Immigrant 'cogs' in Jacksonville construction fraud get prison, deportation, big IRS bills

Two undocumented immigrants living in Jacksonville will finish two years behind bars and be deported to Honduras following their sentencing in a multimillion-dollar fraud involving workers’ compensation insurance.

Oscar Santos-Santos, 45, and Wilkin Santos-Calix, 29, took plea deals in June admitting to conspiring to commit wire fraud and cheat the Internal Revenue Service out of tax money owed from hundreds of construction workers across the South, many in the country illegally.

The men’s cases reflect ongoing government efforts to curb scams that companies in the construction industry have used for years to cut payroll costs while tapping into an undocumented workforce.

“Through their actions, these defendants attempted to create an environment that favored cheaters,” Tara K. Reed, acting special agent in charge of the Internal Revenue Service’s criminal investigations, said after the pair were sentenced this month.

Defense attorneys worked before the sentencing to paint a more sympathetic picture, saying essentially their clients were uneducated working men trying to support themselves in an unforgiving business.

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Santos-Calix “is a ‘cog’ in an illicit ‘machine’ that exists in the construction industry,” attorney Miguel A. Rosada told Chief U.S. District Court Judge Timothy Corrigan last month.

The scheme “has a long history in the construction industry,” Rosada wrote in a memo seeking lenience for his client, whom the attorney said had a third-grade education and was “not a sophisticated person who is capable of masterminding an elaborate scheme.”

How the scam worked

Both defendants were solo officers of businesses that investigators described as shell companies, used to hide the fact that building contractors were using illegal workers.

The shell companies — Santos-Calix was Brothers Forever Construction, Santos-Santos was JWS Construction LLC — bought cheap workers’ comp policies, which Florida law requires, then “rented” the policies to contractors employing far more workers than insurers expected to protect, court records showed.

The policy that Santos-Calix bought for $14,392 per year would have cost $1.9 million to cover the building contractors in Florida, Georgia and Tennessee that received copies of the insurance certificate to use on their jobs, his plea agreement said.

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Brothers Forever and JWS Construction also created space between established building contractors and illegal workers building their projects, getting lump-sum checks from the big companies and handing out cash or new checks to the crews.

But those payrolls for workers didn’t include money for payroll taxes, making it easier for contractors working through the Hondurans’ companies to underbid competitors who worked by the book.

Cheating the IRS

“Through their illegal workers compensation payroll and insurance fraud scheme, these individuals sought to defraud the U.S. government and undercut legitimate private businesses, while taking advantage of noncitizen workers, for their own personal profit,” said Homeland Security Investigations Assistant Special Agent in Charge K. Jim Phillips, whose office was deeply involved in the prosecution.

Payroll taxes that should have been paid totaled $5,018,590 between the two companies.

Besides prison time and deportation, judgments that Corrigan signed Thursday required Santos-Calix — described in an attorney’s memo as sharing an apartment with a brother and a cousin before his arrest — to pay $3.2 million in restitution.

Santos-Santos was ordered to pay about $1.8 million in restitution.

Santos-Calix was also ordered to forfeit $898,000 he had received from the conspiracy and Santos-Santos was ordered to forfeit $491,000.

This article originally appeared on Florida Times-Union: Illegal Honduran builders given prison, fined $5M in Jacksonville scam