The owner of a Brockton construction company and related businesses, Richard McLaughlin, 61, of Quincy was sentenced in Boston’s federal court on charges that he paid employees under-the-table payroll wages. As part of his payroll scam, Mr. McLaughlin had his companies file false payroll information with the Internal Revenue Service and their workers’ compensation insurance carriers. Mr. McLaughlin also had his employees file false unemployment claims while they worked for his companies.
Mr. McLaughlin’s failure to correctly report his companies’ payroll wages and to correctly advise the state’s unemployment office of invalid unemployment claims defrauded the Internal Revenue Service, five workers compensation insurance carriers, and the state unemployment benefits program of more than $1.6 million.
Mr. McLaughlin is the primary owner and operator of several construction related companies headquartered at 120 Clinton Street, Brockton, including:
- A. Vozzella & Sons, a construction company which according to Constructionjournal.com has twenty-one active contracts including state and local government contracts.
- McLaughlin Brothers Equipment Corporation (“McLaughlin Equipment”).
- McLaughlin Brothers Contracting Corp. (“McLaughlin Contracting”); and,
- Underground Utility Contractors, Inc.
One set of payroll books for the government and insurers, another for under-the-table wages
From January 2005 until February 2011, Mr. McLaughlin paid a portion of the wages to employees of McLaughlin Equipment and McLaughlin Contracting through two payroll services, ADP, and QuickBooks Payroll Service (“QuickBooks”).
As part of their services, these companies filed IRS Forms 940 and Forms 941 with the IRS on behalf of these two corporations. These services made the filings based on the information that Mr. McLaughlin provided to ADP and QuickBooks. ADP, and QuickBooks withheld, paid over, and reported to the IRS the required employee income taxes and FICA, together with the employer’s portion of the FICA, based on the information Mr. McLaughlin provided to them.
However, Mr. McLaughlin never informed ADP and QuickBooks, that he paid an additional $2.9 million in wages to the employees of McLaughlin Equipment and McLaughlin Contracting “under the table,” between 2005, and 2011 by using funds withdrawn from bank accounts Mr. McLaughlin established solely for that purpose.
As a result of his actions, McLaughlin Equipment and McLaughlin Contracting failed to withhold and pay over to the IRS income taxes and FICA from the wages paid to their employees “under-the-table.” The companies also failed to pay over to the IRS the employer portion of FICA owed to the IRS for the under-the-table wages.
The companies’ workers’ compensation carriers given false payroll numbers
Between 2005, and 2011, Mr. McLaughlin’s companies had several workers’ compensation insurance carriers providing coverage including National Union Fire Insurance Company of Pittsburgh, PA, ACE Property and Casualty Insurance Company, and AmTrust North America, Inc. (an AmTrust Financial Company) for all the employees of McLaughlin Equipment and McLaughlin Contracting.
For each policy year, the insurance carriers conducted audits of the payroll records of McLaughlin Equipment and McLaughlin Contracting. The carriers received as part of their audits, IRS Forms 941 and IRS Forms 940 from Mr. McLaughlin that purported to represent the actual wages paid to those employees during the policy period.
However, based upon his under-the-table payments of wages Mr. McLaughlin presented false statement to the insurance auditors by submitting, among other records, the false IRS Forms 941 and 940, that underreported the actual number of employees and the actual wages paid to those employees during the policy period.
As a result of the false statements made by Mr. McLaughlin fraudulently suppressing the actual remuneration for calculating these companies’ workers’ compensation premiums, McLaughlin Equipment and McLaughlin Contracting underpaid over $200,000 premiums.
Mr. McLaughlin made false statements to have employees collect unemployment while working under the table
Besides defrauding the IRS and his companies’ workers’ compensation carriers, Mr. McLaughlin instructed employees to apply for unemployment benefits while they were working for his companies. Mr. McLaughlin would falsely verify that these employees applying for unemployment benefits had been laid off even though he was still paying them wages under the table. As a result, these employees received more than $725,000 in fraudulent unemployment benefits.
