Category Archives: Fraud

Employer Work Comp Fraud

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

Employer fraud exists in worker’s compensation.   Despite propaganda about worker alleged “fraud,” most fraud in the system is actually in the form of employer premium fraud–misclassying employees to avoid paying insurance premiums (especially in certain fields).   Employers can falsely label an employee as an independent contractor or pay them in cash, and then effectively keep them off the books for insurance premium purposes.  

This fraudulent behavior affects not only the specific insurance company with lost premium dollars, but the system and insurance industry as a whole by creating faulty rates. 

A recent article shows the prevalence of employer fraud in Louisiana, as well as the significant amount of money recouped from prosecuting bad behaving employers.

Wisconsin now has greater ability to proscecute fraudulent employers.  As of 2016, a new statute allows for criminal prosecution, by the state Department of Justice, to investigate and prosecute fraud committed by employers and insurance carriers. 

Workers’ Compensation Fraud – North Carolina Statistics for 2014 – 2015

Today’s post comes from guest author Kristina Brown Thompson, from The Jernigan Law Firm.

Several months ago, the North Carolina Industrial Commission published their Annual Report for 2014 – 2015. Based on the Annual Report, employer fraud was by far the overwhelming majority of investigated fraud in the North Carolina workers’ compensation system.

 

The Annual Report tracked investigations of suspected fraud and violations related to workers’ compensation involving employees, employers, insurers, health care providers, attorneys, and rehabilitation providers. The total figure of fraud investigations for 2014 – 2015 was 1,474 cases. Of those 1,474 cases, 1,336 cases related to employer fraud. That means that 90.64% of the investigated workers’ comp fraud was fraud on the part of the employer.  Whereas there were 129 cases of suspected employee fraud (i.e. 8.75% of the total investigated fraud cases).

 

The silver lining? Of the employer fraud that was prosecuted, the State of North Carolina was able to collect nearly $1,000,000 in revenue just in 2014 – 2015 in fraud penalties paid by noncompliant employers. 

Insult to Injury: ProPublica’s Series “Demolition of Workers’ Compensation” Focuses on Ongoing Workers’ Comp Woes Faced by Injured Workers Nationally

Today’s post comes from guest author Kristina Brown Thompson, from The Jernigan Law Firm.

Recent years have not been favorable to injured workers. States across the nation have enacted “reform” measures curbing injured workers benefits. Disability caps have been introduced, medical care restricted. In our last blog, we discussed Oklahoma’s Opt Out provisions as an example of the court system declaring that the legislature had legislated away too much of the injured worker’s protections. A couple years ago, Florida workers’ comp laws were declared unconstitutional by a judge. Although the decision was later reversed, the Florida judge (Judge Cueto) expressed concerns regarding the loss of an employee’s right to wage-loss benefits after an accident.  

 

NPR and ProPublica have been authoring an in-depth series on national workers’ compensation issues. ProPublica reviewed “reams of insurance industry data” and their findings confirmed what many workers’ compensation attorneys suspected for years:  insurance companies are increasingly controlling medical decisions, workers are unable to pick their own doctor in many states, and insurers are denying medical care based on internal “guidelines.”

 

As an example, ProPublica’s article talks about a case in California where the insurance company reopened an old case and denied medical care based on the opinion of a doctor who never even saw the patient. “Joel Ramirez, who was paralyzed in a warehouse accident, had his home health aide taken away, leaving him to sit in his own feces for up to eight hours.”

 

The article also brings up a good point about workers’ comp fraud. Repeatedly studies show “most of the money lost to fraud results not from workers making false claims but from employers misclassifying workers and underreporting payroll to get cheaper insurance rates.”

 

Employer Fraud in Workers’ Compensation

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

Legislatures around the country (including ours in Wisconsin) seem to be preoccupied with employee fraud in workers’ compensation, despite overwhelming evidence that employee fraud is virtually nonexistent. 

Employer fraud, however, continues to plague the industry.  Over the last decade, my friend and colleague Len Jernigan has published a Top 10 Workers’ Comp Fraud Claims.  The list from 2015 can be found at this link.

