Former Owner of Stoughton Temporary Employment Agency Sentenced for Under-the-Table Scheme

BOSTON—The former owner of a Stoughton temporary employment agency has been sentenced to six years and four months in prison for his role in running a $30 million under-the-table payroll scheme. The scheme avoided more than $9 million in federal and state payroll taxes and workers’ compensation insurance premiums.

United States District Court Judge Nathaniel M. Gorton sentenced JOHN MAHAN of Stoughton to 76 months in prison, to be followed by two years of supervised release. Judge Gorton ordered MAHAN to pay more than $9 million in restitution to the Internal Revenue Service, the Massachusetts Department of Unemployment Assistance, and two insurers.

MAHAN and MICHAEL POWERS of Westport were convicted in July 2011, after a jury trial, of one count of conspiracy to defraud the IRS and various workers’ compensation insurers, one count of mail fraud and two counts of filing false tax returns.

Between 2000 and 2004, MAHAN and POWERS owned and operated Commonwealth Temporary Services, Inc., which supplied hundreds of temporary laborers to businesses throughout Eastern Massachusetts. To avoid paying employment taxes, such as Social Security and Medicare, and to fraudulently reduce the businesses’ insurance premiums, MAHAN and POWERS under-reported their payroll. In order to hide their fraud, they arranged to pay more than $30 million of their payroll in cash, under the table.

In announcing today’s sentence, Judge Gorton commented that MAHAN had participated in one of the most egregious tax evasion schemes he had come across, and noted that the scheme was noteworthy for its brazenness and conniving ways.

U.S. Attorney Carmen M. Ortiz; William P. Offord, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston; Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation - Boston Field Office; and Anthony DiPaolo, Chief of Investigations for the Insurance Fraud Bureau of Massachusetts made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Sarah E. Walters and Vassili Thomadakis of Ortiz’s Economic Crimes Unit.