Category Archives: Fraud

Study: Work Comp Benefits Up; Employer Costs at Historic Low

Posted on September 25, 2014 by Rod Rehm

Respected colleague Thomas Domer of the Domer Law Firm in Milwaukee, recently wrote a post about a study released by the National Academy of Social Insurance (NASI).

The study, titled Workers’ Compensation: Benefits, Coverage, and Costs, 2012, is a treasure trove of information, as you can see if you click on the 86-page document. The 2012 report was just released this summer, I am guessing because it takes a bit to compile all this data.

Here’s what Mr. Domer said about the study (reprinted with permission):

“A new study released by the National Academy of Social Insurance (NASI) indicates worker’s compensation benefits rose by 1.3% to $61.9 billion in 2012 while employer costs rose by 6.9% to $83.2 billion. Even though total benefits and costs increased in 2012, worker’s compensation benefits and costs per $100 of covered payroll have been lower from 2007 to 2012 than at any time over the last 30 years. In 2012 benefits were 98 cents per $100 of covered payroll while employer costs were $1.32 per $100 of covered payroll.

Over the last 30 years medical benefits have accounted for an increasing share of total benefits from 33% in 1984 to nearly 50% in 2012. Medical benefits accounted for almost 50% of the $61 billion in total benefits paid. In Wisconsin medical benefits exceed cash benefits, indicating that medical cost containment is a significant issue.

The Academy’s report Worker’s Compensation: Benefits Coverage and Costs 2012 is the 17^th in an annual survey. The report provides the nation’s only comprehensive data on worker’s compensation benefits coverage and employer costs.”

Rehm, Bennett & Moore includes attorneys licensed in both Iowa and Nebraska, so I was most interested in these two states. As Mr. Domer indicated, cash wage replacement benefits and medical benefits are almost even nationwide, although cash benefits used to be a much greater cost to employers than medical benefits were. There is some difference in benefits between states, too, according to the study.

“The share of benefits paid for medical care varies tremendously across states. The variation not only reflects between-state differences in amounts paid for medical care, but also differences in the relative generosity of cash benefits across states,” according to the study.

Both Iowa and Nebraska are the same as what Mr. Domer reported with Wisconsin above: medical benefits very much outpaced cash benefits, and medical cost containment is definitely a concern. In 2012 in Iowa, over $362 million was paid in medical benefits, while almost $280 million was paid in cash benefits. In 2012 in Nebraska, over $192 million was paid in medical benefits, while over $120 million was paid in cash benefits.

There is a lot more information to digest in this document, so perhaps future blog posts will address some of the details. But I will end on an encouraging note from the 2012 study: “Workers’ compensation covered an estimated 127.9 million workers, (90 percent of the employed workforce) an increase of 1.6 percent from the number of workers covered in 2011 (125.8 million). … Between 2010 and 2012, all states experienced an increase in both covered wages and covered workers.”

That is definitely good news for workers, whether injured or not, and their loved ones.

Are You Really an Independent Contractor?

Posted on September 8, 2014 by Jon Rehm

“Calling a dog’s tail a leg does not make it a leg.” Abraham Lincoln

FedEx drivers recently won two class-action lawsuits in the 9th Circuit Court of Appeals. The court ruled that FedEx wrongfully withheld overtime pay, Social Security, unemployment, Medicare and other benefits to drivers because they were misclassified as independent contractors rather than employees. The decisions were driven by the fact that FedEx exercised control over the appearance of drivers as well as what packages to deliver, on what days, and at what times.

Though the FedEx decision only applies to Oregon and California, it is very possible that a similar decision would have been made under Nebraska law. Under the Nebraska Wage Payment and Collection Act as well as under the Employment Security Law, Neb. Rev. Stat. 48-601 et al., there is a five-part test as to whether a worker is an independent contractor or employee.

Individual is free from control or direction under contract of hire
Individual is free from control or direction as a matter of fact
Service is outside the usual course of business for which service is performed
Such service is performed outside of all the places of business of the enterprise which such service is performed
Individual is customarily engaged in an independently established trade, business or profession.

