A California man was sentenced today to 96 months in prison and ordered to pay $38 million in restitution for a decades-long scheme to evade employment taxes.
The following is according to court documents and statements made in court: for more than 20 years, Luis E. Perez was the owner and primary decision-maker for more than a dozen labor staffing companies including Check Mate Inc., BaronHR LLC, BaronHR West Inc., and Fortress Holding Group LLC. Typically, a labor staffing company helps connect job candidates with client-companies looking for temporary employees. The staffing company also usually remains responsible for paying the temporary employees’ wages and complying with associated reporting and tax obligations. Specifically, the companies were responsible for withholding Social Security, Medicare, and income taxes from employees’ wages and paying those funds over to the IRS each quarter. They were also responsible for paying their own Social Security and Medicare taxes. 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. The federal income taxes that are withheld from employees’ wages also account for a significant portion of all federal income taxes collected each year.
For nearly as long as Perez was in business, he was noncompliant with his tax obligations. Starting as early as 2001, Perez began not paying over the full amount of taxes withheld from employees’ wages or the full amount of Social Security and Medicare taxes his companies owed. In June 2007, Perez personally owed the IRS taxes related to Check Mate Inc., which the IRS was attempting to collect. By 2017, Perez’s outstanding tax liability had ballooned to nearly $30 million. Between 2007 and 2017, Perez tried to hinder IRS collection efforts in a number of ways. He used BaronHR and Fortress Holding Group’s bank accounts to make personal purchases, such as several luxury items, including automobiles and a boat. He titled the items in the names of several nominees to conceal his ownership from the IRS and to prevent the IRS from seizing them. In addition, he opened a credit card in the name of a nominee and used the card to make personal purchases. He then paid the bills for that credit card from those same business bank accounts. Perez also funneled money from BaronHR and Fortress Holding Group to a nominee, but then used the funds for himself. To further impede IRS collection efforts, Perez lied to IRS revenue officers and submitted false forms to the IRS about his income.
Perez’s misconduct continued even after he was charged for tax offenses in February 2018. From January 2018 through June 2019, he reported that BaronHR West had paid total wages of approximately $54 million and paid approximately $7 million in total taxes on these wages to the IRS. In fact, BaronHR West paid approximately $185 million in total wages and was required but did not pay approximately $37 million in total taxes to the IRS. Similarly, during the first quarter of 2022, BaronHR West paid about $30 million in wages and was obligated to pay nearly $6 million in taxes. The company paid only $76,000.
In total, Perez caused a tax loss to the IRS of approximately $60 million.
Instead of paying his tax obligations, Perez used the money to fund a lavish lifestyle for himself, including multiple large residences, courtside seats to the Los Angeles Lakers, a private jet, a yacht, and dozens of luxury automobiles, including Bentleys and Lamborghinis.
In addition to his prison sentence, U.S. District Court Judge Kenly Kiya Kato for the Central District of California ordered Perez to serve three years of supervised release and pay $38,052,767 in restitution to the IRS.
Acting Deputy Assistant Attorney General Karen E. Kelly of the Justice Department’s Tax Division and U.S. Attorney Bilal A. Essayli for the Central District of California made the announcement.
IRS Criminal Investigation investigated the case.
Trial Attorney Robert Kemins of the Tax Division and Assistant U.S. Attorneys Brett A. Sagel and James C. Hughes for the Central District of California prosecuted the case