- The U.S. Attorney's Office for the District of Oregon announced Tuesday that authorities have charged an Oregon contractor, 38-year-old Victor Hugo Lopez-Diaz, with one count of conspiring to commit tax evasion and two counts of filing false tax returns as part of a scheme to evade paying $65 million of income and employment taxes.
- From at least 2014 through February 2018, Lopez-Diaz and his conspirators, according to prosecutors, were able to duck their personal and employment tax obligations by cashing approximately $185 million of checks at a co-conspirator’s check-cashing business and then using that money to pay construction workers under the table. Lopez-Diaz, along with others, set up subcontracting businesses to aid in their scam and paid unlicensed contractors cash off the books.
- Lopez-Diaz, under the name Miguel Lopez, also accepted payments on behalf of other contractors, cashing those checks and giving the money back to contractors so that they could pay their own crews without withholding or paying the required taxes. According to prosecutors, this is one of the largest tax evasion schemes ever prosecuted in the U.S. District Court for the District of Oregon. The Internal Revenue Service's Criminal Investigation unit Division is leading the investigation.
Unfortunately, this sort of crime is made easier when the perpetrators take advantage of the undocumented workers that work in the construction industry. If a worker has no identification or bank account, then illicit check-cashing operations are often the only way they are able to receive their pay.
In the extreme, these workers also can become targets of mistreatment and subject to threats of violence. Last year, a California court sentenced contractor Job Torres Hernandez to more than eight years and fined him almost $920,000 for forcing several workers into providing labor on construction projects in San Francisco. Torres was also found guilty of harboring undocumented workers.
According to worker testimony, Torres brought in undocumented workers from Mexico and then made them work long hours with little to no pay, locked them up overnight in living quarters that were without access to bathrooms and showers and then threatened anyone who complained with deportation and physical harm to them and their families.
Misclassifying workers as independent contractors makes it cheaper for ill-intentioned labor brokers and contractors because they're not providing these individuals with benefits like health insurance or even paying into the most basic of programs — like social security and workers' compensation — on their behalf.
As part of an effort to reduce worker misclassification and other abuses, California lawmakers passed a controversial law that imposes strict guidelines on employers that use independent contractors.
California employers are now required to use the ABC test to determine whether or not a worker qualifies as an independent contractor. Under the test, workers can only be classified as independent contractors if they perform their work without the control and direction of the employer; offer services that are outside the hiring contractor's normal scope of work; and typically provide their services as part of a business.
It's the second step that drew a great deal of ire from employer organizations because in a strict reading of the law, it could prevent general contractors that self-perform work from subcontracting those tasks to others. As a result of industry efforts, lawmakers included an exemption for licensed subcontractors.