Nebraska law creates a presumption of an employer-employee relationship. Tracy v. Tracy, 581 N.W. 2d 96, 7 Neb. App. 143 (Neb. Court of Appeals, 1998) In short, if you can answer most of those questions “no,” you are very likely an employee rather than an independent contractor. The mere fact that you may have signed a documents stating you are independent contractor does not necessarily mean you are an independent contractor.

In addition to protections under federal law, asking questions about your employment status is also a protected activity under Nebraska law. Being misclassified as an independent contractor could cost you thousands of dollars in wages and benefits. However, you have the ability to fight back if you are being misclassified.

Wage Theft Is Illegal And Immoral

Posted on January 20, 2014 by Emily Wray Stander

Kim Bobo

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm in North Carolina. Generally, a person tips for good service, and many of the folks who work for tips don’t even get minimum wage, so they rely on those tips to live. But what happens when a business withholds tips? It can be really challenging for workers, indeed, and is not all right. On this day of social justice, service, and reflection of Dr. King’s life and legacy, I think the action items listed below are excellent choices to start a discussion with someone about wage theft and how the wages workers make also affect both the workers themselves and are a reflection of society. The Nebraska Legislature will soon be having a variation on this discussion with a bill, LB943, to increase the minimum wage to $9 an hour over three years. Other bills this session that address challenges workers may face include increasing the earned income tax credit and the “Paid Family Medical Leave Act (LB955), which would protect employees from income losses caused by the need to take off time to care for newborns or other family members,” according to this article in the Lincoln Journal Star. This includes up to six weeks a year off for eligible employees covered by the federal Family Leave Act. I hope that today allows reflection about the importance of how Dr. King’s work advocating for workers and social justice continues. And, seriously, please remember to tip your servers if you have the luxury of eating out today.

Kim Bobo, the Executive Director of Interfaith Worker Justice and the author of “Wage Theft in America,” recently spoke at Duke Divinity School and then at N.C. Central University School of Law in Durham, N.C. Ms. Bobo, who was awarded the Pacem in Terris Peace Award in 2012 (other recipients are John F. Kennedy, Mother Teresa, and Martin Luther King, Jr.), has a simple reason for the work she does: as a person of faith, she recognizes injustice and seeks to correct it. Wage theft, which is defined as stealing from workers what they have rightfully earned, is not only illegal it is immoral. She is simply trying to get people to do something about it.

In September a $4 million settlement was announced by the Harvard Club of Boston for not paying tips to its staff.

At N.C Central law school, Bobo spoke to students about waiters not getting tips, even though the restaurant collected those tips when the bill was paid, and asked if anyone in the room had experienced that type of theft. Indeed, one student shared a story about working at an exclusive club in South Carolina where that practice was routine. After reporting the problem and getting nowhere, he finally gave up and quit. He is still bitter about it. In September, a $4 million settlement was announced by the Harvard Club of Boston for not paying tips to its staff. Small amounts can add up for the employer.

Bobo gave some action items to the audience that I wanted to share with you. She said we need to:

start recognizing the seriousness of the problem;
start getting attention about the problem in order to fix it;
stay focused; and
if necessary, cross of the lines of our comfort zone.

For more information about Interfaith Worker Justice, go to: www.iwj.org/

Insurance Company Broker Caught Cooking the Books

Posted on June 17, 2013 by Rod Rehm

Today’s post comes from respected colleague Jon Gelman from Jon Gelman, LLC – Attorney at Law in New Jersey. It is pretty common to hear about fraud when it comes to workers in workers’ compensation. But the fraud can also come from different cogs in the wheel of the workers’ compensation process, an issue that isn’t always covered as thoroughly unless it involves a lot of money, like this situation. This insurance company employee stole millions of dollars instead of buying insurance policies for “trucking, hauling, waste management, moving, and recycling businesses located in New Jersey and New York,” according to the post. So the insurance companies didn’t get their money, the businesses didn’t get their insurance policies, and this fraud violated the trust of the insurance broker itself. At the time of his original blog post, Mr. Gelman wrote that the prosecution anticipated the sentence would include jail.

