Exposing Fraud. Protecting Workers. Restoring Fairness.

Staffing-Firm Owner Allegedly Orchestrates a $90 Million Tax-Fraud Scheme

November 22, 2025•3 min read

In Southern California, federal prosecutors have brought charges against the owner of multiple staffing companies in a sweeping tax-fraud case. According to the U.S. Department of Justice (DOJ) press release, the lead defendant, Lorena Padilla (49, of Villa Park) controlled a network of staffing and payroll-service firms like Next Level Staffing and others — that supplied temporary workers (many of whom were undocumented) to client businesses in Los Angeles and Riverside counties.

From January 2012 to September 2024, prosecutors allege Padilla and her co-defendants lied to client companies by claiming they’d handle payroll taxes and workers’ compensation insurance properly. But in reality, they systematically failed to remit employment taxes, under-paid or neglected workers’ compensation premiums, and recruited undocumented workers who were less likely to report the misconduct.

The losses to the U.S. Treasury are alleged to exceed $90 million, including more than $44 million in understated federal employment taxes alone between 2020 and 2025.

Padilla and others are charged with one count of wire-fraud conspiracy, one count of money-laundering conspiracy, and six counts of failing to account for and pay over employment taxes. If convicted, they face up to 20 years for the wire-fraud count, up to 10 years for money-laundering, and up to five years for each tax‐violation.

The Broader Tax-Fraud Scheme: Undocumented Hiring as a Lever

A companion article reported by the Orange County Register (though the full text was behind a pay‐wall) focuses on the mechanism by which this alleged tax-fraud scheme operated: heavy reliance on undocumented immigrant labor. According to the headline and excerpt, prosecutors allege that using undocumented workers allowed the staffing firms to drastically reduce compliance risks (from their perspective) because undocumented workers are less likely to file federal returns or report failures to pay employment taxes.

This recruitment strategy enabled the staffing firms to cut costs and undercut legitimate competitors, while shifting substantial tax and insurance burdens onto the government and honest businesses.

Implications & Lessons

For businesses and staffing-agencies, this case sends several important signals:

Risk of non-compliance: When a firm claims to handle payroll taxes and workers’ compensation but fails to, both the staffing company and the client could face serious exposure.
Undocumented labor adds risk: Hiring undocumented workers may seem like lower cost in the short term but dramatically raises legal, tax, and reputational risk.
Due diligence is critical: Clients should vet their staffing-service partners. Ensuring workers are properly classified, payroll taxes withheld/paid, and insurance (like WWC) is valid.
Enforcement is serious: Government agencies are actively pursuing major schemes of this sort, with huge dollar amounts at stake and significant prison exposure.
Fair-play matters: The scheme allegedly gave unfair competitive advantage to those violating rules, which harms bona-fide businesses and the broader labor market.

For a firm such as CheckMyCert.org (which you work with, helping verify workers’ compensation certificates), this case provides a vivid example of why certificate verification and compliance audits are more than “paperwork” — they’re essential risk-mitigation tools for businesses using staffing agencies.

Final Thoughts

This dual set of articles shows how a large-scale scheme used a staffing company network, undocumented labor, and false representations of tax and insurance compliance to allegedly divert more than $90 million in federal employment taxes. The links below provide the direct sources for further reading.

Resources: