TOP 10 EMPLOYER FRAUD CASES OF 2011
This top 10 list represents just a small portion of the company fraud cases in the news this year. More importantly, the total amounts stolen are just a fraction of the amounts companies have managed to steal. For every company that has been caught, we can only assume many more are getting away with the same crime.
Of the $2 billion worth of fraud in just 2 of the following cases, only $498 million has been recovered. That's over $1.5 BILLION that these employers got away with stealing. Once again, big business wins, while workers and taxpayers lose, big time.
AIG settled the $1 billion suit for $450 million.
This week, a federal judge approved a settlement by American International Group, Inc. to pay $450 million for shortchanging state insurance pools by nearly $1 billion. This is the same AIG that taxpayers bailed out during the 2007 economic crisis, and just last year they paid $146.5 million in fines, taxes and assessments in a settlement with all 50 states over workers' compensation reporting errors. A good recovery, but the settlement leaves a potential $550 million in unrecovered funds.
Compensation Risk Managers (CRM), a company that acted as trust administrator for small business in New York State who self-insured for workers' compensation, was sued in 2009 for $400 million in a lawsuit for fraud. CRM was deliberately underestimating the liabilities of many businesses, making its service seem to save companies money when it was really leaving them with inadequate reserves when workers got hurt. When CRM filed for bankruptcy, New York State was left with no other option than to go after the 900 small businesses that were CRM's clients, who have collectively under-paid over $600 million. Many businesses were forced to close, and only $48 million has been recovered so far.
Kile and Petronella funded a lavish lifestyle with the money they stole.
Devon Lynn Kile and her husband Michael Petronella committed a total of $30 million in insurance fraud, while buying $500,000 in jewels, Rolex watches, and a car collection including two Ferraris, a Bentley and a Range Rover. Kile has been sentenced to 10 years probation and a possible 10 years in prison, and has been ordered to pay $2.8 million in restitution. Investigators also found an application by Ms. Kile to appear on Bravo's "The Real Housewives of Orange County." The couple are walking off with a profit of more than $27 million for their scheme.
In April, Teresa Reif, owner of Genesis Janitorial in San Mateo, CA, was arrested for under-reporting the number of employees and her payroll to her insurance carriers. Reif allegedly employed more than 140 people but reported fewer than 70 and used fraudulent paperwork to support her lies. Inconsistencies in her numbers alerted her insurance carriers to the fraud and her fraudulent books were found during a search of her business. If convicted, she faces up to five years in prison and a $50,000 fine. That leaves nearly $2 million in unrecovered funds and 70 employees without insurance.
$2.7 million of NES's work' comp' insurance payments were stolen by Carl Dale Fuller
Carl Dale Fuller, a North Carolina businessman, defrauded his employer and the company's employees when he pocketed the $2,716,537 of the company's workers' compensation insurance premium payments. He issued fake insurance certificates and even paid a few claims, but was finally caught by the FBI and brought to justice. The fraudster faces up to 20 years in prison, a $250,000 fine and must pay back all of the money he took in premiums.
Maki-Maki restaurant owners were convicted of $2.1 million in fraud.
In February, the former owners of two high-end Japanese restaurants pled guilty to 14 felony counts including $2.1 million worth of tax evasion and insurance fraud. Since 2001 the couple had pocketed the money they were supposed to be paying in workers' compensation premiums and unemployment insurance. The husband will also serve 2 years in jail, but the $2.1 million remains unrecovered, including an estimated $1.1 million sales tax loss to the state of California.
In February, the former owner of a Bay Area shuttle service was sentenced to 10 years in prison and ordered to pay $2.7 million in fines after being convicted of more than 19 counts of workers' compensation fraud. The company under-reported payroll by more then $5 million, resulting in more than a $925,000 underpayment of payroll taxes. The company also failed to report $11 million in income, costing the state and federal governments more than $500,000 in tax revenue.
Monica Mui Ung convicted on numerous counts of fraud.
Monica Mui Ung, owner of NBC General Contractor Corporation, was convicted of numerous counts of workers compensation and wage fraud, including underpaying wages due her employees, and failing to pay for overtime, sick leave, pension, health care, training, vacation, and other benefits as required by labor laws. She has been sentenced to 4 years in prison and ordered to pay $350,000 in restitution to her employees, as well as $850,000 to the State Compensation Insurance Fund. Because Ung was a recipient of public contracts, her actions "created an unfair bidding environment for all other legitimate bidders for public works contracts."
Anthony Gray was recently sentenced for letting his company's workers' compensation insurance lapse, unbeknownst to his employees, who were filing valid claims. Gray Container, a 55-gallon drum manufacturer, has been ordered to discontinue operations until he becomes compliant with workers' compensation law and takes action to repay more than $600,000 owed to the Ohio Bureau of Workers' Compensation. The CEO of the Ohio Bureau of Workers' Compensation has remarked that "[t]his is one of the most egregious cases of an employer simply ignoring laws meant to protect workers."
Linda Bommer of R&W Swimming Pools was convicted of failing to maintain work' comp' insurance for her employees.
In February, Linda Bommer, owner of R&W Swimming Pools in Harrison, Ohio, was convicted of failing to maintain workers' compensation insurance coverage for her employees. Eight claims were filed against her company while she was operating a business under a lapsed policy. She currently owes approximately $73,000 in past due premiums, in addition to non-compliance claims costs.
Posted 01-17-2012 4:59 PM by caaaAdmin