2012 Top Ten Workers’ Compensation Fraud Cases
Total Fraud: $97,466,500.00
1. ‘Operation Dirty Money,’ Stings Workers’ Comp Fraud Check Cashing Scheme (FLA)
07/27/2012
Multiple arrests were announced in Florida’s joint task force’s “Operation Dirty
Money’, which led to the arrest of alleged ringleader Hugo Rodriguez, owner of the Oto
Group, Inc., and seven other individuals. Mr. Rodriguez was the facilitator of 10 known
shell companies that funneled in excess of $70 million in undeclared and undetected
payroll through different money service businesses.
By using shell companies, Rodriguez was able to run a large construction
operation and avoid paying the cost of workers’ compensation coverage, leaving
employees at risk and scamming legitimate businesses.
2. Firms Face Charges for Skipping Workers’ Comp Payments (OH) 05/13/2012
Thousands of Ohio companies violated state law by not paying their most recent
workers’ compensation premium, which can drive up insurance costs for businesses that
follow the rules, a Dayton Daily News analysis found.
The bureau identified about 41,247 private employers in the state that failed to
report their payroll data and submit premium payments by the deadline. As of May,
more than 12,200 accounts remain outstanding, and those companies owe an estimated
$5.6 million in premiums.
3. Case Proves Employee Leasing too Good to be True (TX) 07/10/2012
$4,466,500.00 was awarded in a Texas court against a staffing agency and its
workers’ compensation insurance company. Jackson Brothers Hot Oil Service hired
Business Staffing, Inc., (BSI) in 1999 and required BSI to have workers’ compensation
insurance for its leased employees. BSI had 150 client companies with 2,000 employees.
BSI bought a policy from Transglobal Indemnity for a total premium of $4,100.00
to cover all its employees. After failing to pay the medical bills of a 27 year old oil field
worker who was in an explosion and had 18 surgeries, the employee and Jackson
Brothers sued BSI and Transglobal for fraud. Neither Transglobal (who had its corporate
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headquarters in the Turks and Caicos Islands) nor BSI had a license to conduct insurance
business in Texas.
4. Business Owner Faces Insurance-fraud Charges (CA) 05/02/2012
Construction business owner George Osumii of Irvine, California was indicted on
numerous felony counts of misrepresenting facts to the State Compensation Insurance
Fund, among other charges.
From December 2001 to March of 2006, Mr. Osumii committed workers’
compensation premium fraud by reporting his payroll to SCIF at just over $1 million,
under-reporting over $3.5 million in payroll. This fraud resulted in a loss of over
$814,000.00 in premium owed to the insurance fund.
5. Watertown Roofing Company and its Owners Plead Guilty and are Sentenced for Labor
Violations (MA) 01/11/2012
The Massachusetts Insurance Fraud Bureau discovered that the company,
Newton Contracting Company, Inc., owned by Shaun Bryan and Antoinette CapursoBryan, misclassified half of its workforce as subcontractors, as well as failing to disclose
to auditors more than $3.4 million of their company’s misclassified subcontractor
payroll during its annual workers’ compensation audits.
6. 7- Year Sentence in $3.1 Million Fraud Case (CA) 11/30/2012
Steven Morales, 65, of Wildomar, CA was convicted and sentenced to seven
years in prison for his part in a 3.1 million workers’ compensation scheme. His son Brian
was also convicted and sentenced to 4 years in prison. Morales and his son had set up a
sophisticated system of shell companies to hide payroll and avoid paying workers’
compensation premiums.
7. Construction Company President Accused of Payroll Fraud (FL) 03/29/2012
Randall Seltzer, president of Navarre Industries, Inc., was charged with multiple
felony counts, including workers’ compensation fraud. An investigation by Florida’s
Department of Financial Services’ Division of Insurance Fraud revealed that Seltzer
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systematically and intentionally under-reported his corporation’s true payroll to his
insurance carrier. The department’s Division of Workers’ Compensation issued the
company two stop-work orders within a five year period.
Seltzer allegedly established a shell corporation in 2011 to intentionally violate
the stop-work orders and continue operating his construction business illegally. If
convicted, Seltzer could face up to to 30 years in prison and pay over $2.8 million in
restitution.
8. CFO Jeff Atwater Announces Arrest of Owner of Fake Company for Creating Fraudulent
Insurance Certificates and Avoiding Millions in Premiums (FL) 04/13/2012
Yucet Batista was arrested for allegedly creating more than 250 fraudulent
certificates of insurance to help uninsured contractors avoid $2.1 million in workers
compensation premiums.
Batista created the company and obtained the workers’ compensation insurance
policy for the purpose of “renting” it, or making it available to dozens of uninsured
subcontractors for a fee.
9. Audits Uncover Almost $1.2 million in Workers’ Compensation Violations at Boston
Marriott Project (MA) 09/04/2012
In 12 audits conducted by the Joint Enforcement Task Force on the Underground
Economy and Employee Misclassification and the Executive Office of Labor and
Workforce Development, it was discovered that there were $584,249.00 in misclassified
1099 wages and $584,287 in unreported W-2 earnings, for a total of &1,171,536.00 in
unreported wages by subcontractors on the Marriot renovation project.
Six companies misclassified workers as contractors rather than employees, and
seven companies failed to report wages. Among the worst of the offenders were one
company that misclassified 28 workers and failed to report over $410,000.00 in wages;
another failed to report $462,081 in W-2 wages.
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10. Inn Owners Facing Workers’ Compensation and Insurance Fraud Charges (CA)
06/13/2012
The owners of historic Brookdale Inn and Spa, Sanjiv and Neelam Kakkar, are
facing trial on charges that they falsified wage information to obtain lower insurance
premiums. According to records, the couple paid approximately $800,000 less in
insurance premiums than they should have over a period of several years.
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