Federal Investigation of My Staffing Agency

Welcome to Spodek Law Group. Our goal is to give you the reality of federal investigations targeting staffing agencies - not the sanitized version other lawyers present, not the "don't worry until you're charged" fiction, but the actual truth about what happens when the federal government decides your business is worth investigating. What follows in this article is going to be uncomfortable. It should be.

The staffing industry sits at the intersection of everything federal prosecutors love to charge: employment taxes, immigration violations, worker classification disputes, payroll fraud, and post-COVID PPP issues. Your business model - the one that seemed perfectly reasonable when you built it - looks like a criminal enterprise to an investigator reviewing your records. And here's what nobody tells staffing agency owners until it's too late: by the time you find out you're under investigation, the government has likely been building your case for months or years. They've already subpoenaed your bank records. They've already talked to your clients. They've already decided you're probably guilty. Now they're just documenting.

That's the part that destroys people. Not the investigation itself. The fact that it was happening in the dark while you kept running your business, generating more evidence against yourself every single day.

The Moment Everything Changes

Most staffing agency owners learn about federal investigations one of three ways. Federal agents show up at there office unannounced - FBI, IRS Criminal Investigation, Homeland Security Investigations, sometimes all three together. Or they recieve what's called a "target letter" from a US Attorney's office informing them they're the subject of a grand jury investigation. Or they get a call from a client saying investigators have been asking questions about your company.

Heres the thing none of those scenarios prepare you for. The investigation didnt start when you found out. It started months ago. Maybe a year ago. Maybe longer. The government has been working on your case the entire time you were running your business thinking everything was normal. That gap - between when they started and when you learned - is where cases are won or lost. And for most staffing agency owners, thats the gap were they lose everything.

Federal investigators dont announce themselves until they have what they need. IRS Criminal Investigation maintains a 90% federal conviction rate. Think about that. Let that sink in for a moment. They dont charge cases they might lose. By the time your name is attached to an indictment, theyve already determined they can prove it.

What's Actually Happening to Staffing Agencies Right Now

In November 2025, an Orange County staffing company owner named Lorena Padilla was arrested on an eight-count federal indictment. The charge: masterminding a $90 million tax fraud scheme. According to prosecutors, she failed to pay employment taxes withheld from temporary workers wages for over twelve years - from 2012 to 2024. Twelve years of building a case. Twelve years before she had any idea she was being watched.

Heres were it gets worse. The assets seized in that case included a $3 million ranch in Riverside, a $2.5 million home in Whittier, a $3.5 million home in Yorba Linda, plus rental properties and luxury vacations documented across Hawaii, Tokyo, Paris, Dubai, Italy, and Aspen. Everything purchased with employment taxes that belonged to the IRS. Everything gone.

The same month, a Nexus Services executive was sentanced to 6.5 years in federal prison for employment tax fraud in Virginia. In January 2025, two Ukrainian nationals who ran labor staffing companies in Florida - Paradise Choice LLC, Tropical City Services - were each sentanced to fifteen years. They tried to flee to Thailand. Federal investigators tracked them there and had them extradited back to face charges.

And heres the kicker. These arent outliers. These are the pattern. Homeland Security Investigations has announced a target of 6,000 I-9 audits per month across there 30 field offices. Thats up from 1,360 audits in all of fiscal year 2017. The enforcement pressure on staffing agencies isnt increasing gradualy - its exploding exponentialy.

Look, I need to be direct with you about something. The government doesnt pick just one charge. They stack them. Your staffing agency can face criminal exposure under at least six different federal statutory frameworks, often all at once.

The Menu of Charges Federal Prosecutors Pick From

Employment Tax Fraud under 26 USC 7202 and 7206. Failing to collect, account for, or pay over employment taxes. Each quarter you didnt pay becomes a seperate count. Each count carries up to five years. Do the math on how many quarters your agency has operated. Thats the exposure.

Wire Fraud under 18 USC 1343. If you used email, phones, or banking systems in connection with any scheme to defraud - clients, workers, the government - thats wire fraud. Twenty years per count. And lets be honest, basicly everything involves wire transfers now.

Money Laundering under 18 USC 1956. Moving money through the banking system to conceal its nature. This gets added whenever theres underlying fraud. Another twenty years per count. The transactions that felt completly normal to you look like structuring to federal prosecutors.

Immigration Violations under 8 USC 1324. "Harboring" undocumented workers doesnt require hiding them in a basement. Providing transportation to worksites, helping with housing, paying wages - prosecutors argue thats harboring. Up to ten years if for financial gain. Sound familiar? Thats the staffing business model.

Worker Misclassification has become a DOJ priority since the 2022 DOJ-DOL Memorandum of Understanding specificaly targeting "business models designed to evade legal accountability." Stop and think about that phrasing. Thats you. Thats the staffing industry as a whole. Not criminal intent - business model.

