Florida targets ‘bad actors’ in check-cashing business

Aug 25, 2011

The following article was published in the South Florida Sun Sentinel on August 25, 2011:

Florida targets “bad actors” in check cashing business

By Doreen Hemlock

Florida’s chief financial officer wants to crack down on “certain bad actors” in the check-cashing industry.

Those stores are cashing checks as part of a scheme to help businesses evade paying insurance and taxes for their workers, Chief Financial Officer Jeff Atwater contends.

He says “shell” construction companies let other firms pretend to be insured under their worker compensation insurance policies. When the firms issue payroll and other checks, they are improperly cashed at the stores under the “shell” company’s name.

Branch estimated that the shell companies likely hid about $1 billion in undeclared payroll in the past couple of years. That in turn deprived insurance companies of about $200 million in workers’ comp premiums. And it meant roughly $27 million in payroll taxes not paid to Florida, Branch figured.

“The check-cashing stores involved make it look like the shell company owner is doing all the business, when multiple companies are involved, ” said Branch. “And they know that many times, the shell company owner doesn’t exist or has left the country.”

In June, David Rodriguez Socarras of Jacksonville was sentenced to four years in prison and ordered to pay more than $400,000 for running a “shell” company that had cashed at least 80 checks at a Jacksonville check-cashing store for more than $2.9 million, authorities said.

In 2008, four South Florida men pleaded guilty to involvement in a $15 million fraud ring based at the former Atlantic Check Cashing Store at Pompano Beach. One man was sentenced to two years and nine months in jail.

A spokesman for Florida’s cash-checking industry said the cashing businesses involved are “rogue stores,” often small operations whose main business is retail and not even check-cashing. The rogues are not among the larger check-cashing chains that are regulated by the state and organized in the industry group Financial Service Centers of Florida, said the group’s executive director Corey Mathews.

Many of the “rogue stores” fall under an exemption in Florida law that lets retail stores cash checks as an add-on service for customers. The exemption aims to let grocery and convenience stores help consumers cash small checks for personal use, with a limit up to $2,000 each. But schemers have taken advantage of that exemption to cash business checks for larger amounts at the stores, Mathews said.

“There’s little requirement for record-keeping by these non-regulated entities. And an officer would have to go in and try to cash a check for more than $2,000 [to find potential violations],” said Mathews, whose group represents about half of the 1,150 check-cashing companies now licensed by the state.

Other violators are licensed, butare independent operators, according to Atwater.

For example, Juan Rene Caro of Miami, owner of La Bamba Check Cashing, was convicted in 2009 of handling more than $132 million in transactions for companies and violating the Bank Secrecy Act and other federal regulations. He was given 18 years in jail, a $250,000 fine and was ordered to forfeit more than $11 million in cash and properties.

Mathews said his industry group would like more oversight of check-cashing at retailers. For checks of $1,000 or more, licensed stores must keep customer files with a copy of a photo ID, a thumbprint and a database including multiple transactions that total $1,000 or more for one person in one day, according to Florida law. Retailers need not keep that paperwork, he said.

The check-cashing industry also is willing to increase reporting of its transactions to the government — including filing information more often from its payroll advance database, said Mathews.

Florida’s Department of Insurance Fraud is offering a reward up to $25,000 for anyone who provides information that directly leads to an arrest and conviction in an insurance fraud scheme. Tipsters can remain anonymous. To date, the agency has awarded nearly $250,000 to about 40 people in the reward program. To report information on insurance fraud, call 800-378-0445.

Find this article here:  http://www.sun-sentinel.com/business/fl-check-cash-fraud-20110825,0,2191457.story