Two Honduran nationals were sentenced Tuesday to 204 months and 51 months in prison for their roles in operating a years-long off-the-books cash payroll scheme that facilitated the employment of undocumented aliens working illegally in the United States and caused a loss to the United States of more than $38 million.
According to court documents and statements made in court, from 2015 to 2022, Iris Villafranca and Osman Donaldo Zapata, both Honduran nationals, conspired together and with others to create a series of shell companies to run an unlicensed check cashing and cash courier service business. These shell companies cashed approximately $89 million in checks from subcontractors in the construction industry, charging them a percentage of the dollar amount of the checks they cashed as a fee for this service. Through this scheme, construction contractors and subcontractors paid their workers in cash without withholding and paying required payroll taxes, allowing them to operate without regard to the workers’ legal authority to work in the United States. The defendants also caused the filing of false tax documents with the IRS to conceal the off-the-books payroll scheme.
In addition, the defendants defrauded workers’ compensation insurance companies by leasing their certificates of insurance to contractors and by providing false and fraudulent information to the insurers about, among other things, the number of workers covered by the insurance and the amount workers were paid.
Villafranca and Zapata both pleaded guilty to one count of conspiracy to defraud the United States and one count of conspiracy to operate an unlicensed money transmitting business. Villafranca also pleaded guilty to four counts of filing false individual income tax returns based on her 2019 through 2022 tax returns, which did not report all the income she earned from the scheme and rental income she earned from real estate she owned.
Villafranca was sentenced to 204 months and Zapata was sentenced to 51 months. Villafranca was ordered to pay more than $38 million in restitution to the United States and forfeit $89 million of criminal proceeds from the scheme and Zapata was ordered to pay more than $2.5 million in restitution to the United States. Francisco Alvarez, who conspired with Villafranca, Zapata and others, was previously sentenced to four years of probation and ordered to pay more than $2.3 million in restitution.
A fourth member of the conspiracy is scheduled to be sentenced in June.
Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division and U.S. Attorney Gregory W. Kehoe for the Middle District of Florida made the announcement.
IRS Criminal Investigation is investigating the case, with assistance from Homeland Security Investigations. ICE ERO Miami (Orlando sub-office), Florida Highway Patrol, Customs and Border Protection, US Marshals Service, State Department and the Florida Department of Law Enforcement have assisted in arrest operations.
Senior Litigation Counsel Sean Beaty and Trial Attorney Kavitha Bondada of the Criminal Division’s Tax Section and Assistant U.S. Attorney Diane Hu of the Middle District of Florida are prosecuting the case.
On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division. The core mission of the Fraud Division is to zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars. Department of Justice efforts to combat fraud support President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.