Honduras Man Gets 8 Years for $38M Payroll Tax Fraud Scheme

What Flores Did — and How the Scheme Worked

Mario Flores, an undocumented immigrant from Honduras, was sentenced to 96 months — eight years — in federal prison for running a large payroll tax fraud scheme. According to court documents, the scheme ran from 2015 to 2022. Flores and his partners created a series of shell companies (fake businesses set up to hide money) that cashed about $89 million in checks from construction subcontractors. They charged a fee for this service. The result: construction companies paid their workers in cash, with no taxes taken out and no questions asked about whether workers had legal permission to work in the US.

The scheme caused more than $38 million in losses to the US government in unpaid payroll taxes. Flores also filed false documents with the IRS to hide what was happening. On top of that, he and his partners defrauded workers' compensation insurance companies — the insurers that cover workers if they get hurt on the job — by giving false information about how many workers were covered and how much they were paid.

Three other people were also sentenced in connection with the scheme. Iris Villafranca received 17 years in prison and must pay back more than $38 million. Osman Zapata received more than four years in prison and must pay back more than $2.5 million. Francisco Alvarez received four years of probation and must pay more than $2.3 million. A fifth person, Michael Mayorga, is still waiting to be sentenced. The case was investigated by IRS Criminal Investigation and Homeland Security Investigations (HSI), with help from ICE, Customs and Border Protection, the US Marshals Service, and Florida state agencies.

What This Means for Immigrant Workers

This case is part of a broader federal push to crack down on underground payroll systems that allow employers to hire workers — including undocumented immigrants — without following US tax and labor laws. The Justice Department said the scheme harmed both American taxpayers and workers who were paid without legal protections. For undocumented immigrants working in industries like construction, cases like this show that employers who pay in cash off the books can put workers at legal risk, even if the workers themselves did not know about the fraud.

What to do

• If your employer pays you only in cash with no pay stub or tax form, ask questions. You have the right to know how your wages are being reported.
• If you are undocumented and worried that your work history could affect your immigration case, speak with an immigration lawyer before any court hearing or government interview.
• If you are in removal proceedings (a legal process where an immigration judge decides if you must leave the US), do not miss your court date. Missing a hearing can result in an automatic removal order against you.
• If ICE contacts you or comes to your home, you have the right to remain silent and the right to speak with a lawyer. You do not have to answer questions without an attorney present.