LI Check-Cashing Business Owner Gets 4 Years In Prison For Fraud

CENTRAL ISLIP, NY — John Drago, 58, of Central Islip, the former owner and operator of several Long Island check-cashing businesses was sentenced to four years in prison Friday, for concealing more than $9.5 million by illegally structuring financial transactions and payroll tax evasion, according to prosecutors.

John Drago, of Central Islip, was also ordered to forfeit $253,000 and to pay restitution of about $593,000 by United States District Judge Gary R. Brown in court, officials said.

According to court filings and facts presented at the plea and sentencing proceedings, Drago owned and operated Kayla Check Cashing Corp., North Island Check Cashing Corp., South Island Check Cashing Corp., East Island Check Cashing Corp., Bay Shore Check Cashing Corp. and Brentwood Check Cashing Corp.

From January 2010 to October 31, 2013, Drago instructed employees to cash multiple checks in excess of $10,000 in a single day for certain customers without filing required Currency Transaction Reports (CTR), according to an investigation.

To avoid the required CTR filings, he directed employees to deposit and cash checks that had been submitted together on a single day in amounts in excess of $10,000.

Drago also instructed employees to tell certain customers who presented individual checks in amounts exceeding $10,000 to return with multiple checks in amounts that were less than $10,000, to avoid the reporting requirement for such financial transactions.

As a result of Drago’s scheme, more than $9.5 million in check cashing transactions were concealed from the IRS, prosecutors said.

Between April 1, 2012 and July 31, 2013, Drago paid overtime wages and commissions to employees of the Kayla Companies in cash and failed to inform the IRS of the payment of these cash wages.

He also falsely underreported to the IRS the gross wages paid to his employees to avoid paying the full amount of Federal Insurance Contribution Act taxes that the Kayla Companies owed.

"Over several years, he used his employees do his dirty work and, at his request, they cashed checks in a way to avoid IRS reporting requirements, concealing more than $9.5 million in check cashing transactions," said Thomas Fattorusso, special agent in charge of IRS-CI." His scheme to make some extra cash has now resulted in him spending time behind bars, where he will no longer have any pockets to be lined."

Drago pleaded guilty to fraud charges in September 2021.

As a result of his plea, he was required to surrender his check cashing licenses and federal money services business registrations. He is also barred from applying for any such licenses or registrations in the future.