[Editor's note: This is the second of two parts on workers' comp fraud. Part one is here.]
In the preceding post, we looked at various cases of injured workers, from relatively simple scams to a bizarre case in which a sheriff’s deputy contends he was set up to take a fall in retaliation for filing a workers’ comp claim.
The next case involves a business owner charged with a laundry list of crimes Florida, after being arrested by the state’s Chief Financial Officer (CFO), an elected position that includes oversight of the Department of Financial Services including the Division of Insurance Fraud.
A shell company
According to a Jan. 26 press release, “Florida CFO Jeff Atwater today announced the arrest of David Rodriguez-Socarras, 49, a Duval County man who allegedly created a ‘shell’ company and fictitious name in order to cash nearly $3 million in payroll checks through a money service business to avoid workers’ compensation premiums and payroll taxes.
“Socarras is facing multiple felony charges, including application fraud, workers’ compensation fraud, criminal use of personal identification information, fraudulent application for a Florida driver’s license or ID card, and possession of a fraudulent Florida driver’s license or ID card, and faces up to 20 years in prison if convicted on all charges. He was booked on Monday into the Duval County Jail with bond set at $300,000.”
57 certificate of insurance
The statement continues, “The violations were uncovered when the department’s Bureau of Workers’ Compensation Compliance served a Stop Work Order on Socarras’ business, HMV Construction Incorporated, and discovered he had provided 57 certificates of insurance to companies from Jacksonville to Naples.
“A ‘shell’ company is often created to utilize money service businesses, such as check cashing stores, to cash large construction payroll checks for contractors who are avoiding paying for workers’ compensation premiums and payroll taxes.
“Socarras’ arrest is part of an ongoing investigation by the North Florida High Intensity Drug Trafficking Area Task Force’s Money Laundering Unit that includes the DIF, Jacksonville Sheriff’s Office and U.S. Immigration and Customs Enforcement.”
A temp agency and more shells
At an Iowa employment agency, things have gone from bad to worse. Last year, someone at the agency got caught embezzling funds. Now, the owner of DES Staffing, Dinesh Sethi, “has been indicted on federal charges of wire fraud and conspiracy to commit wire fraud” in connection with a workers’ comp scheme, according to
a Jan. 24 piece in the Des Moines Register.
A Jan. 25 follow-up story says Sethi pleaded not guilty to a six-count indictment, turned in his passport and was released on his own recognizance. A conviction could result in a 25-year prison sentence, a fine of $250,000, or both.
‘At least $1 million’
According to the earlier story, “The indictment, which became public Monday, accuses Sethi of defrauding four insurance companies of at least $1 million in workers compensation premiums that should have been paid to cover employees of DES Staffing, a temporary employment agency.”
The article also says the indictment alleges the following:
- Sethi created two decoy, “shell” companies, as if they were separate from DES, then listed most employees in the two new entities, in an attempt to avoid higher-priced workers’ comp premiums, which had jumped in 2008 “due to serious worker compensation claims, including the deaths of two employees”;
- two employees listed some workers as holding clerical or lower-premium positions instead of their actual, higher-premium positions;
- Sethi and the pair of employees falsified payroll records to an insurance company in 2009.
The Des Moines-based temp-staffing business is described as having 40 employees in offices in five states, with 2009 revenues of about $20 million and placements of about 1,000 temp personnel.
Chiropractor indicted
A Cincinnati Fox affiliate has
a Jan. 25 story about a medical provider indicted for workers’ comp fraud and theft. If convicted, the Fairfield, OH, chiropractor will be a repeat offender–he pleaded guilty to workers’ comp fraud in 1996, after being charged for billing the Ohio Bureau of Workers’ Compensation (BWC) about $13,000 for services that were not provided.
Subsequently Bruce E. Holaday did not lose his chiropractic license but the BWC yanked the certification that allowed him to serve as a BWC provider. Still, he retained ownership of Back and Spine Center on Mack Road, where other chiropractors also work–chiropractors who are certified for BWC work.
According to the story, the BWC’s Special Investigations Department “initiated an investigation after receiving an allegation that Holaday was concealing from BWC his direct involvement in the treatment of injured workers. Holaday was unlawfully using the names and provider identification numbers of the chiropractors with whom he practiced after being permanently decertified as a BWC health care provider, prohibiting him from seeking and receiving reimbursement from BWC.”
Four insurance companies to pay $120 million
To finish up, let’s see what it look like when carriers do the dirty deeds. Late in December, four insurers reached a settlement with the state of New York to pay about $120 million for overcharging on workers’ comp premiums.
According to
a Dec. 31 piece in Businessweek, “New York Attorney General Andrew M. Cuomo said four insurers, including Zurich Financial Services AG and Ace Ltd., agreed to pay almost $120 million to settle claims they collected too much in workers’ compensation fees.
“Pennsylvania Manufacturers’ Association Insurance Co. and CNA Financial Corp. also entered into the settlement, Cuomo said today in an e-mailed statemen.”
A Dec. 31 Reuters account says, “The Workers’ Compensation Board charges annual fees to workers’ compensation insurers, who cover the fees by charging policyholders a surcharge on premiums.”Beginning in 2000, the board used a different calculation than the one used to determine the surcharges to policyholders. As a result, some insurers including ACE, Zurich, Pennsylvania Manufacturers and CNA collected too much from 36 of their member insurance companies.
“A change in the law in 2009 and 2010 allowed the state to recover the excess funds that the insurers had collected.”
***********************************************************************************************************************
Frequently enough, a worker’s compensation case may be so complex as to demand legal representation. However, sometimes what seems like a cut-and-dried situation to an injured worker may result in a smaller award than envisioned–or even a denial. Have you, a friend or a loved one been injured on the job? Whether you’re merely seeking answers about your rights or believe a lawsuit may be necessary, be sure to seek counsel with attorneys trained and experienced in workers’ compensation. Here’s some resources:
