Businessmen Indicted in Multi-Million Dollar Scheme to Avoid Federal Employment Taxes
Workers, many of them illegal aliens, were allegedly paid in cash delivered to worksites in backpacks
PROVIDENCE – Two Woonsocket businessman who operated a drywall subcontracting business that performed jobs for large construction companies and projects, and that utilized several business addresses in Rhode Island and Massachusetts, are named in a twenty-eight count federal indictment. The indictment alleges that the two individuals executed schemes to avoid paying federal employment taxes by paying employees in cash, often times delivered to worksites in backpacks, and failing to submit the actual amount of employment tax payments due the IRS.
It is alleged in the indictment that for four years beginning in 2013, Jesus Jose Mendez, 43 and Jamie Zambrano, 35, operators of J&J Drywall, Inc., which later became known as Empire, Inc., used check cashing businesses to cash more than 600 business receipts totaling more than $16 million. During that time period, the defendants made more than $4 million in deposits into the business’ bank accounts.
It is alleged in the indictment that Mendez and Zambrano conspired to pay a substantial number of their employees, many of whom were illegal aliens, in cash. Payroll funds were delivered to worksites in backpacks. A small number of employees were paid by Mendez and Zambrano via official payroll, to include withholdings.
It is alleged that Zambrano and Mendez conducted more than 120 cash deposits of between $9,000 and $10,000, often times on consecutive days. Many of the deposits were in the exact amount of $9,900. It is alleged that deposits were frequently structured in amounts of less than $10,000 to avoid federal reporting requirements by financial institutions.
It is alleged that Zambrano and Mendez filed forms with the IRS and the Massachusetts Department of Unemployment Assistance reporting wages paid between 2013 and 2017 totaling $4.3 million, when in fact the company received approximately $20.1 million in gross receipts.
Mendez was arraigned in federal court in Providence on Monday and released on unsecured bond, charged by way of an indictment which charges him and Zambrano with conspiracy to defraud the United States, 17 counts of failure to collect and pay employment taxes, tax evasion, eight counts of structuring financial transactions to avoid reporting requirements, and wire fraud, announced United States Attorney Aaron L. Weisman, Acting Special Agent in Charge of Internal Revenue Service Criminal Investigation Joleen Simpson, and Michael C. Mikulka, Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General.
An arrest warrant has been issued for Zambrano.
A federal indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty.
The case is being prosecuted by Assistant U.S. Attorney John P. McAdams.
The matter was investigated by Internal Revenue Service Criminal Investigation and U.S. Department of Labor Office of Inspector General, with substantial assistance from the U.S. Department of Labor – Office of Labor-Management Standards in Boston.
United States Attorney Aaron L. Weisman thanks Homeland Security Investigations and the Rhode Island State Police for their assistance in the investigation of this matter.