Four family members from Lowell, who operated temporary employment agencies and were indicted last year for evading millions of dollars in federal withholding taxes and defrauding Granite State Insurance of almost a million dollars in workers compensation premiums have pleaded guilty in Federal court. The four defendants pleaded guilty to a host of charges including conspiracy, mail fraud (involving false premium audits), filing false employment tax returns and structuring cash transactions to avoid federal reporting requirements.
Charges against the four defendants carry up to twenty years in prison, fines and forfeiture of property gained by illegal acts
Margaret Mathes, 67, Boseba Prum, 47, Sam Pich, 63, and Thaworn Promket, 52, all of Lowell, pleaded guilty to conspiracy to defraud the Internal Revenue Service, mail fraud through submitting false premium audits, and to violating laws against structuring monetary transactions to avoid reporting requirements.
Prum, Pitch, and Promket each additionally pleaded guilty six counts of mail fraud (submitting false premium audits) and two counts of structuring monetary transactions to avoid federal reporting requirements. Prum also pleaded guilty to ten counts of filing false employment tax returns, while Pitch and Promket also pleaded to 17 and seven counts, respectively, of assisting the filing of false employment tax returns.
The conspiracy charge carries a maximum of five years in prison. The remaining charges carry maximum sentences of up to three years (filing or procuring the filing of false tax returns); up to 20 years (mail fraud); and up to 10 years (structuring of financial transactions as part of a pattern of illegal activity involving more than $100,000 in a 12-month period) in prison per count.
Additionally, the federal indictment seeks forfeiture of, “any property, real or personal, that constitutes, or is derived from, proceeds traceable to the commission of the offenses” involved in the guilty pleas.
[The defendants] reported to the IRS and Granite State their temporary employees had been paid something over $2 million in wages, when the actual figure was $28 million
The defendants were in the temporary employment agency business from 1994
According to the federal indictment, the defendants started in 1994, to run temporary employment agencies in the Lowell are under various names using different operating entities. Their temporary employment agency provided short-term and long-term labor to various client companies in the packaging and food services industries.
Ordinarily such temporary employment agency arrangements have the agency responsible for issuing paychecks to the employees, for paying state and federal employment taxes, and for processing payroll deductions for taxes and other expenses, such as health care benefits and/or union dues for employees. The temporary employment agency is also usually responsible for maintaining workers’ compensation insurance for the employees.
For supplying the employees to the client companies the client companies pay all-inclusive fees to the agency that include the actual wages paid to the worker, additional expenses such as employment taxes, unemployment insurance and workers compensation insurance, as well as any profit margin for the temporary employment agency.
Defendants made false tax, false insurance reports, and withdrew $22 million in cash to hide income
By 2004, the defendant were operating the temporary employment agency under the names International Temp Agency (INT) and JP Company. Between 2004 and 2009, INT and JP reported to the IRS and Granite State their temporary employees had been paid something over $2 million in wages, when the actual figure was $28 million.
The defendants’ agencies did not withhold and pay employment taxes or correctly report workers’ compensation payroll, but instead paid their workers under the table with cash. The defendants, used approximately 20 bank accounts to withdraw cash, with each withdrawal less than the $10,000 federal cash reporting requirement, to pay their temporary workers “off the books.”
Between 2004, and 2009, the defendants cashed or caused to be cashed approximately 4,383 checks totaling approximately $22 million. The checks were made payable to cash, to one of the defendants, or to defendants’ family members.
The defendants also filed false employment withholding statements to the IRS and false payroll audit figures with Granite States for their workers’ compensation insurance.
Granite State defrauded of $880,000 in premiums by the defendants false audit reports
The defendants obtained their workers’ compensation through various brokers who obtained coverage through an assignment by The Workers’ Compensation Rating & Inspection Bureau. Both INT and JP were assigned as their workers’ compensation insurance carrier, Granite State Insurance Company, a subsidiary of AIG.
The defendants routinely submitted to Granite State for its payroll audits, documents and oral representations that completely understated the payroll of defendants’ temporary employment agency. Based on the audits and documents, Granite State calculated premiums based on fraudulent information that grossly understated the temporary employment agencies’ payroll.
By concealing from Granite State the true payroll of $28 million during this period, the indictment alleged and the defendants pleaded guilty to defrauding Granite State through the use of the mails of approximately $880,000 in insurance premiums.
Sentencing in November
The defendants are scheduled to be sentenced on November 24, 2014, in the United States District Court before Senior District Judge Mark L. Wolf.