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May Tax Case of the Month

Mexican national sentenced to 4 years in prison for posing as IRS employee in tax fraud scheme

A promise of a six-figure payout from the IRS sounded too good to be true, but for more than a dozen financially struggling taxpayers who had lost their homes to foreclosure, it seemed like a lifeline.

Francisco Ivan Velazquez preyed on victims, many of whom were non-native English speakers, by falsely claiming to be an IRS employee. He convinced them that the IRS had a special program that allowed people who had lost their homes to recover hundreds of thousands of dollars. For an upfront fee, he promised to file the paperwork needed to secure their money.

There was no such program. Instead, Velazquez submitted or helped submit false tax returns claiming fictitious federal tax withholdings of $100,000 or more in an attempt to fraudulently obtain refunds. In all, the scheme sought at least $1.8 million from the IRS while leaving victims out thousands of dollars they had paid him.

In May, Velazquez was sentenced to 48 months in federal prison after being convicted of wire fraud, aiding the presentation of a false tax return, and impersonating an IRS officer. He was also ordered to pay nearly $200,000 in restitution to his victims.

Each month, IRS Criminal Investigation (IRS-CI) selects one criminal case as the Tax Case of the Month. The May Tax Case of the Month was investigated by the IRS-CI Phoenix Field Office.

June Tax Case of the Month

lRS-CI dismantles $89 million off-the-books payroll tax fraud scheme

It looked like a routine construction payment. A subcontractor wrote a check. A business cashed it. Workers got paid.

But IRS Criminal Investigation (IRS-CI) uncovered those checks were fueling a sophisticated $89 million off-the-books payroll tax fraud scheme run by Mario Flores, an illegal alien from Honduras, that cost the United States more than $38 million in unpaid employment taxes.

From 2015 to 2022, Flores and his co-conspirators created a network of shell companies that operated as an unlicensed check-cashing and cash courier service for subcontractors in the construction industry. They charged subcontractors a percentage of each check they cashed, returned the proceeds in cash so workers could be paid off the books, and filed fraudulent tax documents to conceal the operation. The scheme allowed construction companies to evade millions in payroll taxes, conceal the employment of individuals not legally authorized to work in the United States, and gain an unfair advantage over law-abiding businesses.

The fraud didn’t stop there.

Flores and his co-conspirators also created fraudulent documentation that misled workers' compensation insurance providers by falsely understating companies’ payroll and workforce numbers.

This allowed businesses to obtain insurance coverage at a fraction of the true cost while shifting risk to insurers.

In June, Flores was sentenced to 96 months in federal prison for his role in the operation. In addition to his prison sentence, he will serve three years of supervised release.
Several co-conspirators have also been convicted and sentenced for their roles in the scheme.

Each month, IRS Criminal Investigation (IRS-CI) selects one criminal case as the Tax Case of the Month. The June Tax Case of the Month was investigated by the IRS-CI Florida Field Office.

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IRS-CI is the law enforcement arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money laundering, public corruption, healthcare fraud, identity theft and more. It is the only federal law enforcement agency with investigative jurisdiction over violations of the Internal Revenue Code. IRS-CI has 18 field offices located across the U.S. and maintains an international presence through attaché posts abroad.

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