If you were to hear the phrase ‘workers’ compensation fraud’, what would it bring to mind? It seems that most people might assume that phrase means that the system is being gamed by employees seeking benefits to which they are not entitled. In fact, the phrase ‘workers’ compensation fraud’ more aptly describes the actions by companies; while fraud by employees certainly exists, more common –and far more costly– are the dollars bilked from the government by companies and corporations. This runs into the billions each year.
According to North Carolina attorney Leonard Jernigan, “…states could close large portions of their deficits without raising taxes or cutting spending…” and overall workers’ compensation costs would be lower if said states would just prosecute those entities defrauding the system.”
When companies commit reporting frauds, they cause state workers’ comp insurance funds to be under-funded (and possibly requiring replenishment by taxpayers), workers are left without insurance if they are hurt on the job and receive poor or no care for their injuries.
Jernigan compiled a list of the top ten employer fraud cases of 2011. The associated dollar signs are galling and here are a few of those ten that I find the most distasteful:
1) AIG: You remember those guys, don’t you? They got your tax dollars in 2007’s economic downturn. While your money was bailing them out, they were underpaying state insurance pools to the tune of $1 billion. They only have to pay $450 million of it back, though. So they profited from you, Citizen Taxpayer, not once but TWICE.
2) Not only did Compensation Risk Managers (CRM) act as trust administrator for 900 small businesses in New York state, they also committed $1 billion in fraud. When they were sued for underestimating the liabilities of the businesses they represented, they filed bankruptcy. The state of New York was then forced to go after the small businesses that were CRM’s clients, as they’d collectively underpaid (unknown to them) over $600 million. Many of the businesses involved were shuttered as a result.
3) California residents Devon Lynn Kile and Michael Petronella are partners in marriage and in insurance fraud to the amount of $30 million. While they were busy under reporting payroll, they were also busy leading a lavish lifestyle that included costly watches and cars. The couple has been ordered to make restitution to the tune of $2.8 million, effectively netting $27 million in profit.
4) Carl Dale Fuller is a North Carolina business man who issued fake insurance certificates (and even paid a few claims) while pocketing a nice, healthy $2,716,537.
As you can see, in each of these cases a significant amount of money was bilked from states and walked away in the pockets of these criminals who not only profited, but left workers without needed coverage.
There is lots of talk about workers’ compensation reform, but it’s evident from just this small sampling of cases that it doesn’t need to come from the ground up; It seems to me that the most necessary reforms involve those at the company level who would seek to defraud the workers a company is supposed to care for, protect, and provide relief to in times of work-related injury or disability. Employees aren’t costing billions in taxpayer losses; companies are.