Category Archives: fighting fraud

Should Worker Safety Be Considered When Government Contracts Are Awarded?

A television station in Raleigh, North Carolina (NBC-17) reported the other week that a paving contractor was awarded a new contract because its bid was $6,000 lower than other bids. The bids ranged from $996,000 to $1.2 million. Nothing unusual about that, except the winning company, Triangle Grading and Paving Company, has “dozens more construction-related safety violations than the other companies.

Last year two Triangle workers (Luis Gomez and Jesus Benitez) died when they entered a manhole that had unsafe levels of oxygen, and their deaths could have been avoided had the company conducted required testing before they entered the manhole.

Is it possible this company is able to out-bid other companies because they don’t take the time and expense to insure a safe workplace?

One legislator, Paul Luebke, says he intends to file legislation that will require local governments to take into account the safety records of any company bidding on a government contract. Would that change the way some companies enforce safety regulations? Would that create a more even playing field for competitive bids? We don’t know for sure, but one thing is certain: it we do nothing, we will never know.

If we truly care about safety and if we truly care about fair play in the marketplace, then every government contracting agency, from top to bottom, should adopt this policy.


More on the Triangle Grading and Paving story:

2.7 Million Worker’s Comp Conviction For Employer, Not Worker

Today’s guest post comes to us from my colleague Tom Domer of Wisconsin.

I read this headline in the Insurance Journal while ago. My assumption, even though I represent injured workers, was that the headline concerned an employee who had defrauded an insurance company. Why did I immediately jump to that conclusion? Because most of the headlines screaming about worker’s compensation fraud are headlines aimed at employees who are defrauding the system, even though the vast majority of worker’s compensation fraud involves employers.

The $2.7 million fraud case involved a North Carolina man, Carl Dalmus Fuller, who scammed a Florida based employment services company into purchasing a fake worker’s compensation policy. The employment company’s records showed it paid Fuller over $2.7million in premiums. The insurance company listed had no agent, and the business address was Fuller’s post office box.

Most of the headlines screaming about worker’s compensation fraud are aimed at employees who are defrauding the system, even though the vast majority of worker’s compensation fraud involves employers.

Fraud cases like this involving substantial seven-figure numbers involve insurance companies or employers who mischaracterize actual employees as Independent Contractors, miscategorize Continue reading

$100 Million In Fraud In New Hampshire

Shame on the LGC.

My good friend and colleague Jon Gelman posted this recent piece of news on his blog the other week:

A New Hampshire insurance group has been charged by the State with improperly appropriating millions of dollars of taxpayers’ funds to a workers’ compensation insurance plan. The improper allocation is described in a petition filed by the State.

To provide a bit more detail, the amount of misappropriated funds is actually estimated at upward of $100 million. The Local Government Center of New Hampshire, or LGC, is a non-government, non-profit organization that provides a range of services to municipal governments. LGC is an umbrella organization with subsidiaries that offer services in areas such as finance, personnel, and legal. They also provide a range of insurance programs that municipalities and their employees may buy into.

In this case, the municipal employees thought that they were paying for LGC’s HealthTrust and Property-Liability insurance programs. Instead LGC used the funds to pay for a completely separate workers’ compensation insurance program.

LGC asserts that they did nothing inappropriate, even though what they did is clearly illegal and they used some very tricky tactics to circumvent the law. Continue reading

Corrupt Employers Just Keep Cooking the Books

As you have seen me mention several times on this blog, the failure of many employers to play by the rules continues to plague the nation’s workers’ compensation system. In one type of fraud, known as misclassification, employers incorrectly designate workers as outside consultants or independent contractors.

When workers are misclassified, insurance companies do not consider them employees. The injured workers are then denied workers’ compensation benefits. Additionally, the insurance companies are not paid insurance premiums and are not adequately reserved for the risk of injury by those workers.

The following video excerpt is of an interview I did a while back with Sam Gold, director of the National Association of Injured Workers (NOIW) and producer of Injured On The Job. We discuss this continuing problem and the need for it be addressed by regulatory agencies so that workers’ and their families are protected from fraudulent employers.


$ 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.


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

How Employer Fraud Is Destroying Our Middle Class


Last September I invited Dan Reilly from the Teamsters to give a continuing legal education talk at the annual conference of the Workers’ Injury Law & Advocacy Group. Dan presented on the topic of employer fraud, and in particular on an increasingly common practice known as misclassification. The video above is just a short clip from an interview we did after his talk. I’ll continue to share more clips from our fascinating conversation on this blog from time to time.

These workers have no benefits, and none of the protections that they should legally have. They simply do not have a safety net.

The term misclassification sounds innocent enough, but in reality it is a growing practice of exploitation that is taking away the rights of working people all across the United States.

Companies like FedEx “misclassify” workers who do the same jobs that full-time employees do by calling them independent contractors. This practice saves companies significant amounts of employee-related costs such as health care, workers’ compensation, unemployment taxes and other benefits.

What misclassification means for these independent contractors is up to 25% less salary than Continue reading

Employer Fraud is Alive and Well (Part 2)

In the previous post on this topic, I outlined the problem of employer fraud (as opposed to employee fraud) in the workers’ compensation system. In this post, I will examine some real life examples of employer fraud and discuss what is being done to combat this problem.

First, let’s consider a few real-time examples of employer fraud:




Continue reading

Employer Fraud is Alive and Well (Part 1)

Perception is reality until proven otherwise, and when it comes to fraud in the workers’ compensation system there is the perception that employee fraud is widespread and costs are up because of employee fraud.

In 2005 there was $446,826.00 in employee fraud, but $12 million dollars in fraud by employers.

Could that perception be wrong? For example, are those individuals who believe in employee fraud sailing down the same course as the naval ship identified in the story below? Continue reading