[Update, February 17, 2023: On February 16 the criminal was sentenced to 96 months in prison.]
While we are all rooting for Ukraine, some individuals from that country do not warrant even a single cheer. Case in point: Oleksandr Morgunov, a resident of Key West and one-time illegal alien, who has just pleaded guilty to cheating IRS – and our Social Security and Medicare programs – of $7.9 million dollars.
How did he do that? As the reader might expect, he did it with others (also with Ukrainian names) by running a group of labor broker agencies that supplied illegal-alien workers to “hotels, bars and restaurants” over a period of five years, according to a Law360 article.
Two other people with Ukrainian names were indicted as well, and others have returned to Ukraine rather than face federal charges. Morgunov was on his way to Ukraine when he was arrested in a Dutch airport on a U.S. warrant; he subsequently was returned to the U.S.
Three aspects of the case are intriguing, none of which were mentioned in the Law360 reporting:
- Some court documents (it is PACER case 4:21-cr-10008-JEM) argue that this was a case of “selective prosecution”, saying that the government should have sued the big hotels and restaurants that used the illegal-alien workers for the missing $7.9 million, rather than the defendants;
- Two unindicted co-conspirators, O.O., and O.Y., and Morgunov were all identified as coming to the U.S. on exchange-visitor visas, an unusual vehicle for crooks;
- The missing funds were listed as Medicare and Social Security withholdings, and 5 percent of payroll for income taxes; this formula leaves out a fourth federal entity, the Federal Unemployment Insurance program, which funds the operation of the unemployment insurance system but not the UI checks themselves. Employers routinely pay all four of these systems, but not in this case.
Each of these aspects is troublesome for different reasons.
The “didn’t sue the big guys” issue is both a continuing problem of social justice, and suggests an approach to recovering the missing funds that is likely to fail. On the first point this is the old story, with many a big grower of, say oranges, failing to see to it that withholdings are made for the trust funds and blaming the (probably minority) crew leader for the loss of funds.
The little guy in the conspiracy easier to prosecute, but at the same time is unlikely to have the resources to repay the trust funds. This is an arrangement that the media routinely misses.
As to the fact three of the five co-conspirators in this case arrived in the U.S. through J-1 exchange programs – one would hope that the indictment would shed a little information on how that lightly-regulated visa program could be used by bad guys. Did they arrive through three separate programs? Unlikely. Indictment writers seem to be narrowly focused on specific issues that lead to criminal trials, and to reduce the contents of the indictments to bare bone recital of facts, never dealing with side issues that might be useful to policy makers and administrators – as I think they should.
The J-1 program is run by the U.S. Department of State, which has no states-side regional staff to oversee it. It deals with cultural exchanges of various kinds, and often works through universities.
The third oddity – the lack of any reference to the Federal Unemployment Tax Act (FUTA) – is simply a failing on the part of the U.S. Attorneys handling the case and is costly to the Labor Department and to the nationwide collection of Employment Security offices. This program taxes the first $7,000 of a worker’s wages at six percent, or a maximum of $420 a year. If the Ukrainians’ agencies had, say, 100 workers (paid $7,000 or more) for each of five years that would have created a FUTA obligation of $210,000. If they had 200 workers it would have been $420,000.