New York Construction Principal Jailed in Multi-Million Dollar Payroll Tax Evasion Scheme

NEW YORK – A principal for multiple New York construction companies has been sentenced to prison for his role in a wide-ranging, multi-million dollar scheme to evade payroll taxes, marking another conviction in the government’s ongoing crackdown on financial fraud in the city’s construction industry. According to a sentencing memorandum filed on April 27, a New York federal judge sentenced Joshua Markovics to two-and-a-half years in federal prison. In addition to the incarceration, Markovics faces a $10,000 fine, and must pay $330,000 in restitution. The sentence also includes one year of supervised release following his prison term and a mandatory $100 special assessment. The conviction stems from a sophisticated underground check cashing operation designed specifically to help construction companies pay workers off the books. By doing so, the participating companies avoided paying significant sums in federal and state payroll taxes, including Social Security, Medicare, and unemployment insurance contributions. These schemes have become a persistent target for federal and state prosecutors, who view them as a significant drain on public funds and a source of unfair competition against law-abiding businesses. The mechanics of such conspiracies often involve multiple layers of deception. Typically, a construction company writes large checks to a shell corporation that purports to be a subcontractor but performs no actual work. These shell companies, often established with fraudulent documentation, exist only on paper. An employee or associate of the construction company then takes these checks to a complicit check cashing business, which cashes them for a fee, providing large amounts of untraceable cash. This cash is then used to pay employees under the table, creating a workforce whose wages are never reported to tax authorities. As detailed in a separate but similar case announced by the Manhattan District Attorney’s Office, one construction group allegedly generated between $120,000 and $150,000 in cash each week through this method to meet its off-the-books payroll for over 100 employees. These schemes not only defraud tax agencies but also allow companies to illegally avoid paying for workers' compensation insurance. In the case involving the Schnellbacher-Sendon Group LLC, the Manhattan DA alleged the company stole more than $9 million in unpaid workers' compensation premiums from the New York State Insurance Fund by failing to report at least $40 million in cash payroll. When an unreported worker was injured, the company would allegedly report the claim under a fictitious subcontractor created for that purpose. The check cashing businesses are a critical component of these criminal enterprises. They are legally obligated under the federal Bank Secrecy Act (BSA) to implement anti-money laundering programs and to file Currency Transaction Reports (CTRs) for any cash transaction exceeding $10,000. In many of these schemes, the check cashers either fail to file the required reports or file false ones, attributing the massive transactions to the fictitious shell companies, thereby concealing the identity of the construction company orchestrating the fraud. Federal prosecutors have pursued charges against check cashing businesses for these violations. In one case, Belair Payroll Services in Flushing, New York, and its owner were charged for their alleged roles in a scheme to violate the BSA by filing false CTRs and failing to maintain an effective anti-money laundering program. The investigation, led by Homeland Security Investigations, uncovered transactions totaling more than $50 million that were not properly reported. The consequences of participating in these schemes are severe, with perpetrators facing lengthy prison sentences and crippling financial penalties. The conviction of Markovics is just one of many recent enforcement actions highlighting the risks for business owners who engage in or facilitate payroll tax fraud. In our experience, the pressure on small and mid-sized businesses to manage costs, especially in high-overhead industries like construction, can create a temptation to cut corners. However, schemes involving off-the-books cash payroll and shell companies are not minor compliance issues; they are serious criminal conspiracies that inevitably unravel. The resulting legal fees, restitution, fines, and prison sentences far outweigh any perceived short-term financial savings. We consistently advise that unwavering adherence to payroll and tax regulations is the only sustainable path. Engaging with illicit check cashing operations or creating fictitious entities to hide payroll is a clear line that business owners must never cross. For companies struggling with complex payroll obligations, the solution is seeking professional guidance on tax preparation and compliance, not entering a criminal enterprise. C&S Finance Group LLC helps businesses navigate these exact challenges at csfinancegroup.com. As this latest sentencing demonstrates, federal and state authorities remain highly focused on dismantling these underground financial networks. Law enforcement agencies, including the IRS Criminal Investigation division and various district attorneys' offices, continue to collaborate on complex investigations, suggesting that more indictments and prosecutions in the construction and financial services sectors are likely to follow.