Category Archives: Insurance

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

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

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

Worker Privacy Concerns : Employers’ Access to Employees’ Prior Worker’s Compensation Claims

Today’s post comes from guest author Tom Domer, from The Domer Law Firm.

Republican legislators are feeling their oats these days. Throughout the Midwest, legislators are depriving workers of collective bargaining rights and trying to restrict workers’ rights in workers’ compensation claims.

In Missouri, workers’ compensation legislation was recently proposed that would have permitted an employer to provide a potential hire’s name and Social Security number so an employer could identify the potential employee’s prior workers’ compensation claims and the status of those claims. The Missouri Division of Workers’ Compensation estimated an online data base that would include over a half million claim records with over 10,000 records added each year.

To his credit, Democratic governor Jay Nixon vetoed this proposed online data base which would allow businesses to check a prospective employee’s workers’ compensation claims. He said it was “an affront to the privacy of our citizens and does not receive my approval.” As expected, supporters of the workers’ compensation data base (employers primarily) said the legislation would speed the hiring process and help bosses and workers. Regularly, information about workers’ compensation claims is available by written request and takes about two weeks to arrive.  Supporters of the legislation indicated the law was “preventing workers’ compensation abuses.”

Wisconsin’s workers’ compensation records are subject to Wisconsin public records law, except for records identifying an employee’s name, injury, medical condition, disability, or benefits – which are confidential.  Authorized requestors are limited to parties of the claim (the employee, the employer, and the insurance carrier), an authorized attorney or agent, a spouse or adult child of a deceased employee. Workers’ Compensation Division staff may provide limited confidential information regarding the status of claims to a legislator or government official on behalf of a party. In addition, workers’ compensation staff are not permitted by law to conduct a random search to determine if other injuries have been reported.

If the requestor is the same employer or insurance carrier involved in a prior injury, then access will be allowed. If the requestor is a different employer or insurance carrier but they make a reasonable argument that the prior injury and the current injury are related, access may be allowed. For example, the Department considers injuries “reasonably related” if the two injuries involve the same body areas. 

Simply put, in Wisconsin, at least for the present, claimant information is confidential and not open to the public, other than to the parties to a current claim.

Why Injured Workers Should Deactivate Their Social Media Accounts

Your private photos could be used against you by insurance companies.

Today’s post comes from guest author Nathan Reckman from Paul McAndrew Law Firm.

Recently, it seems as though everyone is connected through social networking sites such as Facebook and Twitter. These tools have become a great way to keep in touch with friends and family scattered all over the world. Unfortunately, the information you or your connections post on your social networking sites can cause your workers’ compensation claim to be denied.

The Commission denied further benefits in part based on pictures obtained from Zack’s MySpace and Facebook pages.

For example, Zack Clement suffered a hernia when a refrigerator fell on him while he was working at a warehouse in Arkansas. After undergoing three surgeries and receiving work comp benefits for a year, Zack took his case back to the Arkansas Compensation Commission to get an extension of his benefits. The Commission denied further benefits in part based on pictures obtained from Zack’s MySpace and Facebook pages. The Arkansas Court of Appeals upheld the Commission’s decision, noting Zack’s claims of excruciating pain were inconsistent with the pictures of Zack drinking and partying.

In Iowa, the Workers’ Compensation Commission has also relied on Facebook posts to deny an injured worker benefits. Jody McCarthy had a debilitating back condition that she claimed was aggravated by her work. The deputy commissioner noted that Continue reading

Uninsured Employers Are Rampant In North Carolina

In North Carolina, 30,000 employers lack workers' compensation insurance.

The News and Observer and Charlotte Observer have reported that nearly 30,000 employers in North Carolina may not have workers’ compensation coverage, even though legislation requires them to have it in case a worker is injured on the job. Although there are stiff penalties and criminal sanctions (it is a Class H felony to intentionally not have insurance if the damages are over $1,000.00) the state has not aggressively enforced compliance with the statute.

Nearly 30,000 employers in North Carolina may not have workers’ compensation coverage

In New York, when the Fiscal Policy Research Institute did a similar study in 2008, it was estimated that as many as one-third of the employers required to have workers’ compensation insurance did not have it, and that as much as $500 million – $1 billion was being lost to the system. Immediate action was taken by then governor Spitzer to correct the problem and all agencies involved were ordered to cooperate and get the problem fixed.

There is no uninsured fund in this state, so if there is no insurance, you can guess who foots the bill: the taxpayer.

A similar massive effort needs to be taken in North Carolina. There is no uninsured fund in this state, so if there is no insurance, you can guess who foots the bill: the taxpayer. Those of us who pay taxes and buy insurance end up paying for the cost of these injuries. Employers cheat the system with no punishment, and we end up paying the hospital bills, providing the food stamps, and paying higher taxes. The crooked employer makes the money and leaves others to clean up the mess. Is this what we teach our children?

The crooked employer makes the money and leaves others to clean up the mess.

The vast majority of employers purchase workers’ compensation insurance. However, when 30,000 other employers don’t, the good guys are placed at a competitive disadvantage. And what message is being sent to those who want to do the right thing? If no one is enforcing the law, why bother to spend that money? Some will simply say: “I’ll take my chances. Even if I get caught, even now they just make you come into compliance and waive the penalty. That’s not a bad deal.” It’s like driving down an interstate highway, knowing that no Highway Patrol Officer is out there making sure people are not speeding. Most of us will drive carefully, but we all know that with no law enforcement there are many who will go as fast as they can, and eventually bad things will happen.

The current system is broken and simply must be repaired.

There is a two-fold solution: (1) enforce the law, and (2) create an uninsured fund to cover those who fall through the cracks. The current system is broken and simply must be repaired.

Premium Fraud: North Carolina Man Sentenced on Workers’ Compensation Insurance Scam

My colleague Jon Gelman shared this piece of news on his blog late last week. I am reprinting here, with his permission.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and Dan Anderson, Director, Department of Financial Services, Division of Insurance Fraud, announce the March 3, 2012 sentencing of defendant Carl Dale Fuller, 52, of Wake Forest, North Carolina.

U.S. District Court Judge Donald L. Graham, sitting in Ft. Pierce, Florida, sentenced Fuller to five years in prison, to be followed by three years of supervised release. In addition, Fuller was ordered to pay $2, 859,067 in mandatory restitution.

Fuller previously pled guilty to mail fraud in connection with a scheme to defraud National Employees Services (NES) of more than $2.8 million in what the company believed were insurance premiums for workers compensation insurance. NES, a Florida Corporation located in Avon Park, Florida, is a provider of cost-effective services for businesses that out-source employee insurance, including workers compensation insurance.

To execute his scheme, Fuller used the name David Walters in e-mails and phone calls and held himself out to NES as an insurance broker. Fuller falsely claimed that he would obtain workers compensation insurance policies for NES and the companies they represented. Instead, Fuller kept the payments and never provided insurance coverage.

From mid-2005 through September 2008, Fuller received more than $2 million of NES premium payments, which he used to fund his extravagant lifestyle in Wake Forest and Pinehurst, North Carolina. NES sent the premiums to Fuller under the name of Southeast Services, a company created and controlled by Fuller. The checks were deposited into numerous accounts all controlled by Fuller. Continue reading

$ Billions In Employer Fraud: Top 10 Cases of 2011

Company owners fund lavish lifestyles with the money they steal through fraud.

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:

  1. 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.
  2. 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.

  1. Insurance giant AIG commits $1 billion in workers’ compensation fraud.

    AIG settled the $1 billion suit for $450 million.

    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.

  2. 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