Category Archives: employer fraud

Mining firm sentenced in workers’ comp scheme

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Today’s post was shared by Gelman on Workplace Injuries and comes from www.wvgazette.com. It struck me to see this because of how West Virginia has recently been in the news for contaminated drinking water. Do I think this state is in worse shape or more corrupt than any other state? Probably not. Do I think that investigators in this state are more diligent than other states? Possibly, but also unlikely.

The story should be a wake-up call for employers who know they’re defrauding the system, because in the long term, society suffers. This story makes for interesting reading and an opportunity to think about how some folks will always take advantage of a situation to profit and have no qualms about doing something illegal, even when it potentially puts other people and their families in danger. This scam definitely put workers in danger so businesses could avoid the cost of workers’ compensation premiums. But what about the workers? If someone were hurt on the job and they thought their employer had workers’ comp coverage but didn’t, that cost either has to be absorbed by the workers and their loved ones, or, more likely, by taxpayers. And that’s one reason that it’s so important for officials to be willing to diligently investigate situations like the one described below. Because it not only helps keep workers safe, but in the long run, also saves taxpayers money and benefits society.

Today’s post is shared from wvgazette.com

Leads continue to develop out of an investigation into a multimillion-dollar scheme aimed at lowering workers’ compensation premiums for contract firms that provided workers to some of the state’s largest coal producers, an assistant U.S. Attorney said Tuesday.

U.S. District Court Judge John Copenhaver said the “scam here has been extraordinary” before sentencing Aracoma Contracting LLC to three years probation and ordering restitution be paid.

The scheme involved former BrickStreet Mutual Insurance Co. auditor, Arville Sargent, who took bribes to help contract companies save millions in workers’ compensation premiums by paying workers in cash and falsifying payroll records.

It involved four mining contract firms  — Aracoma Contracting LLC, Christian Contracting, T&W Services LLC, and Newhall Contracting. The companies were controlled by Jerome Eddie Russell, Frelin Workman and his son, Randy Workman.

The four companies were “employee leasing” services that supplied miners for coal companies, including Alpha Natural Resources and Patriot Coal, under arrangements common in the state’s mining industry.

Acting on behalf of Aracoma, its principals Russell, 50, of Williamson and Frelin R. Workman, 58, of Belfrey, Ky., formed a relationship with the Bank of Mingo, and one of its employees at the bank’s Williamson branch.

Aracoma, Sargent and Workman must jointly pay back about $4.7 million in restitution. Aracoma must also…

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$46 Million Stolen: 2013′s Top Ten Workers’ Compensation Fraud Cases

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Professor Leonard T. Jernigan Jr. has compiled a list of 2013′s Top 10 Workers’ Compensation Fraud Cases

Today’s post comes from guest author Leonard Jernigan from The Jernigan Law Firm in North Carolina. It is unfortunate that this article is necessary, but I appreciate the important work Mr. Jernigan does to compile these fraud cases each year. Because it makes for very interesting reading and reminds folks that fraud occurs on both sides of the workers’ compensation debate.

Employee fraud seems to get headlines, but employer fraud occurs on a much larger economic scale. As Mr. Jernigan points out, it’s the workers and taxpayers who are on the hook with employer fraud when an employee gets hurt and doesn’t have the coverage that they expected. But it is also worth noting that this year (for the first time in the five years Mr. Jernigan has compiled this list), an employee is in the top 10. As noted below, “the record is now 49-1 (employer fraud v. employee fraud) over the past five years.” I find this important food for thought as we begin a new year.

Employer Fraud Cases (9):$44,962,492.00
Employee Fraud Cases (1): $1,500,000.00
Total: $46,462,492.00

Every year we hear about fraud in Workers’ Compensation cases and the public believes the fraud is employee driven. However, in 2009 I began tracking the Top Ten Fraud Cases and 100% of the Top Ten between 2009-2012 involved employers or shady characters posing as legitimate businesses. The amount of employer fraud is staggering. In 2013 one employee fraud case did crack the Top Ten, so the record is now 49-1 (employer fraud v. employee fraud) over the past five years.

  1. Florida: Owners of Diaz Supermarkets in Miami-Dade are Accused of $35 Million Fraud (4/16/13)

    John Diaz

    John Diaz and his wife Mercedes Avila-Diaz owned and operated four supermarkets in the Miami-Dade area. They have been arrested and accused of workers’ compensation fraud and other fraudulent transactions totaling $35 million. One business they operated had no coverage for employees for ten years. They allegedly engaged in a scam to help subcontractors obtain false certificates of insurance that allowed the subs to work for general contractors who required the certificates.