NJ Attorney General Jeffrey S. Chiesa announced that an employee of a former Morris County insurance brokerage company pleaded guilty today to stealing several million dollars entrusted to her employer. These funds had been entrusted to the insurance brokerage for the purpose of purchasing insurance policies for small and medium-sized businesses in New Jersey and New York.

Kelly Roetto, 45, of Bedminster, pleaded guilty to an accusation charging her with second-degree theft by unlawful taking, second-degree issuing bad checks, and second-degree misconduct by a corporate official before Superior Court Judge Thomas V. Manahan in Morris County.

Judge Manahan scheduled sentencing for Dec. 19.Under the plea agreement, the state will recommend that Roetto be sentenced to nine years in state prison. In addition, Roetto will be ordered to pay restitution and will agree to never again obtain an insurance license in the State of New Jersey.

This defendant used her position of trust within this insurance brokerage firm to divert millions of dollars

“This defendant used her position of trust within this insurance brokerage firm to divert millions of dollars,” Attorney General Chiesa said. “My office will continue to work with the insurance industry to root out corrupt insurance brokers.”

“This crime attacked the integrity of our insurance system by Continue reading →

$97 Million In Fraud: 2012’s Top 10 Workers’ Compensation Fraud Cases

Posted on January 21, 2013 by Rod Rehm

CFO Jeff Atwater and Broward Sheriff Al Lamberti announced multiple arrests in Operation Dirty Money.

Today’s post comes from guest author Leonard Jernigan from The Jernigan Law Firm in North Carolina. It is unfortunate that this article is necessary, but I appreciate the important work Mr. Jernigan does to compile these fraud cases. It seems like the headlines frequently feature employee fraud, but employer fraud occurs, too, and sometimes on a much grander scale. As Mr. Jernigan points out, it’s the workers and taxpayers who are on the hook with employer fraud when an employee gets hurt and doesn’t have the coverage that they expected.

Over the past few years, many states have aggressively gone after workers’ compensation fraud (whether it’s the employee or the employer) and the amount of employer fraud being discovered continues to be staggering, notwithstanding these efforts. Legitimate business owners that pay for workers’ compensation, as required by law, are at a competitive disadvantage with those who cheat the system, and 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. The top ten cases for 2012 are listed below.

2012 TOP TEN WORKERS’ COMPENSATION FRAUD CASES Total Fraud: $97,466,500.00

1. ‘Operation Dirty Money,’ Stings Workers’ Comp Fraud Check Cashing Scheme

Florida: July 27, 2012

Multiple arrests were announced in Florida’s joint task force’s ‘Operation Dirty Money,’ which led to the arrest of alleged ringleader Hugo Rodriguez, owner of the Oto Group, Inc., and seven other individuals. Mr. Rodriguez was the facilitator of 10 known shell companies that funneled in excess of $70 million in undeclared and undetected payroll through different money service businesses. By using shell companies, Rodriguez was able to run a large construction operation and avoid paying the cost of workers’ compensation coverage, leaving employees at risk and scamming legitimate businesses.

2. Firms Face Charges for Skipping Workers’ Comp Payments

Ohio: May 13, 2012 Thousands of Ohio companies violated state law by not paying their most recent workers’ compensation premium, which can drive up insurance costs for businesses that follow the rules, a Dayton Daily News analysis found. The bureau identified about 41,247 private employers in the state that failed to report their payroll data and submit premium payments by the deadline. As of May, more than 12,200 accounts remain outstanding, and those companies owe an estimated $5.6 million in premiums.

3. Case Proves Employee Leasing too Good to be True

Texas: July 10, 2012

$4,466,500.00 was awarded in a Texas court against a staffing agency and its workers’ compensation insurance company. Jackson Brothers Hot Oil Service hired Business Staffing, Inc., (BSI) in 1999 and required BSI to have workers’ compensation insurance for its leased employees. BSI had 150 client companies with 2,000 employees. BSI bought a policy from Transglobal Indemnity for a total premium of $4,100.00 to cover all its employees. After failing to pay the medical bills of a 27-year-old oil field worker who was in an explosion and had 18 surgeries, the employee and Jackson Brothers sued BSI and Transglobal for fraud. Neither Transglobal (who had its corporate headquarters in the Turks and Caicos Islands) nor BSI had a license to conduct insurance business in Texas.