PPP Fraud if you recieved Paycheck Protection Program loans. The statute of limitations was extended to ten years. Prosecutions are accelarating, not winding down. Conviction rate: 81.8%. Sentences in 2024-2025 are running 40% longer then sentences for identical conduct in 2021-2022.

Heres were most staffing owners get blindsided. The same underlying conduct - lets say failing to pay employment taxes on workers you knew wernt authorized - can be charged under multiple statutes simultaneosly. Tax fraud plus immigration violations plus wire fraud plus money laundering. Each carrying its own sentance range. Each stacking on top of the others.

Why Your Business Model Looks Like a Crime to Investigators

Staffing agencies have characteristics that federal investigators have been trained to view as red flags. This doesnt mean your running a criminal enterprise. It means your running a business thats structurally vulnerable to prosecution even when your trying to comply.

High employee turnover means incomplete records, I-9 problems, and difficalty tracking who worked when. Cash-intensive operations - even if legitamate - look like structuring to avoid reporting requirements. Multiple corporate entities look like shell companies. Relationships with immigrant worker populations trigger immigration enforcement interest.

In the Maryland SND Services case, prosecutors alleged the owners failed to pay over $10.4 million in employment taxes while purchasing million-dollar homes and luxury vehicles. The lifestyle evidence - what you spend versus what you report - becomes part of the case. Your accountent might think your being tax efficent. Investigators think your evading.

The trap is this: the staffing industry business model evolved to handle practical operational challenges. High turnover. Variable labor needs. Payroll complexity. But the same model that works operationaly looks, on paper, exactly like the fraud schemes federal prosecutors have been trained to identify.

And heres the part nobody talks about. Once your records are subpoenad, you dont get to explain context. You dont get to say "thats not what it looks like." Your records become evidence in someone elses narrative about what you did. The story they tell about your business is the story the jury hears.

The Three Decisions That Destroy Staffing Agency Owners

When staffing agency owners first learn about federal investigations, they almost always make one of three catastrophic mistakes. At Spodek Law Group, weve seen these patterns destroy cases that might otherwise have been defenseable.

Mistake One: Talking to Investigators Without an Attorney

Heres what federal agents will tell you. "Your not the target, were just trying to understand the business." "Hiring a lawyer makes you look guilty." "If you cooperate now, we can resolve this quickly." Every single one of these statements is designed to extract information before you retain counsel. Its a trap. Thats not my opinion. Thats there training.

Its a federal crime to lie to investigators - even if your not under oath, even in a casual conversation, even about things that seem irrelevent. 18 USC 1001. And "lie" includes misremembering, getting dates wrong, or stating something you beleive is true but turns out not to be. The more you talk, the more charges you create against yourself.

Mistake Two: Trying to "Fix" the Problem

You learn about an investigation and your first instinct is to correct the records, pay back taxes, terminate problematic employees. Dont. Once an investigation is underway, attempts to alter records become obstruction of justice. Paying back taxes can be characterized as consciousness of guilt. Terminating employees who might be witnesses looks like witness tampering.

Think about that for a second. The window for fixing compliance problems closes the moment a federal investigation begins. Anything you do after that point gets interpreted through the lens of someone trying to cover there tracks. The helpful instinct becomes the criminal act.

Mistake Three: Assuming Your Corporate Structure Protects You

You set up an LLC. You have corporate formalities. You think the business takes the hit and you walk away. Wrong. The "responsible person penalty" makes business owners personaly liable for unpaid employment taxes regardless of corporate form. And prosecutors pierce corporate structures routinely when theres evidence of fraud.

The Florida staffing owners - the ones who got fifteen years each - had multiple corporate entities. Didnt matter. They went to prison personally. The corporate veil provides exactly zero protection in federal criminal prosecution.

How Cases Actually Get Built Against Staffing Companies

OK so let me show you the pipeline nobody explains. This is how a routine I-9 audit transforms into a federal criminal prosecution. Step by step. Exactly how it happens.

Step one. HSI issues a Notice of Inspection demanding your I-9 forms for the past three years. You might think this is just paperwork compliance. Its not. HSI's explicit strategy uses I-9 audits as a "gateway to prove employers knowingly hired undocumented workers." The audit is the foot in the door.

Step two. During the "audit," investigators request additional records. Payroll information. Bank statements. Client contracts. Your trying to be cooperative so you provide everything they ask for. You dont realize your building there case for them with every document you hand over.

Step three. Payroll records reveal discrepancies. Workers paid in cash. Employment taxes withheld but not paid over. Social Security numbers that dont match. This gets referred to IRS Criminal Investigation. Now its not about I-9s anymore. Now its about tax fraud.

