Two former owners of a temporary employment agency in Massachusetts have been charged with paying more than $24 million in unreported cash to employees as part of a conspiracy to avoid paying more than $7 million dollars in taxes, and hundreds of thousands dollars in workers’ compensation insurance.
Michael Powers and John Mahan have each been charged with one count of conspiracy to defraud the Internal Revenue Service and their workers’ compensation insurers, one count of mail fraud, and two counts of false tax returns.
According to the Indictment, between 2000 and 2004, Powers and Mahan owned and operated Commonwealth Temporary Services Inc. in Stoughton, Mass. Police say that in order to avoid paying employment taxes and to fraudulently reduce the businesses’ insurance premiums, the two arranged to pay more than $24 million of their payroll in cash, under the table.
Commonwealth Temporary Services supplied hundreds of temporary laborers to businesses throughout eastern Massachusetts. The amount an employer pays in payroll taxes and workers’ compensation insurance premiums is largely dependent on the size of their payroll. POWERS and MAHAN allegedly lied to both the IRS and their insurers about the size of their payroll, and paid the majority of their employees in cash to make their fraud more difficult to detect.
If convicted, the two each face a maximum of five years in prison, three years of supervised release and a $250,000 fine on the conspiracy charge; 20 years in prison, three years of supervised release, and a $250,000 fine on the mail fraud charge; and three years in prison, one year of supervised release, and a $250,000 fine on the tax fraud charges.
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