None of the Top Ten includes only an injured worker.  The top six of the Top Ten stem from California claims.  Others are from New York, Washington, Utah, and Massachusetts. 

This year’s dollar amounts were particularly substantial, with nearly $850 million in total frauds, the largest being a $580 million kickback scheme out of California.  The California kickback scheme involved surgeons and the owner of a hospital.  The other California claims included FedEx mislabeling their drivers as Independent Contractors in order to avoid insurance, and the owners of a translation service fraudulently billing the workers’ compensation system.  Additional mislabeling involved California truck drivers from Pacer Cartage, which owed over $2 million to seven truckers, due to unlawful payroll deductions and misclassifications as Independent Contractors.

The single case involving a worker is a professional football player from the New York Giants who colluded with a claims adjuster, providing fictitious invoices and statements for more than $1.5 million.  The New York, Washington, and Utah claims also involved misclassification in which no workers’ compensation insurance was paid for actual employees.

Another popular theme is the under-reporting of earners in order to be granted lower insurance premiums.  That scheme was uncovered in Massachusetts, avoiding more than a half million dollars in insurance premiums.

The workers’ compensation insurance industry has done a marvelous job in diverting attention from the real culprits (employers, medical providers, and insurers) to the very rare, but sometimes spectacular claims involving employee fraud.  (A worker claiming permanent and total disability climbing around on rocks is far sexier than a financial officer mischaracterizing his employees in a closed office.)

2015 Top Ten Workers’ Compensation Fraud Cases

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

  Number Value
Non-Employee Fraud Cases 9 $ 848,000,000
Employee Fraud Cases 1 $ 1,500,000
Total $ 849,500,000

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)

(Credit: MoneyTimes) The kickbacks involving millions of dollars are increasing the insurance costs for patients.Such practice corrupts the relationship between doctor and patient, thus polluting medical profession.

(Credit: MoneyTimes) Kickbacks involving millions of dollars are increasing insurance costs for patients.

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)2. fedex 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)Screen Shot 2016-01-16 at 12.21.25 AM 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) Caroline ChoiJae KimTwo 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 drivers protesting in November (Photo from the Teamsters Union)

Pacer Cartage drivers protesting in November (Photo from the Teamsters Union)

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.     6. (California) NFL Player and Gallagher Bassett Adjuster Plead Guilty to Wire Fraud & Filing False Workers’ Comp Claims for $1.5 Million (10/1/15)
Marcus Buckley (55) played for the New York Giants from 1993 to 2000.

Marcus Buckley (55) played for the New York Giants from 1993 to 2000.

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) USDOL_Seal_circa_2015.svgFour 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) drywallShawn 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 (919) 833-0299 ltj@jernlaw.com www.jernlaw.com Twitter: @jernlaw Blog: www.ncworkcompjournal.com

Roofing Company Owner Faces Felony Charge for Not Paying Workers’ Comp

Today’s post comes from guest author Kit Case, from Causey Law Firm.

A Mason County, WA roofing contractor faces a criminal charge for allegedly failing to provide workers’ compensation insurance for his employees while they were on the job.

The Washington State Attorney General’s office has charged Peter Daniel Yeaman, 55, with unregistered contracting and doing business when his workers’ comp coverage was revoked.

The latter charge is a felony with a penalty of up to five years in prison and a $10,000 fine. Yeaman is scheduled for arraignment in Kitsap County Superior Court today, July 23.

The case resulted from a Department of Labor & Industries (L&I) investigation into Yeaman and his company, Southgate Roofing, of Belfair.

 

Unfair business advantage

“When contractors skip out on workers’ comp, it’s illegal and it’s incredibly unfair to legitimate contractors who pay their fair share and get underbid by these lawbreakers,” said Annette Taylor, deputy assistant director of L&I’s Fraud Prevention & Labor Standards. 

“Workers’ comp premiums for roofers are among the highest in building construction and the trades, based largely on the safety risks those workers face.”

State law requires employers to provide their employees with workers’ compensation insurance. The coverage provides medical care and other financial support if employees are injured on the job.

Construction contractors also must register with L&I. The department confirms they have liability insurance and a bond and that, if they employ workers, they’ve paid their workers’ comp premiums.

