitution payments totaling $3,558,579.42 to the IRS. It is worth noting that Molina-Herrera pleaded guilty to the charges on November 1, 2024.
“Wire fraud and the facilitation of ‘off the books’ payments not only undermine the integrity of our legal and economic systems but also supports unlawful employment activities,” said HSI Jacksonville Assistant Special Agent in Charge Tim Hemker. “Homeland Security Investigations, alongside our partners at the Internal revenue Service – Criminal Investigations and the Florida Department of Financial Services – Bureau of Insurance Fraud, is committed to holding those who facilitate these complex fraud schemes accountable for their actions.”
According to court documents, Molina-Herrera participated in a conspiracy between 2019 and 2020 to facilitate the payment of construction workers “off the books” in order to avoid paying workers’ compensation insurance premiums and payroll taxes. The scheme involved construction contractors and subcontractors entering into agreements with Molina-Herrera and his associates. All National Remodeling LLC, a shell company created by Molina-Herrera, played a key role in this arrangement by distributing proof of insurance and making cash payments to the workers.
In exchange for 6 to 8 percent of the contractors’ and subcontractors’ payroll, Molina-Herrera and others ensured that certificates of liability insurance were issued in the name of All National Remodeling. These certificates were then used by the contractors and subcontractors as supposed evidence that their workers were insured. However, the truth was that All National Remodeling’s insurance policy was obtained through a fraudulent application that failed to disclose the employment of workers under the shell company’s minimal insurance policy.
As a result of this fraudulent scheme, the insurance company was defrauded of more than $2.2 million. Contractors and subcontractors used All National Remodeling’s proof of insurance without paying any insurance premiums, thereby taking advantage of the system.
Molina-Herrera and his accomplices also simplified the process of depositing checks into the shell company’s bank accounts and withdrawing cash to pay workers. However, they neglected their responsibility to withhold and pay payroll taxes to the IRS. This allowed construction contractors and subcontractors to avoid any liability for payroll taxes or ensuring the legal authorization of their workers. Their actions resulted in payments totaling over $14 million being made to workers without any taxes being withheld. Consequently, the U.S. Treasury suffered a loss of more than $3.5 million in tax receipts.
Oscar Molina-Avila, one of Molina-Herrera’s co-conspirators, had previously been sentenced to 52 months in prison for his involvement in the scheme.
Ron Loecker, the Special Agent in Charge of IRS-Criminal Investigation’s Tampa Field Office, emphasized the illegality and unfairness of using shell companies to pay workers under the table. He stated that this practice gives businesses an unfair advantage over those who follow the rules. Loecker also highlighted the commitment of the IRS to investigate such schemes, ensuring compliance with the law and restoring competitive balance to the industry.
The Internal Revenue Service – Criminal Investigation, HSI Jacksonville, and the Florida Department of Financial Services – Bureau of Insurance Fraud conducted an investigation on this case. Assistant U.S. Attorney Michael J. Coolican handled the prosecution.
HSI Tampa is responsible for a vast area that spans over 51,600 square miles in the state of Florida. Within this region, there are 10 strategically located offices, serving a population of over 14.2 million people. HSI Tampa’s jurisdiction covers 58 out of the 67 counties in Florida, including five of the state’s largest cities. Additionally, HSI Tampa oversees 15 primary commercial service airports and 11 seaports in its area of responsibility.
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