Payroll scheme in Naples causes $4.2M loss to IRS, prosecutors say

A leader at a Naples construction company has pleaded guilty to one count of conspiring to defraud the IRS, after prosecutors say he was part of a scheme involving an illegal, off-the-books cash payroll system for construction workers.

When Alex Garcia was the director and manager of operations for Tape Drywall Services Inc. from 2017 to 2019, prosecutors say he made agreements with general contractors that they would sub-contract work to and pay checks to Tape Drywall, which would provide workers for various jobs.

Garcia and the president of the company cashed more than $28.76 million in checks and retained $870,000 for themselves as a fee, according to the plea agreement. They gave the rest of the cash to the foremen, who would pay the workers, the agreement states.

Because of the way they did business, Garcia and the president did not deduct and withhold income tax nor did they deduct and withhold Federal Insurance Contributions Act (FICA) taxes, which include Social Security and Medicare taxes paid by both the employer and the employee, according to the plea agreement. They also avoided paying higher premiums for workers’ compensation insurance.

The total FICA tax due from the $28 million in checks cashed from 2017 and 2018 would be $4.26 million, according to the plea agreement.

“The timely payment of these taxes is critical to the functioning of the U.S. government because, for example, they are the primary source of funding for Social Security and Medicare,” prosecutors say in a statement. “The federal income taxes that are withheld from employees’ wages also account for a significant portion of all federal income taxes collected each year.”

Garcia faces up to five years in prison, prosecutors say. He will also be required to pay more than $4.26 million in restitution to the IRS "on a joint and several basis with any co-defendant," according to his plea agreement. A sentencing date has not yet been set.

The IRS Criminal Investigation investigated the case with help from Homeland Security Investigations. Senior Litigation Counsel Michael C. Boteler of the Justice Department’s Tax Division and Assistant U.S. Attorney Yolande G. Viacava for the Middle District of Florida are the prosecutors.