March 18, 10

NEWS / Former Owners of Stoughton Temporary Employment Agency Charged in Massive Cash Payroll Scheme

BOSTON, MA—Two former owners of a temporary employment agency in Stoughton were charged today with paying more than $24 million dollars in unreported cash to employees of their temporary employment agency as part of a conspiracy to avoid paying more than $7 million dollars in taxes, and hundreds of thousands dollars in workers compensation insurance premiums.

United States Attorney Carmen M. Ortiz; Susan Dukes, Special Agent in Charge of the Internal Revenue Service, Criminal Division – Boston Field Office; Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation – Boston Field Office; and Anthony DiPaolo, Chief of Investigations for the Insurance Fraud Bureau of Massachusetts, announced today that MICHAEL POWERS, age 45, of Wesport, and JOHN MAHAN, age 46, of Stoughton, were charged with one count of conspiracy to defraud the Internal Revenue Service (IRS) and their workers compensation insurers, one count of mail fraud, and two counts of false tax returns, all arising out of their operation of a temporary employment agency.

According to the Indictment, between 2000 and 2004, POWERS and MAHAN owned and operated Commonwealth Temporary Services, Inc. It is alleged that in order to avoid paying employment taxes, such as Social Security and Medicare, and to fraudulently reduce the businesses’ insurance premiums, POWERS and MAHAN arranged to pay more than $24 million of their payroll in cash, under the table.

Commonwealth Temporary Services, Inc. supplied hundreds of temporary laborers to businesses throughout Eastern Massachusetts. The amount an employer pays in payroll taxes (FICA) and workers compensation insurance premiums is largely dependent on the size of their payroll. POWERS and MAHAN allegedly lied to both the IRS and their insurers about the size of their payroll, and paid the majority of their employees in cash to make their fraud more difficult to detect.

If convicted, POWERS and MAHAN each face a maximum of five years in prison, three years of supervised release, and a $250,000 fine on the conspiracy charge; 20 years in prison, three years of supervised release, and a $250,000 fine on the mail fraud charge; and three years in prison, one year of upervised release, and a $250,000 fine on the tax fraud charges.

This case was investigated by the Internal Revenue Service, Criminal Investigation – Boston Field Office and the Federal Bureau of Investigation – Boston Field Office, with assistance from the Insurance Fraud Bureau of Massachusetts. It is being prosecuted by Assistant U.S. Attorney Sarah E. Walters of Ortiz’s Economic Crimes Unit.

The details contained in the indictment are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

http://boston.fbi.gov/dojpressrel/pressrel10/bs031710.htm

Tags: criminal investigation,