LI check-cashing businesses violated $10G limit

The owner of a number of check-cashing businesses on Long Island was arrested Wednesday on an eight-count indictment, charging him with allowing customers to avoid having to report currency transactions over $10,000 to the federal government, officials said.

John Drago, 54, of St. James, also was charged with paying employees of his businesses in cash and failing to report that income to the Internal Revenue Service, as well as failing to pay the required FICA taxes on the unreported income, officials said.

The law requiring the reporting of currency transactions over $10,000 is designed to detect money laundering, possibly the result of illegal activities such as drug dealing or tax avoidance.

The federal government has prosecuted “numerous” of Drago’s clients on tax charges at U.S. District Court in Central Islip, said Burton Ryan, an Eastern District federal prosecutor. Some of those clients had avoided reporting over $1 million in cash, Ryan said. He did not provide further details on the prosecution of the clients.

Drago pleaded not guilty and was released on $500,000 bond by Magistrate A. Kathleen Tomlinson, pending further hearings. He declined to comment afterward, as did his attorney, David Siegal, of Manhattan.

Drago faces up to 10 years in prison, if convicted.

Eastern District U.S. Attorney Richard Donoghue said in a statement: “Drago flagrantly violated his obligations as the owner of check cashing business to follow federal regulations designed to prevent such businesses from money laundering; he also failed to fulfill his responsibility as an employer to pay proper taxes.”

Federal officials said among the businesses Drago operated were Kayla Check Cashing of Farmingdale; North Island Check Cashing of Elmont; South Island Check Cashing of Wyandanch; East Island Check Cashing of Hauppauge; and Bay Shore and Brentwood Check Cashing. Drago’s employees were paid through a management company he ran, Hogwarts, Inc., of Farmingdale, officials said.

According to officials, Drago instructed his employees to avoid having to report his customers’ receipt of over $10,000 in a number of ways.

Among them were having customers cash multiple checks in a single day, each not exceeding $10,000, and not filing the required reports; cash over several days, multiple checks submitted in a single day that exceeded a total of $10,000; and telling customers with checks greater than $10,000 to come back with a series of checks, each less than $10,000.