Category Archives: Employer Fraud

$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

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

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

NEOC Awards Whistleblower Client Misclassified as Independent Contractor

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

I 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.

Wacky Worker’s Comp Week. Stripper Denied Worker’s Comp Benefits

The South Carolina Supreme Court found that an exotic dancer was an “Independent Contractor,” not an employee.

What a wacky week in the world of worker’s compensation.

We found that a stripper who was seriously injured by a bullet fired at the club where she was working was not entitled to worker’s compensation benefits because the South Carolina Supreme Court found she was not an employee, but rather a “Independent Contractor.” She had serious intestinal, liver, pancreas, kidney, and uterus injuries, and had her kidney removed – which rendered her unemployable as an exotic dancer. She claimed she was an employee because the club controlled her activities, including telling her when to dance, what music to dance to, and required her to strive to get VIP dances.

In Wisconsin, an employer’s inclination to mis-categorize an employee as an “Independent Contractor” can be tempting: avoidance of payment of worker’s or unemployment compensation premiums, payroll and Social Security taxes, and other employee benefits.

The Court of Appeals disagreed, indicating she decided the manner in which she performed her dances to satisfy the Boom Boom Room Club customers. In Wisconsin, an employer’s inclination to mis-categorize an employee as an “Independent Contractor” can be tempting: avoidance of payment of worker’s or unemployment compensation premiums, payroll and Social Security taxes, and other employee benefits. For many years the Courts and the Commission wrestled with the legal distinction between Independent Contractors and employees. Workers who maintained a separate business and held themselves out to render service to the public were Independent Contractors, if not employers themselves; all other workers were employees.

The legislature clarified the test for determining Independent Contractors status, indicating an Independent Contractor must maintain a separate business with his or her own office equipment, materials and other facilities, and hold or apply for a Federal Employer Identification Number. Seven other specific criteria apply. Any single criterion that rules out many Independent Contractors like the absence of a Federal I.D. Number or filing self-employment tax returns makes alleged “Independent Contractors” employees and covered under worker’s compensation in Wisconsin. Many employers including trucking companies, temporary help agencies, and up to and including exotic dancers are asked to sign Independent Contractor contracts when in fact they really are employees under worker’s compensation.

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

Today we have a guest post from our colleague Jon Gelman of New Jersey. As we have discussed many times before on this blog, in our experience workers’ compensation fraud is rarely committed by employees. This case is no exception. 

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

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

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.

Workers Beware Questionable (Fraudulent) Employer Tactics

It's time to start talking about employer fraud.

Over the course of 35 years representing injured workers, I have heard some whoppers – Employers’ questionable tactics that make even my jaw drop. With all the insurance company generated blather about “employee fraud” incidences of employer fraudulent tactics abound. Workers beware of the following:

  • Recorded statements taken by worker’s compensation carrier adjuster while employee is under medication or in the hospital still suffering from the injury. Questions such as “It’s true you had (low back pain, arm pain, fill in the blank pain, etc.) before your work injury, correct? You’ve had lots more pain from (your motor vehicle accident, sports injury, etc.) than you’re experiencing from your work injury, correct?
  • Employer “channeling” a worker to its “Return to Work Clinic” (doctors on company payroll whose opinion is “like some athletic coaches, ‘rub some dirt on it and get back in the game’.”
  • Telling employees to take sick leave rather than claim worker’s compensation.
  • Telling employees to file medical bills under their group insurance, not worker’s comp.
  • Nurse Case Manager who initially befriends the employee but later makes every attempt with the worker’s doctor to prematurely return the worker to the job before a healing occurs.
  • Employer paying worker in cash with no payroll stub (or gives workers a Form 1099 rather than a W-2). Continue reading

14 Signs Your Employer Is Committing Fraud

Is your employer committing fraud?

Today’s post comes to us from our colleague Len Jernigan of North Carolina.

All employees should be on the lookout for signs that their employer or potential employer is engaging in workers’ compensation fraud.

The list of signs below was inspired by this one from the Washington State Department of Labor & Industries.

These signs may indicate that your employer is not paying workers’ compensation insurance for their employees. If they aren’t, this could put you in a very difficult situation if you are ever injured on the job.

If any of these signs sound familiar, report the employer to the department of labor and, if at all possible, find another job.

Your employer may be engaged in workers’ compensation fraud if:

  1. They pay you in cash and don’t give you any kind of payroll stub.
  2. They give you a 1099 form instead of the standard W-2.
  3. They pay you other than in cash or check, by such things as free rent, reimbursement of expenses, barter, etc.
  4. They pay you on a piecework basis and do not record hours.
  5. They require you to work long hours but turn in fewer hours than you actually worked.
  6. You or somebody you know is injured on the job, and the employer promises to pay the medical bills rather than reporting the accident to the North Carolina Industrial Commission.
  7. The reported hours on an injured worker’s accident report do not match the hours the employer reported to the North Carolina Industrial Commission.  Continue reading