4. Business Owner Faces Insurance-fraud Charges

California: May 2, 2012

George Osumi was indicted on numerous felony counts.

Construction business owner George Osumi of Irvine, California was indicted on numerous felony counts of misrepresenting facts to the State Compensation Insurance Fund, among other charges. From December 2001 to March of 2006, Mr. Osumi committed workers’ compensation premium fraud by reporting his payroll to SCIF at just over $1 million, under-reporting over $3.5 million in payroll. This fraud resulted in a loss of over $814,000.00 in premium owed to the insurance fund.

5. Watertown Roofing Company and its Owners Plead Guilty and are Sentenced for Labor Violations

Massachusetts: January 11, 2012

Newton Contracting Company misclassified half of its workforce as subcontractors.

The Massachusetts Insurance Fraud Bureau discovered that the company, Newton Contracting Company, Inc., owned by Shaun Bryan and Antoinette Capurso-Bryan, misclassified half of its workforce as subcontractors, as well as failing to disclose to auditors more than $3.4 million of their company’s misclassified subcontractor payroll during its annual workers’ compensation audits.

6. 7-Year Sentence in $3.1 Million Fraud Case

California: November 30, 2012

Steven Morales, 65, of Wildomar, CA was convicted and sentenced to seven years in prison for his part in a $3.1 million workers’ compensation scheme. His son Brian was also convicted and sentenced to 4 years in prison. Morales and his son had set up a sophisticated system of shell companies to hide payroll and avoid paying workers’ compensation premiums.

7. Construction Company President Accused of Payroll Fraud

Florida: March 29, 2012

Randall Seltzer, president of Navarre Industries, Inc., was charged with multiple felony counts, including workers’ compensation fraud. An investigation by Florida’s Department of Financial Services’ Division of Insurance Fraud revealed that Seltzer systematically and intentionally under-reported his corporation’s true payroll to his insurance carrier. The department’s Division of Workers’ Compensation issued the company two stop-work orders within a five-year period. Seltzer allegedly established a shell corporation in 2011 to intentionally violate the stop-work orders and continue operating his construction business illegally. If convicted, Seltzer could face up to 30 years in prison and pay over $2.8 million in restitution.

8. CFO Jeff Atwater Announces Arrest of Owner of Fake Company for Creating Fraudulent Insurance Certificates and Avoiding Millions in Premiums

Florida: April 13, 2012

Yucet Batista allegedly used a shell company to commit large-scale fraud.

Yucet Batista was arrested for allegedly creating more than 250 fraudulent certificates of insurance to help uninsured contractors avoid $2.1 million in workers compensation premiums. Batista created the company and obtained the workers’ compensation insurance policy for the purpose of “renting” it, or making it available to dozens of uninsured subcontractors for a fee.

9. Audits Uncover Almost $1.2 million in Workers’ Compensation Violations at Boston Marriott Project

Massachusetts: September 4, 2012

In 12 audits conducted by the Joint Enforcement Task Force on the Underground Economy and Employee Misclassification and the Executive Office of Labor and Workforce Development, it was discovered that there were $584,249.00 in misclassified 1099 wages and $584,287 in unreported W-2 earnings, for a total of $1,171,536.00 in unreported wages by subcontractors on the Marriot renovation project. Six companies misclassified workers as contractors rather than employees, and seven companies failed to report wages. Among the worst of the offenders were one company that misclassified 28 workers and failed to report over $410,000.00 in wages; another failed to report $462,081 in W-2 wages.

10. Inn Owners Facing Workers’ Compensation and Insurance Fraud Charges

California: June 13, 2012

Owners of the historic Brookdale Inn and Spa are facing trial on charges of falsifying wage information to obtain lower insurance premiums.

The owners of historic Brookdale Inn and Spa, Sanjiv and Neelam Kakkar, are facing trial on charges that they falsified wage information to obtain lower insurance premiums. According to records, the couple paid approximately $800,000 less in insurance premiums than they should have over a period of several years.

“I’m In It for the Money!”

