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  • Dean Smith

2012′s Top 10 Workers Comp Fraud Cases Cost America a Whopping $97 Million

Employees, employers, and healthcare providers alike commit workers compensation fraud. Below, a Texas Workers Compensation Blog put together a comprised list of the top 10 workers compensation fraud cases in the year 2012, which cost America $97,446,500 (making it much easier to understand how insurance fraud costs us BILLIONS each year).

1. “Operation Dirty Money” (Florida)

Owner of the Oto Group, Inc. and 10 Shell companies, Hugo Rodriguez, along with seven accomplices, shafted over $70 million in undeclared payroll using several different money services. Rodriguez avoided paying workers’ compensation premiums and coverage using his 10 Shell companies, while scamming legitimate businesses and putting the lives of countless employees at risk.

2. 41,247 Private Employers Failed to Report Payroll Data (Ohio)

41,247 private businesses/companies in Ohio violated state law by failing to report and pay workers’ compensation premiums, which totaled approximately $5.6 million. And the remaining businesses that actually paid their premiums? Their costs were raised.

3. Employee Leasing Companies…too Good to be True? (Texas)

Texas based company, Jackson Brothers Hot Oil Service, decided to hire a staffing agency back in 1999 to funnel in some temporary workers. The staffing agency was required to purchase workers’ compensation for the workers they provided and took out a $4,100 policy. When one of the agency’s workers was severely injured from an explosion, the agency declined to pay the medical bills that ensued. The injured employee and the Jackson Brothers sued the staffing agency for fraud and won $4,466,500 in 2012.

4. Business Owner Under-Reports Payroll by $3.5 Million (California)

Construction business owner, George Osumii, lied to the State Compensation Insurance Fund by under-reporting his employee payroll by $3.5 million from the years 2001 to 2006. Osumii avoided paying $814,000 in premiums.

5. Roofing Company and Owners Sentenced for Labor Violations (Massachusetts)

Newton Contracting Company, Inc and its owners labeled half of their employees as subcontractors (even though they weren’t) and concealed over $3.4 million worth of payroll during annual audits. The Massachusetts Insurance Fraud Bureau discovered the fraud.

6. Like Father, Like Son (California)

Business owner, Steven Morales, hid his payroll to avoid paying workers compensation premiums that totaled approximately $3.1 million. Morales was convicted and sentenced to seven years in prison. Morales’ son Brian was also convicted and sentenced to four years in prison.

7. Construction Company President Accused of Payroll Fraud (Florida)

The president of Navarre Industries, Inc., Randall Seltzer, was charged with workers’ compensation fraud (among several other felony counts) for under-reporting payroll to his insurer according to an investigation conducted by Florida’s Department of Financial Services Division of Insurance Fraud. Seltzer is facing up to 30 years in prison and restitution payments totaling over $2.9 million.

8. Fake Business Owner Fabricated Insurance Certificates (Florida)

Yucet Batista focused his entrepreneurial efforts in creating a bogus company, obtained workers’ compensation benefits, and “rented” the benefits to subcontractors for a fee. Batista helped the uninsured subcontractors avoid paying $2.1 million in premiums by providing more than 250 fraudulent certificates of insurance.

9. 12 Audits Uncovered $1.2 Million in Workers’ Compensation Violations (Massachusetts)

The Boston Marriot renovation project was enormous, and so were the violations of unreported wages.

Between seven companies, there were $584,249.00 in misclassified 1099 wages and $584,287 in unreported W-2 earnings, totaling $1,171,536.00. Six of these companies registered workers as contractors instead of employees.

10. Owners of Historic Inn Face Fraud Charges (California)

Sanjiv and Neelam Kakkar, owners of historic Brookdale Inn and Spa, are facing charges for falsifying wage information to their insurer to lower insurance premiums. Over a several year period, the Kakkar’s paid approximately $800,000 less in premiums than they should have.

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