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Massachusetts Staffing Agency Owner Admits to $6M Payroll Fraud Scheme

Cash-Only Scheme Evades Taxes, Cheats Government and Insurers

A Massachusetts man who operated a staffing agency has pleaded guilty to a six-year scheme that diverted over $6 million in worker pay while dodging taxes and insurance obligations.

Rather than processing payroll through legitimate banking channels, the agency owner cashed checks at local stores, paying many employees in undocumented cash. This allowed him to cut corners on taxes and insurance premiums, ultimately costing the government $1.5 million in lost revenue.

The Hidden Payroll: A Web of Deception

Between 2016 and 2023, the agency owner instructed client companies to send payments directly to him—bypassing official payroll systems. Instead of depositing these funds, he exchanged checks for cash at check-cashing businesses across Massachusetts. Workers received wages in different forms—some in unmarked envelopes of cash, others via personal checks, and a few received a mix of both.

Prosecutors allege that nearly $6.1 million in payments never appeared on any tax records, allowing the owner to evade payroll taxes by either filing false quarterly reports or skipping submissions entirely.

Workers’ Compensation Fraud: Falsified Records Keep Costs Low

To further reduce expenses, the man submitted fake payroll records to two insurance companies from 2015 to 2022. By underreporting payroll numbers and misclassifying workers’ roles, he artificially lowered his workers’ compensation insurance premiums, saving thousands.

Legal Consequences: Fraud Charges Could Mean Decades in Prison

Federal prosecutors have charged him with:

• Failure to collect and pay payroll taxes
• Mail fraud

If convicted on both counts, he faces:

• Up to 5 years for tax evasion
• Up to 20 years for mail fraud
• Fines in addition to restitution
• Full repayment of stolen funds with extra penalties

Plea Deal: 15 Months in Prison, No Fine, and Restitution

Under a proposed agreement, prosecutors recommend:

• 15 months in federal prison
• No financial penalty
• Two years of supervised release
• Repayment of $1 million+ to the IRS
• Repayment of $88,000 to insurers

The agreement notes his lack of prior criminal history, and a sentencing hearing is scheduled for late August.