Utah HVAC Contractor Convicted on 11 Felonies for Hiding $780,000 in Wages

A jury took less than a week to convict a Tooele County, Utah HVAC business owner of 11 felonies after he hid more than $780,000 in employee wages over a six-year period through off-the-books payments, manipulated payroll records, and false tax filings.

Wayne Margetts, 63, was found guilty on May 1, 2026, following a five-day trial in Third District Court. The charges included five counts of tax evasion, five counts of rendering a false tax return or supplying false information, and one count of pattern of unlawful activity. Sentencing is scheduled for June 4, 2026.

According to the Utah Office of the Attorney General and the State Tax Commission’s Criminal Investigation Unit, Margetts’ company paid approximately $1.6 million in compensation to more than 30 employees between 2013 and 2018 but reported only about $820,000 to the state. The $780,000+ gap stemmed from multiple deliberate practices that violated Utah’s requirement for employers to withhold state income tax from wages and remit it quarterly.

How the Scheme Operated

Investigators uncovered a consistent pattern. Margetts routinely underreported employees’ hours, frequently listing them as working 24 hours or fewer per week when they logged 40 hours. In 2014, 93% of pay stubs showed 24 hours or less despite full-time work.

He manipulated wage rates on paper while paying higher amounts through unreported channels. Former employees told investigators that Margetts “likes to claim people’s wages at 24 hours per week, and the rest of it he pays people under the table.”

Additional tactics included: - Issuing weekly checks to an employee’s spouse with no corresponding work performed or taxes withheld, later characterized by Margetts as “child support makeup” payments. - Failing to report nearly $141,000 in payments to one employee who had zero hours logged in company records despite regular checks. - Underreporting hours and wages for 29 different workers.

The investigation originated from a 2011 complaint to South Jordan Police about an employee falsifying income through dual payment methods. Documentation including tax returns, bank statements, and payroll records eventually reached the Tax Commission’s Criminal Investigation Unit. Margetts admitted during interviews that he oversaw payroll, knew actual hours worked, paid extra amounts to at least six employees off the books, and allowed reduced hour reporting paired with cash or unrecorded payments. He claimed the actions were “not intentional” for tax purposes and offered to repay what was owed.

The state is still out approximately $20,000 in unpaid withholding taxes, plus an estimated $25,000 in interest and penalties.

What HVAC Contractors Should Know About Payroll Compliance

This case stands out because it involves a mechanical contracting business — an industry where seasonal workloads, multiple job sites, overtime, and cash payments to technicians create frequent temptation for simplified or off-books arrangements.

Utah law, like federal rules, treats systematic underreporting of wages as both a tax violation and potential wage theft. The “pattern of unlawful activity” charge reflects the multi-year, multi-employee scope. Convictions on these felonies can bring prison time, though specific penalties await the June sentencing.

Key compliance reminders for HVAC contractors: - Maintain accurate hour tracking. Digital time clocks, GPS-enabled service apps, and separate job costing systems make it harder to manipulate records later. - Issue proper payroll. All compensation for work performed must be reported. “Under the table” payments or recharacterizing wages as reimbursements or gifts triggers both income tax and employment tax liabilities. - Withhold and remit on time. Quarterly withholding payments are not optional. Failures compound quickly with interest and penalties. - Document everything. Pay stubs, W-2s, 1099s (where applicable), and subcontractor agreements must match actual economics. Inconsistencies across bank records, customer invoices, and tax returns invite audits. - Avoid spouse or family payment workarounds. These are among the first red flags for investigators.

The HVAC industry already operates with thin margins on many service calls and competitive bidding on installations. Criminal exposure on top of back taxes, interest, penalties, and potential debarment from certain contracts can destroy a business.

The Broader Warning for Mechanical Contractors

Margetts’ defense — that he was simply “helping” employees and didn’t intend tax evasion — failed to persuade the jury. Admissions about knowing actual hours worked and directing the payment methods proved decisive.

This outcome arrives as many HVAC businesses face rising equipment costs, labor shortages, and tighter scrutiny of contractor classifications nationwide. States continue to pursue misclassification and underreporting because they lose significant revenue on unwithheld income taxes and unemployment insurance contributions.

Contractors using manual processes or third-party bookkeepers without strong construction or trade experience should review their systems immediately. Job costing that fails to reconcile payroll to actual field hours is particularly dangerous.

The $780,000 in hidden wages didn’t disappear into thin air. Every unreported dollar represented compensation that should have supported unemployment funds, workers’ compensation coverage, and state tax revenue. When multiplied across nearly 30 workers over six years, the scale triggered felony-level charges rather than civil adjustments.

HVAC owners reviewing their own 2024 and 2025 filings would be wise to ensure payroll records would withstand similar scrutiny. The difference between aggressive tax planning and criminal evasion often comes down to documentation and consistency. In this case, the jury concluded the records told one story while the bank accounts and employee testimony told another.

With sentencing approaching in less than a month, the final financial and personal cost to Margetts remains to be determined. For the broader industry, the message is already clear: accurate payroll isn’t just good accounting — it’s the bare minimum to stay out of criminal court.