  2. California: Hanford Farm Labor Contractor Convicted of Fraud in the Amount of $4,195,900 (12/6/2013)

    Richard Escamilla, Jr.

    Richard Escamilla, Jr. (47), owner of ROC Harvesting, misrepresented information to workers’ compensation insurance carriers by using new business names to obtain insurance and avoid providing a claim history. Escamilla pleaded guilty on October 29th and was sentenced to pay restitution of $4.1 million and serve six years in prison.

  3. Michigan: Insurance Executive Embezzled $2.6 Million from Workers’ Comp TPA (06/06/2013)

    Jerry Stage

    Jerry Stage (67), the former CEO of a non-profit workers’ compensation insurance company, and George Bauer (55), the bookkeeper, both pleaded guilty to embezzling from the Compensation Advisory Organization of Michigan (CAOM) for more than a decade. Mr. Stage embezzled $2.6 million from the company and conspired with Mr. Bauer to cover up the embezzlement.

  4. California: Employee Wasn’t Wheelchair Bound After All – Fraudulently Took $1.5 Million in Benefits (8/9/13)

    Yolandi Kohrumel

    Yolandi Kohrumel, 35, claimed for nine years that she was wheelchair bound after complications from toe surgery, but after she had collected $1.5 million in benefits it was revealed her claim was false. Her father, a South African native, was also engaged in the scam. Both pleaded guilty to insurance fraud, grand theft and perjury. Ms Kohrumel was sentenced to one year in jail, plus restitution.

  5. California: Father and Son Landscapers Accused of $1.45 Million in Insurance Fraud (5/7/13)

    Sunshine Landscaping

    Jesse Garcia Contreras (57) and Carlos Contreras (33), who operate a Thousand Palms landscaping business, are accused of committing $1.45 million in insurance fraud. They are accused of defrauding the California State Compensation Insurance Fund by misclassifying employees from January 2008 to March 2012. Mr. Jesse Contreras is the president and CEO of Sunshine Landscaping and his son is Director of Accounting. If convicted, they each face up to 19 years and 8 months in prison.

  6. Florida: Workers’ Compensation Check Cashing Operation Charged with $1 Million in Fraud (2/27/13)

    As a result of its investigation of I&T Financial Services, LLC, a company that was allegedly set up to execute a large scale check cashing scheme for the purpose of evading the cost of workers’ compensation coverage. Domenick Pucillo, the ringleader of the fraud scheme, was arrested and charged with filing a false and fraudulent document, forgery, uttering a forged instrument, and operating an unlicensed money service business. If convicted on all charges, he faces up to 45 years in prison. $1 million was seized during this investigation.

  7. California & North Carolina: Cleaning Company Owner Convicted of Underreporting Payroll and Ordered to Pay $898,000 (8/3/2013)

    L. D. Hardas, President of Awesome Products Inc., said support from the community and the state was key to bringing his company to Mount Airy.

    The president of Awesome Products, a cleaning company in California, was convicted and sentenced for underreporting his payroll by over $8 million, resulting in a premium loss of $898,000. Loksarang Dinkar Hardas (53) was sentenced to five years in state prison, stayed pending successful completion of 10 years of formal probation, a $250,000 fine, and restitution payment of $898,000. Notwithstanding his conviction, the town of Mount Airy, N.C was standing by Mr. Hardas and willing to give his company taxpayer money in hopes that Awesome Products would build a manufacturing facility and create jobs in Surry County, N.C.

  8. West Virginia: Coal Company Contractor in Mingo County Caught in $405,000 Scam to Avoid Workers’ Comp Premiums (11/6/13)

    Bank of Mingo

    Jerame Russell (50), an executive with Aracoma Contracting, LLC, a company that provided labor to coal companies on a contract basis, entered a guilty plea to a scam that involved funneling over $2 million through a local bank to pay employees in cash, thus avoiding payroll taxes and $405,000 in workers’ compensation premiums. Aracoma also bribed an insurance auditor to cover up its true payroll.

  9. Ohio: Roofing Business Owners Guilty of $283,592 in Workers’ Comp Fraud (7/30/2013)

    Frederick Diebert

    The owners of Triple Star Roofing were found guilty of fraud on July 15 for failing to report payroll to the Ohio Bureau or Workers’ Compensation(BWC). The company failed to report to the BWC from 2004 to 2008, resulting in under-reported premiums of $283,592.

  10. Florida: Owner of Staffing Company arrested for $130,000 in Workers’ Comp Fraud

    Preferred Staffing of America, Inc.

