Just months after Florida lawmakers enacted a new law designed to target the role of check cashing companies in the construction industry, state officials announced a string of arrests netting more than $140 million in fraudulent transactions.
One investigation revealed that Hugo Rodriguez used the check cashing companies to hide $70 million in payroll by using seven individuals to set up 10 shell companies to avoid paying workers’ compensation premiums while operating a large construction company.
Among the check cashing firms used by Rodriguez is K&N Fords, a licensed check cashing firm in Palm Beach County. The owners, Nibala and Kanti Patel agreed to pay some $490,000 to the state following an investigation into their business in September 2011.
“I am grateful to all of the partnering agencies who have brought down a workers’ compensation fraud ring,” said state Attorney General Pam Bondi in a statement. “My Office of Statewide Prosecution will prosecute these individuals and ensure that justice is served.”
Lawmakers earlier this year enacted a law to crackdown on this kind of fraudulent activity within the check cashing industry, of which there are currently 1,065 licensed companies.
Among the changes, the law eliminated a requirement that regulators give check cashing firms 15 days notice prior to conducting an audit or investigation. It retained a requirement that regulators examine check cashing firms within five years, while jettisoning another requirement that regulators conduct an examination within six months of the check cashing firm being licensed. Regulators requested the change to give them more flexibility over which firms to investigate.
Check cashing companies also are required to maintain a commercial account to deposit checks and can only accept checks from the original payee or an authorized officer of a company.