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Date: 10-21-2022

Case Style:

United States of America v. John Drago

Case Number: 18-cr-394

Judge: Gary R. Brown

Court: United States District Court for the Eastern District of New York (Nassau County)

Plaintiff's Attorney: United States Attorney’s Office

Defendant's Attorney:




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Description: Central Islip, New York criminal law lawyer represented Defendant charged with illegally structuring financial transactions and payroll tax evasion.

“John Drago, age 58, operated his check cashing business as a haven for tax cheats like himself, concealing over $9.5 million from the federal government,” stated United States Attorney Peace. “Today’s sentence demonstrates that significant consequences follow business owners who place greed above 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 pockets. Over several years, he used his employees do his dirty work and, at his request, they cashed checks in a way to avoid IRS reporting requirements, concealing more than $9.5 million in check cashing transactions. His scheme to make some extra cash has now resulted in him spending time behind bars, where he will no longer have any pockets to be lined," said Thomas Fattorusso, Special Agent in Charge of IRS-CI.

According to court filings and facts presented at 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 each cash transaction in excess of $10,000. In addition, a CTR is required to be filed by the financial institution when multiple checks, the total value of which exceeds $10,000, are cashed in a single day.

From January 2010 to October 31, 2013, Drago instructed employees to cash multiple checks in excess of $10,000 in a single day for certain customers without filing required CTRs. In addition, to avoid the required CTR filings, Drago directed employees to deposit and cash checks that had been submitted together on a single day in amounts in excess of $10,000. Drago also instructed employees to tell certain customers who presented individual checks in amounts exceeding $10,000 to return with multiple checks in amounts that were less than $10,000 to avoid the reporting requirement for such financial transactions. As a result of Drago’s scheme, more than $9.5 million in check cashing transactions were concealed from the IRS.

Between April 1, 2012 and July 31, 2013, Drago paid overtime wages and commissions to employees of the Kayla Companies in cash and failed to inform the IRS of the payment of these cash wages. Drago falsely underreported to the IRS the gross wages paid to his employees to avoid paying the full amount of Federal Insurance Contribution Act taxes that the Kayla Companies owed. In addition, as part of his plea, Drago agreed to pay restitution to the IRS for evading personal income taxes between 2010 and 2013. Overall, Drago’s payroll and personal tax evasion cost the IRS approximately $590,000.

The government’s case is being handled by the Office’s Long Island Criminal Division. Assistant United States Attorneys Burton T. Ryan, Jr., Bradley T. King and Madeline O’Connor are in charge of the prosecution.

31 U.S.C. 5318(h)(2) and 5322(a); 18 U.S.C. 2 and 3551 et seq. FAILURE TO MAINTAIN AN EFFECTIVE ANTI-MONEY LAUNDERING PROGRAM
(1s)

18 U.S.C. 1957, 2 and 3551 et seq. ENGAGING IN UNLAWFUL MONETARY TRANSACTIONS; Criminal Forfeiture Allegation 18 U.S.C. 982(a)(1) and 982(b)(1); 21 U.S.C. 853(p)
(2s)

31 U.S.C. 5313(a) and 5322(b); 18 U.S.C. 2 and 3551 et seq. FAILURE TO FILE CTRs; Criminal Forfeiture Allegation 31 U.S.C. 5317(c)(1)(A) and 5317(c)(1)(B); 21 U.S.C. 853(p)
(3s)

26 U.S.C. 7202; 18 U.S.C. 2 and 3551 et seq. Failure to Collect and Pay Over Taxes
(4)

26 U.S.C. 7202; 18 U.S.C. 2 and 3551 et seq. FAILURE TO COLLECT AND PAY OVER TAXES
(5s-7s)

26 U.S.C. 7202; 18 U.S.C. 2 and 3551 et seq. FAILURE TO COLLECT AND PAY OVER TAXES
(8s)


Outcome: JUDGMENT: Forty-eight (48) months imprisonment. Two (2) years supervised release with special conditions. Fine is waived. $100.00 special assessment.

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