National Association of Government Contractors


Contractor Sentenced to 8 Years for CDC Fraud

Two Florida men who owned and operated a drywall labor supply company in were recently sentenced to eight years each in prison after being convicted in federal court of using their business to defraud the Centers for Disease Control and Prevention.

Cesar Arbelaez Tabares, 37, of Pembroke Pines, Fla., and Juan Carlos Bazantes, 45, of Miami, owners of IWES Contractors, Inc., were also required to pay a $75,000 fine for submitting false payroll forms to the CDC in connection with a 2012 construction project at the federal facility.

"Federal contractors and subcontractors are not immune from rules and laws that apply to any company with employees," said U.S. Attorney Bjay Pak. "The jury's verdict and the court's sentence in this case reinforce that if you want to compete and obtain a federal contract work, you must abide by the law and truthfully report your payroll and employment tax withholdings."

A jury convicted the two men on six counts of submitting false forms to the CDC and one count of conspiracy following a one-week trial in late August and early September of this year. They were acquitted of related tax charges.

According to evidence presented in the trial, beginning in 2012, IWES supplied drywall laborers for a construction project commissioned by the CDC.

Under the direction of Tabares and Bazantes, the company maintained a double payroll system for its employees, internally classifying the workers as either "W2.REAL" or "W2.F.2CHK".

Workers who were classified as W2.REAL received one paycheck each pay period with employment taxes withheld, received an Internal Revenue Service (IRS) W-2 Form at the end of the calendar year and were reported on quarterly employment taxes filed by IWES with the IRS.

Workers who were classified as W2.F.2CHK received two paychecks simultaneously each pay period, the first of which totaled the worker's net pay  -- gross wages minus employment taxes withheld  -- while the second totaled the employment taxes withheld from the first paycheck so that the worker, in actuality, was receiving his or her gross wages with no tax withholdings.

Though W2.F.2CHK workers performed many of the same job duties as those who were classified as W2.REAL, they did not receive a W-2 Form at the end of the year and were not reported on quarterly employment taxes that IWES filed with the IRS.

James E. Dorsey, Acting Special Agent in Charge of the IRS' Criminal Investigation, said the conviction was a win for the justice department.

This case was investigated by the IRS' Criminal Investigation, the U.S. Department of Labor-Office of Inspector General and the U.S. Department of Health and Human Services-Office of Inspector General.



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