Boston Employment Agency Owner Sentenced for Tax and Workers’ Compensation Fraud

By Insurance Journal staff | September 28, 2023

A Dorchester woman was sentenced recently in federal court in Boston for tax and workers’ compensation fraud offenses in connection with her operation of a temporary employment agency, according to officials.

Dam Ngoc Luong, 70, was sentenced by U.S. District Court Judge Leo T. Sorokin to one year and one day in prison and three years of supervised release. Luong was also ordered to pay $3,993,169 in restitution to the Internal Revenue Service and $155,870 in restitution to Traveler’s Insurance Co., according to the U.S. attorney and IRS offices in Boston.

Prosecutors said Luong pleaded guilty in April to two counts of filing false corporate and individual tax returns, three counts of failure to collect and pay over employee taxes, and one count of mail fraud.

According to the prosecutors, from at least 2015 through 2019, Luong owned and operated Four Seasons Temp, Inc., an agency providing temporary workers for client businesses. When collecting payments from business clients, Luong cashed most checks rather than deposit the funds into her business account. Then, on annual corporate tax returns, Luong reported to the IRS only the amounts deposited to the business account and failed to pay federal taxes on more than $14 million of the company’s income. Additionally, because Luong created Four Seasons as an S-corporation, the net business income and expenses flowed through to her individual tax returns. As a result, Luong failed to report more than $3 million in pass-through income and failed to pay $885,000 in personal income taxes.

As the owner of the company, Luong also had an obligation to withhold taxes from wages paid to the employees. Despite this obligation, Luong paid more than $12 million of employee wages in cash “under the table.” She failed to withhold taxes from the cash wages and failed to pay more than $3 million in employment taxes she owed to the IRS.

Finally, Luong defrauded the firm’s workers’ compensation insurance carrier, Travelers, by concealing the cash wages paid to her employees. As a result, Luong defrauded the insurance carrier of $155,000 in premiums she should have paid, prosecutors said.

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