WC Fraud abounds
- Top Ten Workers’ Compensation Fraud Cases For 2012
Guest post from Leonard Jernigan of the NC Bar*
Over the past few years, many states have aggressively gone after workers’
compensation fraud (whether it’s the employee or the employer) and the
amount of employer fraud being discovered continues to be staggering,
notwithstanding these efforts.
Legitimate business owners that pay for workers’ compensation, as required
by law, are at a competitive disadvantage with those who cheat the system,
and when people suffer a workplace disability and have no insurance local
businesses that provide goods and services feel the pain along with health
care providers who cannot get properly paid for their services. The cost of
medical care and disability ends up being shifted to the taxpayer through
Social Security, Medicare and Medicaid, and in states where compliance is
not vigorously enforced a culture of cheating continues. The top ten cases
for 2012 are listed below.
2012 TOP TEN
WORKERS’ COMPENSATION FRAUD CASES
Total Fraud: $97,466,500.00
(http://gelmanmedia.us4.list-manage.com/track/click?u=d03d949631f0d3b8cc699e19b&id=909a95d299&e=d6dba65757) CFO Jeff Atwater and Broward Sheriff Al
Lamberti announced multiple arrests in Operation Dirty Money.
1. ‘Operation Dirty Money,’ Stings Workers’ Comp Fraud Check Cashing
Scheme (FLA) 07/27/2012
Multiple arrests were announced in Florida’s joint task force’s ‘
Operation Dirty Money,’ which led to the arrest of alleged ringleader Hugo
Rodriguez, owner of the Oto Group, Inc., and seven other individuals. Mr. Rodriguez
was the facilitator of 10 known shell companies that funneled in excess of
$70 million in undeclared and undetected payroll through different money
By using shell companies, Rodriguez was able to run a large construction
operation and avoid paying the cost of workers’ compensation coverage,
leaving employees at risk and scamming legitimate businesses.
2. Firms Face Charges for Skipping Workers’ Comp Payments (OH) 05/13/2012
Thousands of Ohio companies violated state law by not paying their most
recent workers’ compensation premium, which can drive up insurance costs for
businesses that follow the rules, a Dayton Daily News analysis found.
The bureau identified about 41,247 private employers in the state that
failed to report their payroll data and submit premium payments by the
deadline. As of May, more than 12,200 accounts remain outstanding, and those
companies owe an estimated $5.6 million in premiums.
3. Case Proves Employee Leasing too Good to be True (TX) 07/10/2012
$4,466,500.00 was awarded in a Texas court against a staffing agency and
its workers’ compensation insurance company. Jackson Brothers Hot Oil
Service hired Business Staffing, Inc., (BSI) in 1999 and required BSI to have
workers’ compensation insurance for its leased employees. BSI had 150 client
companies with 2,000 employees.
BSI bought a policy from Transglobal Indemnity for a total premium of
$4,100.00 to cover all its employees. After failing to pay the medical bills of
a 27-year-old oil field worker who was in an explosion and had 18
surgeries, the employee and Jackson Brothers sued BSI and Transglobal for fraud.
Neither Transglobal (who had its corporate headquarters in the Turks and
Caicos Islands) nor BSI had a license to conduct insurance business in Texas.
(http://gelmanmedia.us4.list-manage.com/track/click?u=d03d949631f0d3b8cc699e19b&id=48ed2e0d29&e=d6dba65757) George Osumi was indicted on numerous
4. Business Owner Faces Insurance-fraud Charges (CA) 05/02/2012
Construction business owner George Osumi of Irvine, California was
indicted on numerous felony counts of misrepresenting facts to the State
Compensation Insurance Fund, among other charges.
From December 2001 to March of 2006, Mr. Osumi committed workers’
compensation premium fraud by reporting his payroll to SCIF at just over $1
million, under-reporting over $3.5 million in payroll. This fraud resulted in a
loss of over $814,000.00 in premium owed to the insurance fund.
(http://gelmanmedia.us4.list-manage1.com/track/click?u=d03d949631f0d3b8cc699e19b&id=005f811379&e=d6dba65757) Newton Contracting Company misclassified
half of its workforce as subcontractors.
5. Watertown Roofing Company and its Owners Plead Guilty and are Sentenced
for Labor Violations (MA) 01/11/2012
The Massachusetts Insurance Fraud Bureau discovered that the company,
Newton Contracting Company, Inc., owned by Shaun Bryan and Antoinette
Capurso-Bryan, misclassified half of its workforce as subcontractors, as well as
failing to disclose to auditors more than $3.4 million of their company’s
misclassified subcontractor payroll during its annual workers’ compensation
6. 7-Year Sentence in $3.1 Million Fraud Case (CA) 11/30/2012
Steven Morales, 65, of Wildomar, CA was convicted and sentenced to seven
years in prison for his part in a $3.1 million workers’ compensation scheme.
His son Brian was also convicted and sentenced to 4 years in prison.
Morales and his son had set up a sophisticated system of shell companies to hide
payroll and avoid paying workers’ compensation premiums.
