Contractor Gets 18 Months in Jail for Workers’ Compensation and Tax Fraud for Under-the-Table Payroll Scheme

Agency Checklists previously reported on the indictment and guilty plea of Argyrios “Eric” Mavros, the owner of a Peabody construction company for workers’ compensation and tax fraud arising out of his paying undocumented immigrants “under-the-table” cash wages. See Agency Checklists’ articles of October 6, 2020, “Peabody Contractor Indicted For Insurance Fraud And Payroll Tax Evasion On $2.5 Million Of Under-The-Table Wages” and November 11, 2021, “Construction. Co. Owner Pleads Guilty To $1 Million Tax and Workers’ Compensation Fraud.”

Eighteen months to serve and restitution of $1,166,284 to the IRS and his comp carrier

On March 24, 2022, U.S. Senior District Court Judge William G. Young sentenced Mr. Mavros to eighteen months in prison and eighteen months of supervised release in consideration of Mr. Mavros’s prior guilty plea to all eleven counts of an indictment describing his long-term scheme to defraud the IRS of payroll taxes and his workers’ compensation insurance carrier of premiums by failing to disclose how many workers he employed.

Judge Young’s sentence also ordered Mr. Mavros to pay restitution in the amount of $1,007,760 to the IRS and $158,524 to his workers’ compensation insurance carrier.

Scheme to avoid paying withholding taxes and workers’ compensation premiums

Mr. Mavros, who owned Mavros Construction, Inc., cashed more than $3.3 million in customer checks at a Peabody check cashing business and used some of those funds to pay his employees in cash. Mavros failed to report these employees or their wages in quarterly corporate tax filings, in an effort to avoid paying Social Security and Medicare taxes on employee wages and withholding federal income taxes. Overall, Mavros failed to pay and withhold federal taxes on more than $2.5 million in wages, resulting in a tax loss of more than $1 million. Additionally, Mavros failed to report these employees to his workers’ compensation insurance carrier, thereby defrauding his construction company’s insurer of $158,524 in premiums.

The U.S. Attorney recommended twenty-four months to serve and twenty-four months of supervised release

The sentencing memorandum submitted by the U.S. Attorney to Judge Young recommended Mr. Mavros serve twenty-four months in prison followed by twenty-four months of supervised release plus restitution to the IRS and the workers’ compensation carrier involved.

The U.S. Attorney based this recommendation on:

A twenty-four-month sentence would “send a strong message to other would-be tax and workers’ comp cheats that imprisonment is a reality for those who willfully violate the internal revenue laws and defraud their workers’ compensation insurers.”Such a sentence would also assure law-abiding employers that they are not foolish for filing their quarterly tax returns, paying their share of employment taxes, and accurately reporting their payroll to their workers’ compensation insurance carriers.The offenses were not the result of a single lapse in judgment; rather, “his schemes stretched over several years, including after his workers’ compensation insurer threatened to cancel his policy because he failed to participate in the annual premium audit.”Mr. Mavros took deliberate steps to conceal his scheme. He used a check cashing business, paid his employees in cash, and did not share this information with his tax preparer or his workers’ compensation insurance carrier.His workers’ compensation insurance premium manipulations left one of his undocumented workers without coverage for medical bills or compensation during the two years he could not work as a result of his work-related injuries. This worker and the other undocumented immigrant workers Mr. Mavros hired were not in a position to challenge Mr. Mavros’s employment practices or lack of insurance for fear of immigration consequences.

Mr. Mavros requested a sentence of a “year and a day.”

Mr. Mavros’s sentencing memorandum asked that the Court consider factors in mitigation

Mr. Mavros did not earn substantial profits by failing to pay over to the government his payroll taxes and employee income tax withholding.Mr. Mavros was not a person whose unpaid taxes permitted him to live a lavish lifestyle, accumulate wealth, or support an expensive habit like gambling or drugs. Mr. Mavros was a man of modest means who almost lost his home to foreclosureMr. Mavros and his wife only have a current net worth of $120,800, driven primarily by the equity in their home, and their monthly expenses exceed their combined income.Mr. Mavros’s under-the-table payments to employees allowed him to maintain a steady flow of work for him and his workers by providing inexpensive labor to general contractors in a competitive construction market.Mr. Mavros had taken full responsibility for his actions and in no way has attempted to minimize his criminal conduct and cooperated fully with the IRS during its investigation.When Mr. Mavros met with IRS agents at his accountant’s office on July 20, 2017, Mr. Mavros truthfully answered each question put him, including admitting to cashing checks in order to pay his workers in cash.When Mr. Mavros was served with a subpoena for payroll records, Mr. Mavros not only complied, but reconstructed from notes and payroll slips his entire cash payroll for the years 2010 – 2016 into neatly organized journals and provided them to the IRS which used these journals in calculating the tax loss in this case.Among other medical conditions, in 2014, Mr. Mavros underwent open-heart surgery and subsequently had a pacemaker implanted to regulate his heartbeat. To periodically monitor the heart, his cardiologist monitors a device that transmits signals from Mr. Mavros’s pacemaker of any irregularities.

Court’s sentence did not “split the difference” one and two years to serve

In imposing sentence, Judge Young, explained his sentence to Mr. Mavros stating “Mr. Mavros, I don’t want you to think that I just split the difference between 2 years and a year and a day, I didn’t.”

The judge then listed the factors he considered in a lesser sentence than the U.S. Attorney recommended, and in not accepting Mr. Mavros’ counsel request for a sentence of a year and a day. These factors were that:

He would not impose a sentence of “a year and a day, given how long this crime took place, how much you stole in effect, how many people you cheated.”“[Y]ou did forthrightly acknowledge what was actually going on once they were on to you, that counts for something.”Every sentence has to deal with the person before the court and that he was not insensitive to the fact that Mr. Mavros had various health issues that he took “into account.”

The judge, however, did specifically reject one argument Mr. Mavros tried to make in his favor:

“So that I can be clear, I want to say one thing that was raised on your behalf that I reject. The fact is that you were providing these services because you were hiring undocumented aliens and you were in effect giving them employment.
That’s not a beneficent thing for our society, we have laws that forbid that, laws that require that employment go to our own citizens, with various exceptions. So, I don’t count that in your favor.”

The judge concluded stating: “This is a fair and a just sentence and I have no hesitancy in imposing it.”

Mr. Mavros begins his eighteen-month sentence in May

The sentencing hearing ended with the judge allowing Mr. Mavros to self-report to the Federal Bureau of Prisons on May 4, 2022. Also, the judge agreed to recommend as part of the Court’s judgment that Mr. Mavros serve his sentence at Fort Devens, located approximately forty miles from Boston.

The prosecution team involved in Mr. Mavros’ case

The announcement of Mr. Mavros’ sentence was made by United States Attorney Rachael S. Rollins and Joleen D. Simpson, the Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston. They acknowledged the valuable assistance provided by the Insurance Fraud Bureau of Massachusetts. Assistant U.S. Attorney Kristen A. Kearney of Rollins’ Securities, Financial & Cyber Fraud Unit prosecuted the case.