2013’s Top Cases of Workers’ Comp Fraud

Workers’ comp fraud: the phrase conjures images of employees playing hooky and pretending to suffer from crippling injuries sustained at work, all while cashing in a nice, big check from their innocent and well-meaning employers. Right?

Wrong. According to a list compiled by Professor Leonard T. Jernigan, Jr., 49 of 50 fraudulent workers’ comp cases in the past 5 years were actually the result of an employer’s wrongdoing. Take a look at five of the top ten cases of workers’ comp fraud in 2013, and see for yourself.

Case Number 1: Owners of a Miami-Dade supermarket chain almost get away with $35 million in fraudulent workers’ comp-related transactions.

The proud owners of Diaz Supermarkets, John and Mercedes Diaz, were arrested and accused of $35 million of workers’ comp fraud (among other illegal and fraudulent transactions), including, failure to provide coverage for employees for ten years.

Case Number 2: A California labor contractor learns that a business by any other name is still the same business.

Richard Escamilla, Jr. accrued $4.1 million by creating new business names and filing for insurance, thus avoiding the need to provide a claim history. Mr. Escamilla will serve up to 6 years in prison, and must find a way to repay the $4.1 million that he now owes California workers’ comp insurance carriers.

Case Number 3: Michigan-based insurance executive charged with embezzling $2.6 million from workers’ compensation TPA.

Former CEO Jerry Stage and employee John Bauer found themselves in a tight spot last June. After the two were caught embezzling money from the Compensation Advisory Organization of Michigan—which they’d been doing for 10 years—they’ve been asked to repay all $2.6 million. Did we mention that both Stage and Bauer were employed by a non-profit workers’ comp insurance company?

Case Number 4: A father and son landscaping business in California turns out to be a lot less wholesome than it seems.

Father-son team Jesse and Carlos Contreras were accused of committing $1.45 in insurance fraud. From January 2008 to March 2012, the two “misclassified” their employees, defrauding the California State Compensation Insurance Fund and earning themselves up to 19 years in prison—each.

Case Number 5: A California cleaning company sweeps payroll under the rug.

The president of Awesome Products, a cleaning company based out of California, was found guilty of underreporting his total payroll by $8 million. (That’s quite a rounding error.) His mathematical sleight of hand resulted in a premium loss of $898,000.

If you have legal questions or concerns, contact Atlanta workers’ comp attorney Michael Moebes at (404) 354-5432, or visit him online at www.atlanta-workers-comp.com.

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