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Two Indictments Filed in NY for Workers’ Compensation Premium Fraud Totaling $10 Million

According to an article in Claims Journal, two indictments were announced late last month by Manhattan District Attorney, Alvin Bragg, Jr., in connection with workers’ compensation fraud schemes, one worth $7 million, and the other worth $3 million.

The details of each case are highlighted below by Claims Journal:

Juan Escobar

“In one case, Juan Escobar, and his drywall and carpentry companies, were charged with defrauding the state workers’ compensation provider, New York State Insurance Fund (NYSIF), of nearly $3 million in insurance premium payments. The charges include conspiracy, insurance fraud and falsifying business records. According to court documents, Escobar defrauded NYSIF by ‘significantly underreporting his payroll’ during annual insurance premium audits. Escobar cashed more than $26 million in checks at locations across Manhattan and Queens during the course of this scheme, using the cash to fund his companies’ unreported payrolls, the documents allege.

The district attorney claims that Escobar and his companies — Infinity Drywall Corp., Infinity Quality Services Inc., JMC Drywall Corp. And JJM Builders, Inc. — fraudulently reported the smaller employee payrolls to the state, grossly reducing the amount of insurance payments Escobar and the companies were required to pay to NYSIF, and leaving workers on large construction projects underinsured.

To facilitate the scheme, Escobar allegedly issued cashier’s checks to shell companies in the names of family members, which were then cashed at his direction. Prosecutors say the cashier’s checks were made to appear as legitimate payments to subcontractors for construction work. These proceeds were funneled to his off-the-books payroll, which typically totaled more than $50,000 a week. Escobar gave employees cash in envelopes near a train stop in Sunnyside, Queens.

According to prosecutors, Escobar hid the missing workers from the reported payroll using multiple tactics. He directed injured workers to falsely claim workplace injuries occurred elsewhere, told them to avoid detection from site safety inspectors or gave workers cash in exchange for failing to file workers’ compensation claims. Escobar also failed to report the worker injuries to NYSIF. When a workers’ compensation claim did get filed, he would misrepresent the worker’s employment status.”

Mario Rojas, Jr. and Steven Lyon

“In the second case, OneTeam Restoration, Inc., its owner and president Mario Rojas, Jr., and accountant Steven Lyon were indicted for defrauding NYSIF of more than $7 million in workers’ compensation insurance premium payments by filing doctored payroll-related documents that greatly reduced the size of OneTeam’s workforce. The defendants were charged in a New York State Supreme Court.

According to court documents and statements, OneTeam, a Long Island City-based masonry subcontractor specializing in building façade repairs and waterproofing, and Rojas, its owner, hired Lyon to prepare and file the company’s quarterly payroll reports with the New York State Department of Labor, as well as its yearly state and federal tax returns. Lyon also acted as the company’s representative during NYSIF’s mandatory annual audits.

As alleged, Lyon used separate email accounts to file payroll-related documents with the Department of Labor and NYSIF. While the filings submitted to DOL were accurate, the filings submitted to the state workers’ compensation provider NYSIF were doctored to “drastically reduce” the size of OneTeam’s workforce. Over the course of the scheme, OneTeam underreported its payroll by more than $16 million, and underpaid NYSIF by more than $7 million, according to court documents.”

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