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Wisconsin Federal Case Sheds Light on Payroll Fraud, Wage Theft and Worker Misclassification

A Wisconsin drywall contractor was sentenced to 18 months in federal prison last month on charges of ripping off state and federal taxpayers to the tune of more than a half-million dollars.

The case in federal court was a rarity — the first big prosecution in the state of a construction labor broker for payroll fraud, according to Robb Kahl, executive director of the Construction Business Group, a joint labor-management organization that represents the interests of unions and contractors in monitoring the Wisconsin construction marketplace.

That’s despite what Kahl and other construction labor experts say is the widespread occurrence of the crimes that led to the man’s conviction.

“Unfortunately in construction it’s quite common,” Kahl says. “We’re pleased [by the prosecution] but it’s just the tip of the iceberg.”

Dane County drywall contractor Gustavo Reyes pleaded guilty in federal court in Madison in May to a charge of failing to pay $557,907 in back taxes. On Aug. 18 he was sentenced to 18 months in prison and ordered to pay the money.

There are also 20 liens for a total of $2.3 million against Reyes or his businesses, operating under several different names, for failure to pay state income taxes and unemployment insurance premiums, according to the Construction Business Group.

Over the years in which he was operating, going back a decade, there were “likely many dozens of employees” working for Reyes, says Kahl, “but there really is no way for us to know for certain.”

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