The former owner of several Long Island commercial check-cashing companies was sentenced Friday in federal court in Central Islip, after pleading guilty to fraud charges last year.
John Drago of Central Islip was sentenced to four years in prison, following his guilty plea back in September 2021 in a scheme involving illegally structuring financial transactions and payroll tax evasion, according to the U.S. Department of Justice.
Drago was ordered to forfeit $253,000 and pay restitution of about $593,000. He was required to surrender his check cashing licenses, his federal money services business registrations and he is barred from applying for any such licenses or registrations in the future as a result of his plea.
“Drago operated his check cashing business as a haven for tax cheats like himself, concealing over $9.5 million from the federal government,” U.S. Attorney Breon Peace said in a statement.
“Drago used his seemingly legitimate check cashing business to defraud the government while lining his pockets. Over several years, he used his employees do his dirty work and, at his request, they cashed checks in a way to avoid IRS reporting requirements, concealing more than $9.5 million in check cashing transactions. His scheme to make some extra cash has now 2 resulted in him spending time behind bars, where he will no longer have any pockets to be lined,” Thomas Fattorusso, special agent in charge of IRS-CI.
Records show that Drago owned and operated Kayla Check Cashing Corp., North Island Check Cashing Corp., South Island Check Cashing Corp., East Island Check Cashing Corp., Bay Shore Check Cashing Corp. and Brentwood Check Cashing Corp. The companies were collectively known as the “Kayla Companies,” according to officials.
The DOJ said that financial institutions must file a currency transaction report, or CTR, for each cash transaction in excess of $10,000. In addition, a CTR is required to be filed by the financial institution when multiple checks, the total value of which exceeds $10,000, are cashed in a single day.
But officials said that from January 2010 to October 31, 2013, Drago instructed employees to cash multiple checks in excess of $10,000 in a single day for certain customers without filing required CTRs. Officials also said that to avoid the required CTR filings, Drago directed employees to deposit and cash checks that had been submitted together on a single day in amounts in excess of $10,000. Drago had instructed employees to tell certain customers who presented individual checks in amounts exceeding $10,000 to return with multiple checks in amounts that were less than $10,000 to avoid the reporting requirement for such financial transactions. This resulted in more than $9.5 million in check cashing transactions were concealed from the IRS.
Between April 1, 2012 and July 31, 2013, Drago paid overtime wages and commissions to employees of the Kayla Companies in cash and did not inform the IRS of the payment of these cash wages. Drago falsely underreported to the IRS the gross wages paid to his employees to avoid paying the full amount of Federal Insurance Contribution Act taxes that the Kayla Companies owed.
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