What Workers’ Compensation Fraud Actually Looks Like

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Some company owners fund lavish lifestyles with the money they steal through fraud.

What does workers’ compensation fraud actually look like? It looks like big insurance skimming billions of dollars and wealthy businesses living lavishly on workers compensation funding. Fraud costs everyone involved in the workers compensation system. Unfortunately the insurance and business interests continually claim employee fraud is a major problem. In reality worker fraud is a very small problem, accounting for less than 5% of fraud costs. A recent PBS segment summarized this fact very well. Please take a moment to read this and get the facts.

My respected North Carolina colleague, Leonard Jernigan, has studied real fraud costs for several years. His recent article, Billions in Employer Fraud: Top Ten Cases of 2011 is a must read for everyone who cares or is interested in the workers compensation system. Check out items 2 and 3 from his list below to see the old adage “if you are going to steal, steal a lot” at work in the workers’ compensation system:

  1. Compensation Risk Managers commits $1 billion in fraud, forcing many small businesses to close.
    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.
  2. California couple underreports payroll by $30 million, buys Ferraris and Rolexes instead.
    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.


The next time some one argues that worker fraud makes the system too expensive and benefits need to be cut back, please show them the facts.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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