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Work & Commerce

Employment & Payroll Fraud

Creating fake employees on payroll, forming shell companies, or inflating payroll numbers to divert funds, commit unemployment fraud, or obtain larger government loans and credits than the business qualifies for.

01 — How it works

  1. 01

    Establish

    Set up a shell company and payroll or benefits accounts.

  2. 02

    Inflate

    Add ghost employees or falsify headcount.

  3. 03

    Draw

    Collect wages, loans, or credits on the inflated payroll.

  4. 04

    Launder

    Route the proceeds through other entities.

02 — Lifecycle

From first contact to detection.

  1. Structured

    Shell company and payroll accounts created.

  2. Inflated

    Ghost employees added or headcount falsified.

  3. Funded

    Loans, credits, or wages drawn on the fraud.

  4. Audited

    Discrepancies surface during review.

03 — Common variants

  • Ghost employees
  • Shell companies
  • Payroll inflation
  • Unemployment fraud

04 — Statutes & penalties

18 U.S.C. § 1343 (Wire Fraud), § 1341 (Mail Fraud); tax and employment laws

5–20+ years depending on scale, often combined with money-laundering or tax charges. Significant restitution and program debarment are common.

05 — How people are drawn in

Frequently framed as 'helping out a friend with their business,' 'easy extra income,' or 'getting on the books for a while.'

06 — Examples

  • Owners placing friends or family on payroll who perform no work, often combined with laundering.
  • Inflating employee counts and payroll on PPP/SBA applications or Employee Retention Tax Credit claims.
  • Using shell LLCs to bid on contracts or receive payments while hiding the real operators.