United States v. Estepa: False Payroll Scheme Leads to Conviction

The case of United States v. Estepa involved a federal prosecution for wire fraud and conspiracy related to government contracting. Javier Estepa and Diego Alejandro Estepa Vasquez, who operated Aaron Construction Group, were accused of falsifying payroll records to secure public housing contracts while failing to comply with the prevailing wage requirements of the Davis-Bacon Act. The Eleventh Circuit Court of Appeals upheld their convictions, finding sufficient evidence that the defendants knowingly engaged in a scheme to defraud Miami-Dade County by misrepresenting their compliance with federal wage laws.

Background and Legal Issues

Aaron Construction Group secured multiple contracts for federally funded public housing repair projects in Miami-Dade County. As a condition of these contracts, the company was required to comply with the Davis-Bacon Act, which mandates that contractors pay workers the local prevailing wage.

Federal investigators discovered that Aaron Construction:

• Misclassified subcontractors as employees to conceal their use and avoid reporting requirements.
• Submitted false certified payroll documents, listing workers who were not present and misrepresenting wages paid.
• Paid workers a flat rate rather than an hourly wage, failing to meet the prevailing wage standards.
• Omitted subcontractors from required county disclosures, falsely stating they did not use them.

Javier and Diego Estepa were indicted for wire fraud and conspiracy to commit wire fraud. The trial court found them guilty, sentencing Javier to 51 months and Diego to 41 months in prison. They appealed, arguing that their misrepresentations were immaterial and that there was insufficient evidence of fraudulent intent.

Court’s Analysis and Findings

The Eleventh Circuit affirmed the convictions, holding that:

• Material misrepresentations supported wire fraud convictions. The Estepas falsely certified compliance with the Davis-Bacon Act and concealed their use of subcontractors, which influenced the county’s decision to award and pay the contracts.
• The scheme to defraud was not an isolated mistake. Evidence showed a repeated pattern of misrepresentation over several years, including falsely signed payroll records and failure to disclose subcontractors.
• Financial loss was not required to prove wire fraud. The court rejected the defendants’ argument that Miami-Dade County suffered no economic harm, explaining that fraud statutes also punish schemes that involve deceit in obtaining government funds.
• The defendants acted with fraudulent intent. Testimony from subcontractors and payroll records demonstrated that the Estepas knowingly falsified documentation to mislead county officials and federal regulators.

The court emphasized that government contractors must strictly comply with prevailing wage laws and transparency requirements to ensure fair competition and protect workers’ rights.

Conclusion and Ruling

The Eleventh Circuit upheld the convictions of Javier and Diego Estepa for wire fraud and conspiracy. The case highlights the legal consequences of falsifying payroll records and misrepresenting compliance with the Davis-Bacon Act in government contracting.

Legal Guidance for Government Contractors

Ensuring compliance with prevailing wage laws and accurate payroll reporting is critical for contractors on federally funded projects. Our team at Whitcomb, Selinsky, PC assists clients in navigating compliance requirements, government investigations, and contracting disputes.