Washington Man Sentenced to 8 Years for $89 Million Construction Payroll Tax Fraud

SEATTLE — A Washington state man was sentenced on June 21 to eight years in federal prison for his central role in a sprawling $89 million payroll scheme that enabled construction contractors to evade millions in federal taxes and state insurance premiums by paying workers off the books.

Denis Voronenko, a Ukrainian national residing in Washington, was convicted by a federal jury in October 2023 for orchestrating a system of shell companies that provided fraudulent payroll services to construction firms. According to the Department of Justice, from 2017 to 2020, Voronenko and his co-conspirators used these entities to cash checks from contractors and then pay construction workers in cash, bypassing legal payroll requirements. The scheme resulted in an estimated tax loss to the IRS of at least $15 million and a loss of over $6.8 million to the Washington State Department of Labor and Industries (L&I).

While the headline focuses on the mastermind, the real risk for many small and mid-sized businesses lies with the contractors who used these fraudulent services. In our experience, construction and other labor-intensive industries are rife with 'too good to be true' subcontractor bids that are only possible through illegal practices like this. Engaging with such vendors, knowingly or not, exposes a company to immense liability, including audits, back taxes, and severe penalties that can cripple a business.

The operation involved a network of shell companies, including Trendi Homes, LLC, and others registered in Washington state. Construction contractors would issue checks to these shell companies for the purported cost of labor. Voronenko and his associates would then cash these checks at a local check-cashing business operated by co-conspirator Saulius Poliakas. The cash was then used to pay the construction workers, with no taxes withheld or paid, including federal income taxes, Social Security, and Medicare (FICA taxes).

This practice, often referred to as a “payroll tax scheme,” allowed the participating construction contractors to submit artificially low bids for projects, undercutting competitors who followed the law. By avoiding their employer tax obligations, they gained an unfair market advantage while depriving federal and state governments of essential revenue. Furthermore, by not paying into the state's workers' compensation fund, they left their workers without coverage for job-site injuries.

"Mr. Voronenko’s scheme not only cheated the U.S. government, it also left his workers vulnerable and exposed, and gave his clients an unfair advantage over their competitors,” said U.S. Attorney Tessa M. Gorman in a statement. “This significant prison sentence sends a message that those who line their own pockets by undermining our tax system will be held accountable.”

Voronenko was found guilty of conspiracy to defraud the United States, five counts of willful failure to pay over taxes, and five counts of aiding and assisting in the filing of false tax returns. The investigation was a multi-agency effort involving IRS Criminal Investigation (CI), Homeland Security Investigations (HSI), and the Washington State Department of Labor & Industries.

This case underscores the critical need for rigorous due diligence and transparent financial systems. It's not enough to simply accept a low bid; business owners must verify that their partners are compliant with all tax and labor laws. This is where professional oversight becomes invaluable. Having robust internal controls or leveraging outsourced CFO services can prevent a company from becoming entangled in a criminal enterprise. The cost of compliance is always lower than the cost of a federal investigation. For businesses looking to ensure their payroll and tax systems are fully compliant, the team at C&S Finance Group LLC at csfinancegroup.com provides expert guidance on tax preparation and compliance.

Several other individuals have been charged and have pleaded guilty for their roles in the scheme. Poliakas, the check casher, pleaded guilty and was sentenced for his involvement. Additionally, multiple construction company owners who used Voronenko’s services have also pleaded guilty to filing false tax returns, acknowledging their complicity in the fraud. These related cases demonstrate the extensive reach of the investigation and the broad liability for all parties involved in such arrangements.

Officials emphasized the seriousness of payroll tax crimes. “This sentencing should serve as a warning to those who use the ‘cash economy’ to commit tax fraud and hide their income,” stated Special Agent in Charge Adam Jobes of IRS CI. “Employers who pay their employees in cash ‘under the table’ are not only cheating the U.S. government, but they are also cheating their employees out of future benefits.”

Federal prosecutors are continuing to pursue charges against other contractors who participated in the scheme. The sentencing of Voronenko represents a significant milestone in the case, but it also signals ongoing enforcement efforts targeting tax fraud within the construction industry and other sectors that rely heavily on subcontracted labor.