    The owner of Preferred Staffing of America, Inc., a temporary staffing agency in Tampa, has been arrested for allegedly running an organized workers’ compensation fraud scheme. Preferred Staffing’s owner misled clients into believing that his company was a licensed professional employer organization (PEO) and could provide workers’ compensation insurance coverage. Employers were reportedly charged more than $130,000 for workers’ compensation insurance and other services that were never provided.

For more information, contact: Leonard T. Jernigan, Jr. Adjunct Professor of Workers’ Compensation N.C. Central School of Law The Jernigan Law Firm 2626 Glenwood Avenue, Suite 330 Raleigh, North Carolina 27608 (919) 833-0299 ltj@jernlaw.com www.jernlaw.com @jernlaw

Employer Fraud: NJ employer accused of stealing over $265K from workers’ comp insurer

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Charles Kelcy Pegler Sr.

Today’s post was shared by Gelman on Workplace Injuries in New Jersey and comes from www.app.com. As 2013 winds down, here is yet another blog post to show that fraud doesn’t only occur on the workers’ side. It looks like this business owner did not disclose all he needed to when it came to getting insurance coverage. Because he also had a government contract, he was charged with additional crimes in New Jersey. As I and other colleagues have written about numerous times, when employers cheat the system, the costs get passed on to someone, and that someone is usually the taxpayer who often pays for injured workers’ costs when there are problems with employers’ workers’ compensation coverage, or there is no coverage at all. “This defendant had a legal responsibility to provide adequate and lawful workers’ compensation coverage for employees,” Acting Attorney General John J. Hoffman said in a release, in the story. “By providing misinformation to his workers’ compensation carrier, he not only failed in this responsibility but also defrauded an insurance company out of hundreds of thousands of dollars. The cost of such fraud is passed on to consumers through increased premiums.” I hope all have a safer workplace with appropriate workers’ compensation coverage in 2014.

TRENTON — Charles Kelcy Pegler Sr., 55, of Spring Lake, has been indicted for stealing more than $265,000 by providing false and misleading information to the workers compensation insurance carrier for his roofing company.

Pegler was charged Thursday with second-degree theft by deception, second-degree false contract payment claim for a government contract, third-degree insurance fraud and fourth-degree false swearing, the state Attorney Generals Office announced.

Pegler is the president of Roof Diagnostics Inc. located at 2333 Route 34 in Wall. During the time described by the indictment, the company was at 608 Brighton Ave. in Spring Lake Heights.

The indictment alleges that between June 6, 2002 and Oct. 5, 2009, Pegler stole $265,044 from New Jersey Casualty Insurance Co. by creating the false impression that Roof Diagnostics was not a roofing company, that it did not employ roofers and that it did not install, maintain or repair roofs. That meant he paid far less in insurance premiums than he should have, according to state investigators.

This defendant had a legal responsibility to provide adequate and lawful workers compensation coverage for employees, Acting Attorney General John J. Hoffman said in a release. By providing misinformation to his workers compensation carrier, he not only failed in this responsibility but also defrauded an insurance company out of hundreds of thousands of dollars. The cost of such fraud is passed…

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NEOC Awards Whistleblower Client Misclassified as Independent Contractor

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justiceI was happy to have the chance to represent Theron Chapman in his whistleblower claim against his former employer, Midwest Demolition. While the Lincoln Journal Star headline of “Man chased from job by manager with stun gun awarded back pay” is catchy, the real story here is that an employee who was fired for complaining of legitimately being misclassified as an independent contractor won some measure of justice from the Nebraska Equal Opportunity Commission.

Mr. Chapman had a legitimate grievance about being misclassified as an independent contractor. Nebraska law explicitly prohibits the type of misclassification that he questioned. In 2010, State Sen. Steve Lathrop, who authored the legislation outlawing misclassification in Nebraska, said in his bill’s statement of intent, as quoted in Truckinginfo: the web site of Heavy Duty Trucking magazine, that:

“When a contractor misclassifies an employee, the employee is ineligible for unemployment and workers’ compensation benefits, loses labor-law protections and does not receive employer-provided health insurance. Misclassification creates an unfair advantage to unscrupulous contractors who are able to outbid law-abiding employers who must take into account the payment of taxes and insurance premiums when bidding for jobs. The State’s loss in revenue negatively affects the funding of essential programs such as unemployment benefits.”

The deeper story here is that people on the margins of the workforce can sometimes vindicate their rights in the workplace. My client was hired through a job lottery at the People’s City Mission, a homeless shelter, here in Lincoln. People in his situation are vulnerable to abuse in the workplace. Not every instance of bad behavior by management is legally actionable, but that is true from the executive suite to low-wage workers like my client. But fair-employment laws can protect people who are being abused in the workplace and do sometimes provided protections to the people who need them the most.

Former President of Chemical Company Sentenced for Federal Crimes Related to Employee Deaths

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Today’s post was shared by Gelman on Workplace Injuries and comes from ehstoday.com. Mr. Jon Gelman is a respected colleague who focuses on workers’ compensation in New Jersey.

As the post points out, it is unusual, but not unheard of, for an employer to be charged and sentenced for Occupational Safety and Health Act violations. In fact, in 2012, I wrote about a situation that happened at a Nebraska grain elevator that caused a worker’s death and resulted in a misdemeanor charge, including a $100,000 fine and 2 years of probation for the employer.

The article below is important for a number of reasons. First, two truck drivers, Joey Sutter and Charles Sittig, died as a result of chemical exposure to hydrogen sulfide through their work. Next, the company’s former president, Matthew Lawrence Bowman, was sentenced to serve 12 months in federal prison and also fined $5,000, according to the article. As president of his company, Port Arthur Chemical and Environmental Services LLC (PACES) of Port Arthur, Texas, Bowman even directed some of the violations. And these actions were “criminally negligent,” according to John M. Bales, U.S. attorney for the Eastern District of Texas.

Although no amount of prison time or fines can bring the drivers back to their loved ones, it is good to see someone being held at least a little bit accountable for the dangers of this company’s practices.

Matthew Lawrence Bowman, the former president of Port Arthur Chemical and Environmental Services LLC (PACES) finally had his (sentencing) day in court. Bowman pleaded guilty on May 9 to violating the Occupational Safety and Health Act (OSH Act). It is rare for individuals to be prosecuted and sentenced to violations of the OSH Act.Bowman admitted to not properly protecting PACES employees from exposure to hydrogen sulfide, a poisonous gas resulting in the death of truck driver Joey Sutter on Dec. 18, 2008. In addition, Bowman admitted to directing employees to falsify transportation documents to conceal that the wastewater was coming from PACES after a disposal facility put a moratorium on all wastewater shipments from PACES after received loads containing hydrogen sulfide. He was sentenced to serve 12 months in federal prison on Oct. 28 by U.S. District Judge Marcia Crone. Bowman was also ordered to pay fines in the amount of $5,000.

Acting Assistant Attorney General Robert G. Dreher called the sentence “a just punishment” for Bowman’s actions, which placed workers “at unacceptable risk and had fatal consequences.”

“The Justice Department and the U.S. Attorney’s Offices will continue to work with our law enforcement partners to vigorously investigate and prosecute those who violate the laws enacted to ensure the safety of workers handling hazardous materials and to prevent the kind of tragedies that…

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“Open for Business” In Wisconsin Does Not Mean An Option To Provide Workers’ Comp For Workers

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A recent article from Wisconsin colleague Tom Domer points out that workers’ compensation insurance is required, i.e., mandatory, and not optional in most states for almost all businesses. Nebraska and Iowa make insurance coverage mandatory for employers, too. And it’s not fair or realistic for employers to skimp on covering their employees workers’ comp. That’s one of the ways taxpayers can get stuck with medical bills – when a business cheats its employees and the public by not carrying workers’ compensation insurance.

Companies are trying to cut costs and demand more productivity in these bad economic times. Unfortunately, one way “start up” and other employers are attempting to cut costs is by not insuring their workers under workers’ compensation. It is simply not acceptable to allow these employers to forego this fundamental protection for their employees. We field calls daily from workers whose employers do not have workers’ compensation, who tell their employees to file claims under group insurance policies (which are shrinking) or Medicare or Medicaid. This “cost shifting” to some kind of public assistance is simply not acceptable.

Failing to hold employers accountable for not having workers’ compensation coverage puts workers at risk. It also violates fundamental fairness. It would be like not holding drivers who have basic liability insurance accountable, because uninsured drivers put everyone else on the road at financial risk. Many states (North Carolina, Texas, California, Michigan, to name a few) are undergoing fundamental workers’ compensation “reform” in the name of cost saving. One of those “cost savings” should not be the failure to purchase workers’ compensation for their employees. Every employee in Wisconsin that employs even one person who is paid $500 in a quarter must have workers’ compensation insurance, and any employer who employs at least three employees( regardless of what they are paid) must have workers’ compensation insurance.

It is simply not acceptable to allow these employers to forego this fundamental protection for their employees.

Wisconsin has an “Uninsured Employer’s Fund” for those employees whose employers should have insurance but do not. Although the Fund pursues these scofflaw employers vigorously, many employees fall through the cracks, and we all pay the price through medical expense filtering down to Medicaid, Medicare, Badger Care, or some other public assistance.