Orlando Man Sentenced to Prison for Construction Payroll Scheme that Defrauded the IRS and Workers’ Compensation Insurers

Jacksonville, Florida - Santiago Humberto Erazo-Zelaya (32, Orlando) has been sentenced by U.S. District Judge Marcia Morales Howard to one year and two months in federal prison for conspiracy to commit tax fraud and conspiracy to commit wire fraud. The court also ordered Erazo-Zelaya to pay $765,446.00 in restitution to the IRS for unpaid payroll taxes and $26,720.12 in restitution to an insurance company for a workers' compensation claim. The court entered a money judgment against Erazo-Zelaya in the amount of $181,529, representing the proceeds of the wire fraud. U.S. Attorney Gregory W. Kehoe made the announcement.

Erazo-Zelaya pleaded guilty on February 9, 2026. His co-defendant, Gregorio Jose Fuentes-Zelaya, was previously sentenced to 33 months in federal prison.

Erazo-Zelaya is a citizen of Honduras who is illegally present in the United States. He is subject to deportation after he serves his sentence.

According to court documents, Erazo-Zelaya established a shell company that purported to be involved in the construction industry. Erazo-Zelaya obtained a workers' compensation insurance policy in the name of the shell company to cover a minimal payroll for a few purported employees. He and Fuentes-Zelaya then "rented" the workers' compensation insurance to work crews who wanted to obtain subcontracts with construction contractors on projects in various Florida counties.

The conspirators sent the contractors a certificate as "proof" that the work crews had workers' compensation insurance, as required by Florida law. By sending the certificate, they falsely represented that the work crews worked for the shell company.

The contractors issued payroll checks for the workers' wages to the shell company and Erazo-Zelaya cashed these checks. The conspirators then distributed the cash to the work crews after deducting their fee, which was typically 6% of the payroll. During the period of the scheme, the conspirators cashed payroll checks totaling approximately $3 million, with their fees totaling approximately $181,500.

Neither the shell company nor the contractors reported to government authorities the wages that were paid to the workers, nor did they pay the employees' or the employer's portion of payroll taxes - including Social Security, Medicare, and federal income tax. According to the IRS, the amount of payroll tax due on wages totaling $3 million was approximately $765,000.

The scheme allowed the contractors and subcontractors to avoid the higher cost of obtaining adequate workers' compensation insurance for the numerous workers on the work crews to whom the workers' compensation insurance was "rented." The policy that Erazo-Zelaya obtained was for an estimated payroll of $100,800, and the insurance company issued the policy for an annual premium of $19,526. Had a workers' compensation insurance policy been purchased for a payroll totaling $3 million, the policy premium would have totaled about $587,000.

The scheme also facilitated the employment of undocumented workers who were not legally authorized to work in the United States.

"The defendant in this case engaged in a deliberate scheme to exploit workers and circumvent federal and state employment, tax, and insurance laws," said U.S. Attorney Gregory W. Kehoe. "Because of the diligent investigation by our Homeland Security Task Force partners, these conspirators were held accountable for their crimes."

"Fraudsters don't get a free pass-they get jail time," said Special Agent in Charge Ron Loecker of IRS Criminal Investigation, Florida Field Office. "This sentence shows that if you hide payrolls and cheat the tax system, you will pay the price. IRS Special Agents will continue to protect the integrity of our tax system and safeguard businesses that play by the rules."

"Workers' compensation insurance fraud fuels an underground economy built on exploitation, deception, and unfair competition," said Homeland Security Investigations Jacksonville Assistant Special Agent in Charge Timothy Hemker. "By facilitating the illegal employment of illegal aliens, these schemes rob legitimate workers of opportunities, depress wages, expose employees to unnecessary risk, and saddle honest contractors with the financial burden created by criminals gaming the system. This conduct is not merely unethical-it is criminal. HSI and our law enforcement partners are committed to exposing these fraud networks, following the money, and ensuring those responsible face the full consequences of their actions. We will not allow fraudsters to profit while undermining American workers, honest businesses, and the integrity of our economic system."

This case was the result of a joint investigation conducted by Homeland Security Investigations and IRS Criminal Investigation, working collaboratively as part of the Homeland Security Task Force (HSTF). The Florida Department of Financial Services also assisted with this investigation. It is part of a continuing investigation by those agencies of the use of shell companies and "ghost" employees in the construction industry. It is being prosecuted by Assistant United States Attorney Arnold B. Corsmeier. The asset forfeiture is being handled by Assistant United States Attorney Clint Locke.

On April 7, the Department of Justice announced the creation of the National Fraud Enforcement Division. The core mission of the Fraud Division is to zealously investigate and prosecute those who steal or fraudulently misuse taxpayer dollars. Department of Justice efforts to combat fraud support President Trump's Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.