Earlier today in federal court in Central Islip, John Drago, the former owner/operator of several check cashing businesses on Long Island, was sentenced to 4 years in prison for illegally structuring financial transactions and payroll tax evasion. The proceedings took place before U.S. District Judge Gary R. Brown. In addition to his prison sentence, Judge Brown ordered Drago to confiscate $253,000 and pay restitution of approximately $593,000. Drago pleaded guilty to fraud charges in September 2021. As a result of his plea, Drago had to relinquish his check cashing licenses, federal money services business registrations, and is prohibited from applying for such licenses or registrations in the future.
Breon Peace, United States Attorney for the Eastern District of New York, and Thomas Fattorusso, Special Agent in Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI) announced the sentence.
“Drago operated his check cashing business as a haven for tax cheats like himself, hiding more than $9.5 million from the federal government,” the U.S. peace attorney said. “Today’s sentence demonstrates that significant consequences follow business owners who place greed above the public good.”
Mr. Peace expressed his thanks to the New York State Department of Financial Services for their assistance.
“Drago used his seemingly legitimate check cashing business to defraud the government while lining his own pockets. For several years he used his employees to do his dirty work and, at his behest, they cashed checks way to avoid IRS reporting requirements, hiding more than $9.5 million in check cashing transactions.His plan to earn extra money has now led him to spend time behind the bars, where he will have no more pockets to fill,” said Thomas Fattorusso, Special Agent in Charge of the IRS-CI.
According to court documents and facts presented during the plea and sentencing proceedings, Drago owned and operated check cashing businesses on Long Island, including 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. (collectively, the “Kayla Companies”). Financial institutions are required to file a Currency Transaction Report (CTR) for every cash transaction over $10,000. In addition, a CTR must be filed by the financial institution when several checks, whose total value exceeds $10,000, are cashed in a single day.
From January 2010 to October 31, 2013, Drago instructed employees to cash multiple checks over $10,000 in a single day for certain customers without depositing the required CTRs. Additionally, to avoid required CTR deposits, Drago instructed employees to deposit and cash checks that had been submitted together in a single day for amounts over $10,000. Drago also instructed employees to tell some customers who presented individual checks over $10,000 to come back with multiple checks under $10,000 to avoid the reporting requirement for such financial transactions. As a result of Drago’s scheme, over $9.5 million in check cashing transactions were hidden from the IRS.
Between April 1, 2012 and July 31, 2013, Drago paid cash overtime wages and commissions to employees of the Kayla companies and did not notify the IRS of the payment of such cash wages. Drago falsely underreported gross wages paid to his employees to the IRS to avoid paying the full amount of Federal Insurance Contribution Act taxes the Kayla companies owed. Additionally, as part of his plea, Drago agreed to pay compensation to the IRS for evading personal income tax between 2010 and 2013. Overall, payroll and tax evasion individuals from Drago cost the IRS approximately $590,000.
The government’s case is being handled by the Bureau’s Long Island Criminal Division. Assistant United States Attorneys Burton T. Ryan, Jr., Bradley T. King, and Madeline O’Connor are charged with the prosecution.
Age: 58 years old
Central Islip, New York
EDNY File No. 18-CR-394 (S-1) (GRB)