|Non-Employee Fraud Cases||9||$||848,000,000|
|Employee Fraud Cases||1||$||1,500,000|
The top six of our top ten fraud cases of 2015 are from California, a perennial offender. The other four cases are from New York, Washington, Utah, and Massachusetts. As we continue to discover each year, non-employee fraud cases dominated the list. This year’s dollar amounts were particularly large, with nearly $850 million in total frauds. The largest fraud was a $580 million kickback scheme out of southern California. Authorities have begun to enforce the law against companies who have misclassified their workers and we expect to see a continued increase in these enforcement actions, both against our traditional offenders and against some of the sharing economy companies who are now the subject of multiple lawsuits.
1. (California) Surgeons and Owner of Hospital Charged In $580M Kickback Scheme (11/26/15)
Five people have been criminally charged for their involvement in a medical kickback scheme that defrauded the California workers’ compensation system and insurance companies of $580 million over eight years. Two of the five charged were surgeons and one was a former owner of Pacific Hospital. The scheme benefited doctors and chiropractors who referred their patients to two Southern California hospitals for thousands of operations.
2. (California) FedEx Settles Misclassification Case For $228 Million (6/16/15)
FedEx has agreed to pay $228 million to resolve claims by 2,300 FedEx Ground pickup and delivery drivers in California. FedEx was labeling drivers as independent contractors in order to avoid the costs of trucks, branded uniforms, scanners, fuel, maintenance of the trucks, insurance and much more. Drivers were also not paid for missed meals, rest periods, or overtime compensation.
3. (California) Spanish Translators Caught in $24 Million Workers’ Compensation Fraud Case (12/17/15)
The owners of G&G Translation services and over 200 of their employees fraudulently billed $24.6 million in workers’ compensation cases for services never rendered. For example, one bill was for $422,000 for translation services by a translator who was actually in prison at the time. G&G obtained a list of patients who needed translation services at medical facilities and used those names to submit bills to large self-insured employers.
4. (California) Sewing Subcontractors Charged With Running $11 Million Dollar Workers’ Comp Insurance Fraud Scheme (4/16/15)
Two CEOs of a sewing company were arrested on April 15, 2015 for conspiring with their CPA, Jae Kim, to underreport $78.5 million in payroll to multiple insurers. They were arrested on 18 felony counts of workers’ compensation insurance fraud totaling more than $11 million in losses.
5. (California) Truck Drivers Awarded More Than $2 Million Due To Misclassification By Employer (2/3/15)
Pacer Cartage, Inc. (one of the largest port trucking companies in the U.S.) owes $2,026,483 to seven truckers due to “unlawful payroll deductions and expenses as part of a wage theft scheme” by the company. The employees were incorrectly classified as “contract laborers” who were forced to lease their trucks by their employer, and the employer avoided paying workers’ compensation premiums. Their leases were deducted from their paychecks, and the employees were not allowed to use the trucks for any other business purpose or drive them home.
Claims Adjuster Kimberly Jones filed fraudulent workers’ compensation claims on behalf of former NFL player Marcus Buckley between 2001 and 2011. In 2006 Buckley filed a workers’ compensation claim that was settled for $300,000 in 2010. After the case was settled, Buckley and Jones filed numerous requests for reimbursement under Buckley’s closed cases providing fictitious invoices, statements and credit bills. Buckley received more than $1.5 million.
7. (New York) Plumbing and Heating Contractors Settle for $1.4 Million(4/21/15)
Four Long Island City plumbing and heating contractors misclassified and underpaid a total of 300 employees. At least 25 employees were misclassified as independent contractors, several hundred were not paid overtime, and the companies’ recordkeeping did not meet the Fair Labor Standards Act requirements. The companies settled out of court when the Wage and Hour Division’s New York City District Office investigated and litigation began for a total of $710,000 in back wages to cover September 2010-April 2014 and damages for 300 employees equaling $1.42 million dollars.
8. (Washington) Drywall Contractor in Walla Walla Must Pay More Than $1 Million in Workers’ Compensation Premiums and Penalties (4/17/15)
Shawn A. Campbell and his wife were held personally liable for over $1 million in unpaid premiums, interest and late penalties for their company. Campbell listed his employees as co-owners in order to avoid paying workers’ compensation premiums.
9. (Utah) Construction Company to Pay $700,000 for Misclassification Scheme (5/1/15)
CSG Workforce Partners (a.k.a. Universal Contracting, LLC and later as Arizona Tract/Arizona CLA) required their workers to classify themselves as “members/owners” which limited their legal rights and gave them no minimum wage guarantee, no time-and-a-half overtime pay, no workers’ compensation insurance and no unemployment insurance. When the employers found out that the state of Utah was investigating, they packed-up and left for Arizona. However, they were tracked down and charged $600,000 in back wages to employees as well as $100,000 for their willful violations of employment laws.
10. (Massachusetts) Roofing Business Owners Indicted for Workers’ Comp Fraud Totaling $615,000 (3/25/15)
Two business owners allegedly failed to accurately report their payroll and underreported earnings in order to be granted lower insurance premiums in three roofing companies between 2008 and 2014. They avoided paying a total of more than $615,000 in insurance premiums alone.
For more information, contact:
Leonard T. Jernigan, Jr.
Adjunct Professor of Workers’ Compensation Law
N.C. Central University School of Law
The Jernigan Law Firm
2626 Glenwood Avenue, Suite 330
Raleigh, North Carolina 27608