When we hear about workplace fraud, most of us think of a worker faking an injury to receive benefits that he or she does not deserve. While that kind of fraud does exist, it is minor compared to the big money lost to fraud from companies.
The big money lost to fraud comes from companies, not workers.
Companies are cheating the government out of billions of dollars a year. It baffles me why we never hear about this, especially when, just by prosecuting these bad actors for defrauding the system, states could close large portions of their budget deficits without raising taxes or cutting spending, the overall cost of the workers’ compensation system would be lower, and costs to law abiding employers would be less.
Companies are stealing, and we are stuck paying the bills.
When companies commit workers’ compensation fraud and other kinds of payroll fraud — under-reporting or misreporting the number of employees on their payroll — they do major damage to working people’s lives in 2 major ways:
- State workers’ compensation insurance funds are left under-funded, and taxpayers may be called upon to replenish them. It’s a dollar out of your pocket and tacked onto the profits of the company.
- Workers are left without insurance if they are hurt on the job. Uninsured injured workers often receive poor medical care, or none at all. When these workers do receive medical care, often tax-supported hospitals or Medicaid (taxpayers again) are left to foot the bill while their employers pocket the profits from not having paid for insurance that they are required by law to have. Middle class workers who have prudently saved all of their lives can end up on the edge of bankruptcy. It’s why companies are required by law to provide workers’ compensation insurance.
This is not a new problem
I have been tracking this issue for over 20 years, as an adjunct professor of workers’ compensation law at NC Central University School of Law and somebody who has been practicing in this field for 30 years, as well as in my capacity as chair of the Workers’ Injury Law and Advocacy Group’s (WILG) national Fraud Task Force. In that time, I have consistently seen companies break the law. Even worse, for the small number of companies that do get caught, the cases are often settled for less than the amount the company saved by acting illegally. You and I wouldn’t expect to keep the stolen cash if we robbed a bank, so why do these employers keep some of their ill-gotten gains when robbing the government? When the victim is the taxpayer, it apparently pays to break the law.
We all need to come together to hold companies accountable for their legal obligations. If we did that, we wouldn’t be forced to make the choice between paying more in taxes and firing teachers and police. This enforcement issue is not about higher taxes; it’s about catching thieves who hide in offices and behind spreadsheets.
TOP 10 EMPLOYER FRAUD CASES OF 2011
This top 10 list represents just a small portion of the company fraud cases in the news this year. More importantly, the total amounts stolen are just a fraction of the amounts companies have managed to steal. For every company that has been caught, we can only assume many more are getting away with the same crime.
Of the $2 billion worth of fraud in just 2 of the following cases, only $498 million has been recovered. That’s over $1.5 BILLION that these employers got away with stealing. Once again, big business wins, while workers and taxpayers lose, big time.
- Insurance giant AIG commits $1 billion in workers’ compensation fraud.
This week, a federal judge approved a settlement by American International Group, Inc. to pay $450 million for shortchanging state insurance pools by nearly $1 billion. This is the same AIG that taxpayers bailed out during the 2007 economic crisis, and just last year they paid $146.5 million in fines, taxes and assessments in a settlement with all 50 states over workers’ compensation reporting errors. A good recovery, but the settlement leaves a potential $550 million in unrecovered funds.
- Compensation Risk Managers commits $1 billion in fraud, forcing many small businesses to close.Compensation Risk Managers (CRM), a company that acted as trust administrator for small business in New York State who self-insured for workers’ compensation, was sued in 2009 for $400 million in a lawsuit for fraud. CRM was deliberately underestimating the liabilities of many businesses, Continue reading