PROVIDENCE — An asbestos-removal contractor who did work for public agencies in Providence Cranston, North Providence and South Kingstown, yesterday pleaded guilty to extorting kickbacks from his employees.

Michael Macaruso, 49, of Bishop Hill Road in Johnston, also admitted that he failed to report more than $280,000 in income on his tax returns for 2005 and 2006, federal prosecutors said.

“This case should serve as a warning to any other employers who defy the federal prevailing wage law,” U.S. Attorney Robert Clark Corrente said. “Exploiting workers in this manner exposes unscrupulous employers to investigation and prosecution.”

Macaruso’s companies — Ocean State Building Wrecking and Asbestos Removal, and Ocean State Environmental — removed asbestos for the Providence, Cranston and North Providence housing authorities, the Providence School Department and the Town of South Kingstown, prosecutors said. Federal law requires that workers on public sector projects be paid the prevailing wage as calculated by the Department of Labor.

Macaruso did submit certified payrolls to the public agencies, reporting that he was paying his workers the prevailing wages, and he did provide time sheets to an accounting firm, which generated paychecks for the workers at prevailing wages, prosecutors said.

But instead of distributing the paychecks, Macaruso cashed them himself and then handed out cash to workers at “significantly less” than the prevailing wage, Assistant U.S. Attorney Lee H. Vilker said at yesterday’s plea hearing.

Ten employees reported that Macaruso held back some of their pay. And the investigation determined that Macaruso withheld about $95,000 that was due to his workers, prosecutors said.

“Rather than distribute the payroll checks to his employees, on many occasions from July 2003 through December 2006, defendant Michael Macaruso would either himself sign the employees’ names on the backs of the checks or require the employees to endorse the backs of their paychecks and return the paychecks to them,” prosecutors stated in court documents.

Macaruso would meet with each worker on a weekly basis, giving them an amount of cash that was “significantly below the amount of their paycheck,” prosecutors said. “The employees accepted less in cash than the amounts of their paychecks due to their belief that they would lose their jobs if they insisted upon receiving the prevailing wage.”

Besides paying less than the prevailing wage for regular hours worked, Macaruso paid less than the time-and-a-half rate required beyond 40 hours per week on public projects, prosecutors said.

Also, prosecutors said that on numerous occasions from January 2005 through December 2006, Macaruso cashed checks made out to his companies at check-cashing facilities rather than depositing them into the companies’ bank accounts.

Macaruso did not tell his accountants that he cashed those checks, so his individual and corporate tax returns omitted $283,392 in income for tax years 2005 and 2006, prosecutors said in court documents. “Although defendant Macaruso knew that his personal income tax returns and the income tax returns of Ocean State Environmental for 2005 and 2006 omitted large amounts of income, he signed and filed the returns with the Internal Revenue Service,” prosecutors wrote.

The estimated loss to taxpayers was $79,350, according to prosecutors.

Macaruso pleaded guilty to one count of extorting kickbacks from workers employed in a public works project — a charge that carries a maximum penalty of five years in prison and a $250,000 fine. He also pleaded guilty to one count of filing a false tax return — a charge that carries a maximum penalty of three years in prison and a $100,000 fine, prosecutors said.

As part of the plea agreement, prosecutors agreed to recommend a reduction in the offense level for “acceptance of responsibility.” That will be one factor in calculating Macaruso’s sentence.

Macaruso is free on bond, and sentencing is scheduled for Jan. 16 before U.S. District Judge William E. Smith.

Macaruso’s lawyer, William C. Dimitri, declined to comment yesterday.

efitzpat@projo.com