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It’s that time again! Every year Leonard Jernigan compiles a list of the top ten most egregious cases of Employer and Insurer workers’ compensation fraud that occurred over the previous calendar year. Despite what you might have been told, the most costly fraud is not committed by workers, but by employers trying to shave some dollars and sneak them into their pockets. Jernigan’s list has some real doozies this year, and they add up to over $97 million. Just like last year, let’s discuss some of the ones I find the most despicable:
1) Business Staffing, Inc (BSI) was hired by Jackson Brothers Hot Oil Service to provide contract employees. Jackson Brothers required BSI to provide workers’ compensation insurance on those employees, so BSI bought a policy from Transglobal Indemnity for $4,100. Subsequently, a 27-year-old oilfield worker was injured in an explosion and had eighteen surgeries and 77 days in intensive care. The worker and Jackson Brothers were forced to sue BSI and Transglobal when his medical bills in excess of one million dollars went unpaid. The court found against the two companies to the tune of $4,466,500 and it was discovered that neither of them had a license to conduct insurance business in Texas.
2) Apparently Ohio has a problem on its hands. Thousands of companies located there skipped out on paying their most recent workers’ comp premiums, according to a Dayton Daily News analysis. Over 41,000 private employers failed to report payroll data and submit premiums by the deadline. As of May 2012, over 12,000 accounts were still outstanding in the amount of $5.6 million total. Sadly, this behavior has a tendency to drive up insurance costs for the companies playing by the rules.
3) Several of Jernigan’s top ten originate in Florida. Among them is Yucet Batista, who was caught creating fraudulent certificates of insurance so that contractors could pocket over $2 million. Batista created a fake company, purchased a workers’ comp policy and then ‘rented’ it for a fee to uninsured subcontractors.
4) In July of 2012 the Florida joint task force arrested several people at the culmination of ‘Operation Dirty Money.’ Hugo Rodriguez, owner of Oto Group, Inc., was arrested along with seven others. They stand accused of running shell companies that directed over $70 million in undeclared payroll through various money service businesses. This enabled Rodriguez and his associates to run a huge construction business without paying workers’ compensation premiums. This left his employees unprotected and cheated legitimate businesses.
“Legitimate business owners that pay for workers’ compensation, as required by law, are at a competitive disadvantage with those who cheat the system,” according to Jernigan, “When people suffer a workplace disability and have no insurance local businesses that provide goods and services feel the pain along with health care providers who cannot get properly paid for their services. The cost of medical care and disability ends up being shifted to the taxpayer through Social Security, Medicare and Medicaid, and in states where compliance is not vigorously enforced a culture of cheating continues.”