7. Construction Company President Accused of Payroll Fraud (FL) 03/29/2012
Randall Seltzer, president of Navarre Industries, Inc., was charged with
multiple felony counts, including workers’ compensation fraud. An
investigation by Florida’s Department of Financial Services’ Division of Insurance
Fraud revealed that Seltzer systematically and intentionally under-reported
his corporation’s true payroll to his insurance carrier. The department’s
Division of Workers’ Compensation issued the company two stop-work orders
within a five-year period.
Seltzer allegedly established a shell corporation in 2011 to intentionally
violate the stop-work orders and continue operating his construction
business illegally. If convicted, Seltzer could face up to 30 years in prison
and pay over $2.8 million in restitution.
(http://gelmanmedia.us4.list-manage2.com/track/click?u=d03d949631f0d3b8cc699e19b&id=2e5b9bc87f&e=d6dba65757) Yucet Batista allegedly used a shell
company to commit large-scale fraud.
8. CFO Jeff Atwater Announces Arrest of Owner of Fake Company for Creating
Fraudulent Insurance Certificates and Avoiding Millions in Premiums (FL)
Yucet Batista was arrested for allegedly creating more than 250 fraudulent
certificates of insurance to help uninsured contractors avoid $2.1 million
in workers compensation premiums.
Batista created the company and obtained the workers’ compensation
insurance policy for the purpose of “renting” it, or making it available to
dozens of uninsured subcontractors for a fee.
9. Audits Uncover Almost $1.2 million in Workers’ Compensation Violations
at Boston Marriott Project (MA) 09/04/2012
In 12 audits conducted by the Joint Enforcement Task Force on the
Underground Economy and Employee Misclassification and the Executive Office of
Labor and Workforce Development, it was discovered that there were $584,249.00
in misclassified 1099 wages and $584,287 in unreported W-2 earnings, for a
total of $1,171,536.00 in unreported wages by subcontractors on the Marriot
Six companies misclassified workers as contractors rather than employees,
and seven companies failed to report wages. Among the worst of the
offenders were one company that misclassified 28 workers and failed to report over
$410,000.00 in wages; another failed to report $462,081 in W-2 wages.
(http://gelmanmedia.us4.list-manage.com/track/click?u=d03d949631f0d3b8cc699e19b&id=cc70aaafd8&e=d6dba65757) Owners of the historic Brookdale Inn and
Spa are facing trial on charges of falsifying wage information to obtain
lower insurance premiums.
10. Inn Owners Facing Workers’ Compensation and Insurance Fraud Charges
The owners of historic Brookdale Inn and Spa, Sanjiv and Neelam Kakkar,
are facing trial on charges that they falsified wage information to obtain
lower insurance premiums. According to records, the couple paid approximately
$800,000 less in insurance premiums than they should have over a period of
*_Leonard T. Jernigan, Jr_ (http://www.jernlaw.com/attorneys.htm#1) .
practices in Raleigh, North Carolina (_The Jernigan Law Firm_
(http://www.jernlaw.com/index.htm) ). Mr. Jernigan is the author of _North Carolina
Practice, Workers Compensation Law and Practice 4th ed._
(http://west.thomson.com/productdetail/128484/40121136/productdetail.aspx) He has been recognized by
_Best Lawyers in America_ (http://www.bestlawyers.com/) and _Super Lawyers_
(http://www.superlawyers.com/) . Leonard T. Jernigan, Jr. is an Adjunct
Professor of Workers Compensation Law at _North Central University School of
Law_ (http://web.nccu.edu/law/faculty/faculty/fbios.html) . He is one of
only 48 workers' compensation attorneys in the United States authorized by the
National Football League Players Association (_NFLPA_
(http://www.nflplayers.com/) ) to represent its members. He is also authorized to represent
players in the National Hockey League (_NHL_ (http://www.nhl.com/) ) and the
Professional Hockey Players Association (_PHPA_ (http://www.phpa.com/) ) as
well as other professional athletes.
Read more about "employer Fraud" and workers' compensation.
_Workers' Compensation: Corrupt Employers Just Keep Cooking the ..._
Oct 29, 2012
Corrupt Employers Just Keep Cooking the Books. Today's post about employer
fraud comes from guest author Leonard Jernigan of the NC Bar and describes
how serious such actions deteriorate the workers' compensation .
_Workers' Compensation: Employer Fraud is Alive and Well_
Apr 11, 2011
The most surprising information contained in these statistics, however,
was the amount of money discovered from employer fraud. In 2005 there was
$446,826.00 in employee fraud, but $12 million dollars in fraud by ...
_Workers' Compensation: Study Reveals Employer Fraud Is Rampant_
Jan 11, 2012
A recent study of employer fraud published by Professor Leonard Jernigan,
of NC Central University School of Law, reveals that employer fraud
continues to be a major problem. Jernigan's latest report describes The Top Ten ...
_Workers' Compensation: Insurance Company Broker Caught ..._
Dec 09, 2012
Workers' Compensation: Employer Fraud is Alive and Well. Apr 11, 2011.
Perception is reality until proven otherwise, and when it comes to fraud in
the workers' compensation system there is the perception that employee ...
[Non-text portions of this message have been removed]