Step four. Grand jury subpoenas. Now its criminal. Your employees are being interviewed. Your clients are being interviewed. Your bank is producing years of records you forgot you even had. And some of those employees? Theyre being offered immunity in exchange for testimony against you.

Step five. Indictment. Multiple counts. Tax fraud. Wire fraud. Money laundering. Immigration violations. Your assets are forfeited before trial - the government seizes your bank accounts, your house, your cars under civil forfeiture. You havent been convicted of anything and youve already lost everything you built.

This pipeline runs the same way in case after case. The Massachusetts temp agency owner who cashed checks instead of depositing them. The Pennsylvania staffing owner who provided housing for unauthorized workers. The St. Paul agency owner who paid employees partially in cash. The pattern is consistant because the investigative playbook is standardized.

The Multi-Agency Coordination That Makes This Worse

Heres what makes staffing agency investigations particuarly devastating. Federal agencies dont work in isolation anymore. When DOL finds wage violations, they notify IRS about unreported wages. When IRS finds unpaid payroll taxes, they notify ICE about potential unauthorized workers. When ICE does an I-9 audit, they share findings with both.

One investigation becomes three. Three agencies looking at your records. Three angles of criminal exposure. And each agency has there own prosecutors, there own statutes, there own charging decisions.

The 2022 DOJ-DOL Memorandum of Understanding formalized this coordination. The agencies now explicitely share information and coordinate enforcement. That memo specificaly targets "business models designed to evade legal accountability through labor exploitation." Notice the phrase. Business models. Not criminal intent. Business models.

Your staffing agency - the way its structured, the way it operates - might fit that description even if you never intended to evade anything. And now multiple federal agencies are reviewing your operations simultaneosly.

What Happens When Your Workers Become Witnesses

Heres the part that really destroys staffing agency owners. The workers you thought you were helping? The ones you paid cash to because they needed it? The ones whose documentation issues you overlooked because you wanted to give them a chance?

Those workers become the governments witnesses.

Federal prosecutors offer immunity in exchange for testimony. The employee who was grateful for the job becomes the witness who explains exactly how you knew the I-9s wernt right. The worker you paid in cash testifies about receiving those payments. The person you thought you were protecting testifies to protect themselves.

Its not personal. Its how the system works. And its devastatingly effective because those witnesses have first-hand knowledge of everything you did. Every payment. Every conversation. Every decision.

The Window That Closes Fast

Heres what Todd Spodek tells staffing agency owners who come to him worried about federal exposure. The window between learning about an investigation and formal charges is everything. Its the only time proactive defense matters. Once your indicted, your playing defense. Before indictment, you have options.

A federal defense attorney can contact the investigating agents and prosecutors to announce representation. This stops direct contact with you immediately - all communication goes through counsel. That alone prevents the "casual conversation" trap that creates 1001 charges.

An attorney can review what records investigators have likely accessed and assess the actual exposure. Sometimes what looks catastrophic is actually managable. Sometimes what looks minor is actualy serious. You cant know without understanding what they have.

In some cases - not all, but some - early intervention can persuade prosecutors not to charge at all. Or to charge lesser offenses. Or to structure a resolution that doesnt involve prison. That window exists only before indictment. After indictment your negotiating from weakness.

IRS Criminal Investigation has a 90% conviction rate. DOJ obtains convictions in the overwhelming majority of cases they bring. The sentences are significant - fifteen years for the Florida staffing owners, six and a half years for the Virginia executive, eight years for the California scheme, 75 months for the Tennessee staffing company, years in federal prison across case after case.

But that 90% conviction rate also means this: they chose not to charge in the other cases. The ones where defense counsel got involved early. The ones were prosecutors decided the evidence wasnt strong enough. The ones were a different resolution made more sense. Those cases exist. And the difference is almost always timing.

What Happens Next Depends on What You Do Now

If your reading this, you probably found it because something happened. Maybe agents showed up. Maybe you got a letter. Maybe a client mentioned investigators asking questions. Maybe you just have a bad feeling about your compliance situation and your trying to understand the exposure.

Whatever brought you here, understand this. The clock started ticking before you knew it. Every day that passes is a day the government continues building there case. Every day you wait is a day you cant get back. The decisions you make in the next 48 hours could determine whether you spend the next decade running your business or sitting in a federal prison cell. That sounds dramatic becuase it is dramatic. But its also exactly what happened to the staffing owners in the cases I described above.

At Spodek Law Group, we handle federal investigations and prosecutions involving staffing agencies, employment tax issues, immigration violations, and white collar matters. We know how these cases are built. We know how to intervene. We know what the government needs to prove and were the weaknesses are.

The staffing industry isnt going away. Neither is federal enforcement. The question is whether your one of the statistics or whether you got ahead of it. The difference between those outcomes often comes down to a single decision made in the first 48 hours.

Call us at 212-300-5196. The consultation is confidential. The window is closing. Use the time you have.