Honduran National Sentenced to Eight Years for $89 Million Payroll Tax Fraud Scheme

Mario Flores, a Honduran national without legal status in the United States, was sentenced on June 25 2026 to eight years in federal prison after pleading guilty to conspiracy to defraud the U.S. government and to operate an unlicensed money-transmitting business.

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The investigation falls within a wider DOJ initiative targeting payroll-tax fraud tied to unauthorized workers, reflecting heightened enforcement of immigration and tax laws.

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Between 2015 and 2022, Flores and co-defendants created shell companies that ran an unlicensed check-cashing and cash-courier service. The network processed about $89 million in checks from construction subcontractors, charging a fee, and paid workers in cash to avoid payroll-tax withholding. The arrangement allowed contractors to hire undocumented construction workers without reporting payroll taxes. False tax filings were submitted to the IRS, and fraudulent workers-compensation insurance data were provided to insurers.

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Flores was the primary defendant; earlier cases sentenced Iris Villafranca, Osman Zapata, and Francisco Alvarez to four-through-seventeen-year terms. The investigation was led by the Department of Justice’s Criminal Division, with Assistant Attorney General Colin McDonald overseeing, and by Homeland Security Investigations (HSI) agent John Condon. The IRS assisted with tax-fraud analysis.

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Court filings show the scheme diverted roughly $38 million from U.S. taxpayers, while $89 million in checks were processed. Flores received an eight-year term, complementing the 4-to-17-year sentences of his co-defendants. Officials said the case illustrates how unauthorized employment can enable large-scale payroll-tax fraud, reducing tax revenue and fostering underground labor markets.

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Assistant Attorney General McDonald said the prosecution shows illegal immigration can facilitate payroll-tax fraud and harm workers and taxpayers. HSI agent Condon stressed the agency’s duty to protect the financial system and hold fraudsters accountable.

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• “Today, we held an illegal alien from Honduras accountable for a brazen scheme that stole more than $38 million from American taxpayers to facilitate the employment of illegal aliens,” — Colin McDonald, Assistant Attorney General

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• “This case exposes how unchecked illegal immigration fuels widespread payroll tax fraud and underground economies that harm American workers and taxpayers,” — Colin McDonald, Assistant Attorney General

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• “This sentence sends a strong message: Those who exploit our open borders, cheat the U.S. Treasury, and violate federal laws will face justice.” — Colin McDonald, Assistant Attorney General

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• “Homeland Security Investigations is committed to protecting the integrity of our financial system and enforcing our nation’s laws,” — John Condon, HSI

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• “Those who orchestrate large-scale payroll tax fraud and facilitate the illegal employment of unauthorized workers will be held accountable.” — John Condon, HSI

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Prosecutors said investigations of related shell companies continue, indicating possible further indictments as authorities pursue illegal payroll-tax networks.

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