Mr. McLaughlin pleads guilty to an eight-count information charging tax and insurance fraud
After his payroll scam became a criminal tax matter, Mr. McLaughlin, through counsel entered negotiations with the U.S. Attorney’s Office and agreed to plead guilty to a criminal information in lieu of an indictment.
The eight counts of the information charged five counts of aiding and assisting the filing of false tax returns in violation of 26 U.S.C. §7206(2) for his companies, McLaughlin Equipment and McLaughlin Contracting, and three counts of mail fraud in violation of 18 U.S.C.§1341 involving his insurance premium fraud.
Each count of aiding and assisting the filing of false tax returns carried up to 3 years in prison, a fine of $250,000 or twice the gross gain or loss, whichever is greater, the costs of prosecution, 1 year of supervised release and restitution.
The mail fraud counts each allowed up to 20 years in prison, 3 years of supervised release, a fine of S250,000 or twice the gross gain or loss, whichever is greater, restitution, and forfeiture to the extent charged in the Information.
The plea agreement advised Mr. McLaughlin that the United States Attorney would recommend at his sentencing:
- A jail sentence at the low end of the [federal sentencing] Guidelines range as calculated by the Court at sentencing.
- A fine within the Guidelines sentencing range as calculated by the Court at sentencing unless the Court found Mr. McLaughlin was not able, and is not likely to become able, to pay a fine.
- 36 months of supervised release.
- Forfeiture equal to the amount of the insurance premium fraud involved in the false payroll reports.
- Restitution to the IRS, the workers’ compensation insurers, and the state unemployment department.
Judge sentences Mr. McLaughlin to 3 years of supervised release, payment of $1,686,541.58 in restitution, and the forfeit of $207, 571
On July 1, 2021, U.S. Senior District Court Judge Douglas P. Woodlock did not impose a jail sentence on Mr. McLaughlin, but instead sentenced him to three years of supervised release (probation).
The court as part of its sentence ordered restitution by Mr. McLaughlin to the Internal Revenue Service, the Department of Unemployment Insurance, and the five insurance companies he defrauded. The total restitution ordered of $1,686,541.58 consisted of payments in the following amounts:
|Internal Revenue Service||$747,781.58|
|MA Dept. of Unemployment Assistance||$731,188.00|
|American Home Assurance||$87,562.00|
|National Union Fire Ins. of PA||$36,541.00|
|Savers Property & Casualty||$35,156.00|
|Insurance Company of PA||$33,391.00|
|Ace Property & Casualty||$14,922.00|
Under federal law, any partial payments that Mr. McLaughlin makes are paid proportionally to each payee, However, by statute, all nonfederal victims must be paid before the United States is paid.
Pursuant to the mail fraud statute by which the workers’ compensation premium fraud counts were brought against Mr. McLaughlin, there is a mandatory forfeiture to the United States equal to the amount by which he defrauded the insurance companies.
In this case, the judge ordered Mr. McLaughlin to forfeit $207, 571 to the United States, an amount equal to the restitution Mr. McLaughlin must pay to the five insurers for their unpaid premium.
The final judgment of the court included, besides the sentence of three years’ supervised release, an order for the payment in full of the restitution and forfeiture within Mr. McLaughlin’s three-year probation period. The judge also ordered Mr. McLaughlin’s to make his first payment on the court’s judgment within fifteen days.
The prosecution team involved in Mr. McLaughlin’s conviction
Acting United States Attorney Nathaniel R. Mendell and Ramsey E. Covington, Acting Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation Division in Boston made the announcement of Mr. McLaughlin’s sentence and restitution orders. Assistant U.S. Attorney Victor A. Wild of Attorney Mendell’s Securities, Financial & Cyber Fraud Unit prosecuted Mr. McLaughlin’s case.