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LOWELL COUPLE PLEADS GUILTY IN UNDER-THE-TABLE PAYROLL SCHEME

September 16, 2010

BOSTON, Mass. - A Lowell couple pleaded guilty today in federal court to defrauding the Internal Revenue Service, and their workers compensation insurers, by concealing millions of dollars of wages they paid to employees of their temporary employment agency.

United States Attorney Carmen M. Ortiz, William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation - Boston Field Office and Anthony DiPaolo, Chief of Investigations of the Massachusetts Insurance Fraud Bureau announced today that JENNIFER MILESKI, 36, and her common law husband, KINH DINH DO, 34, of Lowell, pleaded guilty to a three-count criminal information with conspiracy, mail fraud, and assisting in the preparation of false tax returns.

Mileski and Do operated C&A Associates, a temporary employment agency in Lowell that supplied workers to a graphics company to perform manual labor. The couple charged their customer by the hour for each employee, and were responsible for paying payroll taxes and workers compensation insurance for the employees. Mileski was in charge of the business and its finances, while Do was responsible for recruiting workers, nearly all of whom were recent immigrants, and for distributing the payroll. At any given time, the couple had from 10 and 60 employees on the payroll.

The defendants concealed the true size of their payroll from the IRS, and from their workers compensation insurer, in order to reduce their employer payroll taxes (FICA) and their workers compensation insurance payments. They did this by paying their employees in cash each week and hiding any record of the payments. Even though they retained a payroll service, they routinely told the service that C&A had no work and therefore no employees. Relying on this misrepresentation, the payroll service filed over 20 quarterly payroll tax returns on behalf of C&A that reported no payroll. They similarly told the auditors for their workers compensation insurance carrier at the end of every policy period, that C&A had no employees, and concealed any record of the cash payroll, knowing that the fewer employees they appeared to have, the lower their insurance premiums would be.

Over the course of their six-year scheme, the defendants paid out over $3.4 million in cash wages. In so doing, they fraudulently deprived the IRS of approximately $656,414 in tax payments, and their insurance carrier of approximately $77,811 in premium payments.
Mileski and Do are scheduled to be sentenced by the Honorable Douglas P. Woodlock on December 20, 2010. Each face up to 28 years imprisonment, to be followed by three years of supervised release and a $750,000 fine.

The case was investigated by the IRS-Criminal Investigation and the Massachusetts Insurance Fraud Bureau. It is being prosecuted by Assistant U.S. Attorneys Jonathan Mitchell and Sarah Walters of Ortiz’s Economic Crimes Unit.

 

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