Owner of Orange County staffing companies pleads guilty to tax crimes, admits to cheating IRS out of nearly $60 million

Date: Sept. 5, 2024

Contact: [email protected]

Riverside, CA - The owner of Orange County-based temporary staffing companies pleaded guilty today to two federal criminal charges for willfully evading the payment of nearly $30 million in taxes, penalties and interest, assessed against him to the IRS as well as causing a false tax return to be filed with the IRS as part of defendant's efforts to conceal nearly $30 million in additional tax liabilities incurred by his staffing companies.

Luis E. Perez, who has maintained residences in Anaheim Hills, Yorba Linda, and Dove Canyon, pleaded guilty to one count of tax evasion and one count of aiding and assisting in the preparation of a false tax return.

"This defendant's greed and lies lasted over a decade and caused tens of millions of dollars in unpaid taxes to the IRS so he could live a lavish lifestyle," said United States Attorney Martin Estrada. "Today's guilty plea shows my office will continue to aggressively prosecute tax offenders who fail to pay their fair share to the federal fisc and hold corporate executives accountable for violating their obligations."

"For nearly a decade, Mr. Perez committed tax evasion by withholding millions of dollars in payroll taxes from employee paychecks and using that money to purchase luxury items for himself," said Acting Special Agent in Charge Jose Gonzalez, IRS Criminal Investigation (IRS-CI), Los Angeles Field Office. "As a business owner, he had a duty to his employees and to the IRS, yet despite attempts by the IRS to work with Mr. Perez, he lied and continued to report false information. IRS Criminal Investigation will exhaust all avenues to pursue tax criminals, all of whom place additional burden on honest taxpaying Americans."

According to his plea agreement, Perez's companies - which include Checkmates Staffing Inc.; Staffaide Inc.; BaronHR, LLC; BaronHR West Inc.; and Fortress Holding Group LLC - were required to withhold taxes from employee wages and to pay the withheld amounts to the IRS on a periodic basis. These withheld taxes, sometimes known as "trust fund taxes," include income taxes and Federal Insurance Contributions Act (FICA) taxes that fund Social Security and Medicare.

From May 2009 to January 2017, Perez's companies failed to pay the IRS the payroll taxes for the tax years 2001, 2002, 2003, 2006, 2007, 2008 and 2010, including trust fund taxes that Perez's companies withheld from employees' paychecks. Beginning in June 2007, the IRS attempted to collect Perez's outstanding tax liability, including penalties and interest. By February 2017, the outstanding balance had grown to $29,593,378, which included the unpaid taxes, interest and the "Trust Fund Recovery Penalty."

Perez attempted to thwart the IRS's collection efforts by purchasing luxury items from his business bank accounts - including numerous cars and a boat - and concealing his ownership by placing the titles of these items in the names of his businesses and other individuals. Those luxury items included a Ferrari 360 Spider F, a Rolls Royce Phantom, a Duffy D 22 Bay Island boat, a Mercedes-Benz SLS, a Mercedes-Benz G-Class, and a Lamborghini Aventador. Perez also evaded the IRS's collection efforts by obtaining a Visa Black credit card in the name of another person (now his wife) to make personal purchases and paid off the credit card using funds from his business bank accounts.

As part of his efforts to impede the IRS, Perez lied to IRS revenue officers during interviews and failed to include material information in documents submitted to the IRS. For example, Perez falsely claimed that he received a salary of only $1,000 per week from BaronHR and he did not receive any other funds from the company, when in fact Perez distributed money to himself from his businesses by making payments to his now wife for Perez's benefit.

While on pretrial release for the abovementioned criminal conduct, Perez engaged in additional criminal tax violations. From October 2018 to August 2019, Perez willfully aided and assisted in the preparation of false tax returns that substantially understated the wages paid to the employees of Anaheim-based temporary staffing company BaronHR West from January 2018 through June 2019. Specifically, Perez admitted in his plea agreement that he caused BaronHR West to underreport employee wages and other compensation paid by the company by approximately $130,879,521, which resulted in the company's failure to pay approximately $29,633,516 in federal employment taxes.

United States District Judge Kenly Kiya Kato scheduled a January 16, 2025, sentencing hearing, at which time he will face a statutory maximum sentence of eight years in federal prison.

Perez has been in federal custody since August 15, when a federal magistrate judge revoked his bond after a two-day evidentiary hearing finding probable cause to believe that Perez had violated the terms of his pretrial release by committing still more criminal tax violations between 2021 and 2023. In a motion to revoke Perez's bond filed with the court on August 2, the government alleged that Perez had willfully caused his staffing companies to fail to pay over $25 million in federal payroll taxes (including over $13 million in federal trust fund taxes withheld from employee wages) since March 2021.

IRS-CI investigated this matter.

Assistant United States Attorneys Brett A. Sagel of the Corporate and Securities Fraud Strike Force, James C. Hughes of the Major Frauds Section, and Robert A. Kemins of the Department of Justice Tax Division are prosecuting this case.

IRS-CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. IRS-CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.

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