Henry Lam, who ran a Lowell staffing company called HL Temporary Services, was sentenced on Sept. 30, 2026 to 13 months in federal prison for hiding more than $6.2 million in payroll. Chief U.S. District Judge Denise J. Casper also ordered him to pay $1,652,573 in restitution and to serve two years of supervised release after he gets out, according to the U.S. Attorney’s Office in Massachusetts.
Prosecutors said the scheme ran from 2016 to 2023 and let Lam avoid more than $1.5 million in payroll taxes. He also used the false payroll numbers to buy workers’ compensation insurance at lower rates than the agency’s real payroll would have carried.
Anyone who works through a temp agency, or whose business hires one, has a stake in how that payroll is handled. Payroll taxes are supposed to be withheld, deposited and reported on every paycheck, and a worker paid mostly in cash has no wage record to match against the agency’s books. A W-2, the wage and tax statement an employer files for each worker, is the paper that shows what was reported in a worker’s name.
The quarterly Form 941 payroll tax return is the recurring deadline at the center of employer cases like this one.
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How the cash payroll worked
HL Temporary Services supplied temporary workers to client companies across New England, and the clients paid the agency by the hour for them. According to IRS Criminal Investigation, which published the release, Lam took those client checks to check-cashing businesses in the state and paid the workers mostly in cash.
That routing is what removed the payroll from view. Money that moves through a payroll system leaves a record of wages, withholding and employer tax deposits. Cash drawn from a check casher and handed to workers leaves none of that. The release puts the amount of payroll kept off the books at more than $6.2 million, and the payroll taxes that went unpaid as a result at more than $1.5 million.
The IRS says employers must deposit and report the federal income tax withheld from employees, plus both the employer and employee shares of Social Security and Medicare taxes, and must file a return on what they deposit. The agency’s employment tax page lists Form 941, the Employer’s Quarterly Federal Tax Return, as the quarterly filing. A business that pays in cash and keeps no payroll records is skipping all of those steps at once.
Two counts, two kinds of loss
Lam pleaded guilty in May 2026 to failure to collect and pay over taxes and to mail fraud. The first count covers the payroll taxes. The release also describes how the agency’s false payroll figures were used to obtain workers’ compensation insurance at lower premium rates, and the mail fraud count is the one that fits that conduct.
Workers’ compensation premiums are set partly by payroll, so understating payroll understates the premium. The Insurance Fraud Bureau of Massachusetts assisted in the investigation, and the insurer, not just the IRS, was on the receiving end of the false numbers.
The release gives one restitution figure, $1,652,573, and does not divide it between the tax loss and the insurance loss. The payroll-tax avoidance it cites is more than $1.5 million. Restitution is a court order to repay a loss, and it sits apart from the prison term and the supervised release.
From indictment to sentence
Lam was indicted in June 2025 and arrested the following month, July 2025. The plea came in May 2026, and the sentencing came about four months later. The case was announced by U.S. Attorney Leah B. Foley and Thomas Demeo, the IRS Criminal Investigation special agent in charge in Boston. Assistant U.S. Attorney Kristen A. Kearney of the Securities, Financial and Cyber Fraud Unit prosecuted it.
The release does not give Lam’s age or say whether he has been told where to report, and it does not mention any forfeiture order. It also names no client companies, and nothing in it suggests the clients were accused of wrongdoing.
Checking where an agency placement’s pay comes from
The free official reference for employer obligations is the IRS page on employment taxes, which covers deposits, quarterly returns and the forms that go with them. For workers, the practical check is the paperwork: pay stubs that show withholding, and a W-2 in January that matches what was actually earned.
A worker paid in cash with no stub has nothing to hand a tax preparer or to compare against Social Security earnings later. A business that uses staffing agencies can ask for proof that the agency carries workers’ compensation coverage and that its payroll tax returns are being filed.
The Massachusetts numbers close the loop: more than $6.2 million in payroll hidden between 2016 and 2023, more than $1.5 million in payroll taxes avoided, 13 months in prison and $1,652,573 in restitution, all announced by the U.S. Attorney’s Office in Boston on Sept. 30.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