 

At least six roofing employees

L&I suspended Southgate Roofing’s contractor registration in November 2012 for failing to pay workers’ comp premiums, and later officially revoked the company’s workers’ comp coverage.

Nonetheless, according to the charges, L&I found two consumers in Silverdale who had work done by the company in May 2014 and in August 2014.

During the August job, six workers told an L&I inspector they worked for Southgate Roofing. Yeaman himself told the inspector he needed to pay a bill before he could register as a contractor, charging papers said.

 

Eight previous infractions

In addition, the charges say that between October 2013 and September 2014, the company bought roofing materials numerous times from a Bremerton supplier and made numerous trips to a Bremerton disposal site.

Apart from the criminal charges, L&I has cited Yeaman with six unregistered contracting and two permit-related infractions since 2013, and several safety violations in 2013. L&I currently lists him as ineligible to bid or work on public works projects. He owes the department more than $28,000 for the unpaid fines and more than $131,000 for unpaid workers’ comp premiums, penalties and interest.

Photo credit: davidwilson1949 / Foter / CC BY 

Stop Work Orders In Massachusetts Created $1.4 Million In Fines And Obtained Coverage For Over 5,000 Workers

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

The Massachusetts Workers’ Compensation Advisory Council has released its Fiscal Year 2014 Annual Report (PDF link). This report contains some eyebrow-raising statistics. Between 2008 and 2014, Massachusetts was able to help over 50,000 workers receive coverage due to Stop Work Orders (SWOs). In 2014 alone the Agency was able to obtain insurance for over 5,000 workers who previously had no workers’ compensation coverage.

Stop Work Orders are issued to employers who are operating without workers’ compensation insurance. An investigator is sent to the worksite and if an order is issued, the employer must cease business operations immediately. Fines will then be given starting at $100 per day until penalties are paid and the company secures insurance.

In Fiscal Year 2014, there were 5,785 Field Investigations resulting in 2,150 SWOs issued and $1,430,599 in fines collected. While SWOs are in effect, employees are still paid for the first ten days out-of-work due to the order and the days missed are considered “days worked.” In addition to the fines that the employer receives, they will be added to a debarment list preventing them from bidding or participating in any state or municipal contracts for three years.

 

Original post on www.mass.gov/lwd/workers-compensation in April 2015.

 

Contracting Scams Result in Jail Time and Fines

Today’s post comes from guest author Kit Case, from Causey Law Firm.

Seattle – A contractor who scammed two building owners has been sentenced to four months in King County Jail and ordered to pay more than $25,000 in restitution.

Collin Patrick Chester, 43, pled guilty in December 2014 to two felony charges of first-degree theft. Superior Court Judge Theresa B. Doyle ordered Chester into custody immediately after sentencing March 27 and filed a 10-year no-contact order with the owners or buildings.

“Justice for consumers is important,” said Elizabeth Smith, assistant director of the Fraud Prevention & Labor Standards Program for the Washington State Department of Labor & Industries. “This is sadly another example of someone trying to take advantage of people who simply wanted to get needed work accomplished.”

In one case, in the spring of 2012, the owner of the Quality Inn on Maple Valley Highway in Renton agreed to pay Chester $70,000 to replace the roof. The only work Chester did was to hire an unregistered subcontractor who tore off a portion of the roof and then abandoned the job because he was not paid, leaving an open roof that resulted in water damage to the hotel when it rained.

In the second case, Chester was contracted to build a new roof for a building in Shoreline. He said he would do the work for $16,000, but no work occurred from May to September 2013, when it was supposed to take place.

In both cases, the building owners paid for some of the work in advance and faced additional expenses to complete the projects. Chester’s previous criminal history included three cases of contracting without a license, a gross misdemeanor.

L&I can help building owners hire smart. Go online to www.protectmyhome.net to verify contractor registration, report fraud, and find agency representatives at many home shows around the state. Upcoming events include the Spokane SHBA Premier Home Improvement Show April 10 – 12, at the Big Home & Garden Show April 18 – 19 in Lacey, and at the Clark County Home & Garden Idea Fair in Ridgefield, April 24 – 26.