Federal authorities have just concluded the largest under-the-table cash
payroll scheme ever prosecuted in Massachusetts.
The hidden payroll generated an estimated $10 million loss to the IRS and an
additional $7 million to workers’ compensation insurance companies.
Aimee King McElroy of North Dartmouth, Massachusetts, was sentenced to 6 ½
years in prison Tuesday, September 23, in the wake of her conviction for
paying cash wages through her temporary employment agency to evade millions of
dollars in tax payments and workers’ compensation premiums.
King McElroy was convicted of paying out more than $43 million in cash wages
through the temporary agency she ran with her husband, Daniel W. McElroy,
according to the U.S. Attorney’s Office in Boston.
The couple were also ordered to pay $9.1 million in restitution.
In February, King McElroy and her husband were convicted after a 2½-week
jury trial of conspiring to defraud the IRS and their workers’ compensation
insurers; three counts of mail fraud; and 14 counts of procuring false payroll
tax returns.
Daniel McElroy was earlier sentenced to nine years in prison, followed by
three years of supervised release and restitution.
The couple’s trial revealed that from the early 1990s to June 2001, they ran
a temporary employment agency based in Taunton, and later in Easton,
Massachusetts. They did business as the Dan Agency, Daily Agency, Daily A. King
Labor Inc., ProTemp Co., PTC and Precission Temp. Corp. Federal authorities
said the couple paid a large share of the businesses’ payroll in cash to avoid
paying employment taxes such as Social Security and Medicare, and to minimize
the businesses’ workers’ compensation insurance premiums.
Every employer is required to pay payroll taxes and to have workers’
compensation insurance. The dollar amount of those taxes is based on the size of
the company’s payroll.
The agencies supplied hundreds of laborers to factories and food-processing
plants throughout eastern Massachusetts. About one-third of the employees worked
at fish-processing plants in New Bedford, Massachusetts.
A civil action brought against the Mcelroys by the U.S. Department of Labor
led to a 1994 court order forbidding them and their agency to pay employees in
cash. Authorities said that led the couple to take added measures to conceal
their payroll. The couple then started a straw corporation called ProTemp Co.,
through which they funneled most of their cash payroll, authorities said. Later,
they opened another straw corporation called Precission Temp for the same
purpose. Their businesses—Daily A. King, ProTemp and Precission Temp—were run as
a single business.
The couple disguised their ownership of ProTemp and Precission Temp by having
two employees named as presidents of the two companies, authorities said. And
the company’s in-house accountant, they added, was directed to file false tax
returns in the names of the three businesses that omitted the company’s cash
payroll. The in-house accountant was also allegedly directed by the couple to
report a falsely lowered payroll amount to mislead insurance auditors.
Edward Lenz, general counsel for the Alexandria, Virginia-based American
Staffing Association, which represents 1,400 staffing firms globally, has
followed the McElroy case.
“This is completely outrageous,” Lenz said. “It’s hard to know in a large
industry whether players are playing by the rules. I can’t recall seeing
anything like this in recent years.”
The association’s members pay dues and subscribe to a code of ethics, the
first of which is “to comply with all laws and regulations applicable to their
business.”
Crooks in the industry, he said, don’t tend to belong to such industry
organizations.
“They hide in the shadows,” Lenz said. “This was outright fraud. These people
evidently knew what they were doing.”
—Mark Larson
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