Posted on September 13, 2012 by Roger Moore

Surprisingly, many employers and insurance companies actually believe workers hurt themselves on purpose or at the very least put themselves in positions where they think an injury is likely. We hear this a lot as a basis for not settling claims for existing employees. Employers are worried that it will encourage other employees to get injured as well. What does that say about the particular employer who believes this? Either they are downplaying lots of injuries or they truly believe employees are willfully getting hurt.

The reality is that most of our clients come to us because their injury-related medical bills are not being paid or they’re not being paid for time off from work due to their injury.

In this age of limited, and in some cases very limited, workers’ compensation benefits, you would have to be an imbecile to actually believe people are willingly causing permanent injuries to themselves to cash in on the “windfall” that is workers’ compensation. Who would honestly trade even thousands of dollars for a lifetime of uncompensated pain and suffering? The reality is that most of our clients come to us because their injury-related medical bills are not being paid or they’re not being paid for time off from work due to their injury. The vast majority of them don’t even ask how much they could get for their injuries in their initial meeting with us, as I’m sure is the case with most workers’ compensation law firms.

This is one of a long line of personal-injury myths perpetrated by the insurance industry to make filing a workers’ compensation claim a stigma. It’s similar to the one about “if you file a claim our premiums will go up and they’ll have to shut down the plant.” Shouldn’t the question really be: are we requiring too much physically of our employees, and if so, what can we do to make things safer? Instead, Continue reading →

NIOSH To Review Underreporting of Occupational Injuries and Illnesses by Workers

Posted on June 21, 2012 by Rod Rehm

Today’s post comes to us from our colleague Jon L. Gelman of Wayne, New Jersey. We encourage all workers to report their injuries to the appropriate person within their company, and if the proper reports are not filed, to seek legal representation. We are concerned about workers being discouraged from reporting injuries on the job. Mr. Gelman, one of the nation’s leading commentators on workers’ compensation, points out this is potentially a national problem.

The National Institute for Occupational Safety and Health (NIOSH), Centers for Disease Control and Prevention (CDC) has proposed a project to review the Underreporting of Occupational Injuries and Illnesses by Workers.

“In 2008, the Congressional Committee on Education and Labor released the report, “Hidden Tragedy: Underreporting of Workplace Injuries and Illnesses,” indicating “that work-related injuries and illnesses in the United States are chronically and even grossly underreported.” Based in part on the report’s results, Congress allocated funds for NIOSH to conduct a follow-up study using NIOSH’s occupational supplement to the National Electronic Injury Surveillance System (NEISS-Work) to estimate underreporting among individuals who seek care at an emergency department (ED) for an occupational illness, injury, or exposure.

“Objectives for this project are to (1) assess the reporting behavior of workers that are injured, ill, or exposed to a harmful substance at work; (2) characterize the chronic aspects of work-related injuries or illnesses; and (3) estimate the prevalence of work-related chronic injuries and illnesses among United States workers treated in EDs. Particular attention will be paid to self-employed workers, workers with work-related illnesses, and workers with chronic health problems.

“Data collection for the telephone interview survey will be done via a questionnaire containing questions about the respondent’s injury, illness, or exposure that sent them to the ED; the characteristics of the job they were working when they were injured, became ill, or were exposed; their experiences reporting their injury, illness, or exposure to the ED and their employer (if applicable); the presence of an underlying chronic condition that was associated with their ED visit; and the nature of any other work-related chronic conditions they have experienced. The questionnaire was designed to take 30 minutes to complete and includes a brief series of questions to screen out individuals who were not seen in the ED for a work-related injury, illness, or exposure; who are younger than age 20 or older than age 64; who do not speak English or Spanish; or who were working as volunteers or day laborers when the injury, illness, or exposure occurred or was made worse.

Image: scottchan / FreeDigitalPhotos.net

Workers Beware Questionable (Fraudulent) Employer Tactics

Posted on April 22, 2012 by Rod Rehm

It’s time to start talking about employer fraud.

Today we have a guest post by our colleague Tom Domer of Wisconsin.

Over the course of 35 years representing injured workers, I have heard some whoppers – Employers’ questionable tactics that make even my jaw drop. With all the insurance company generated blather about “employee fraud” incidences of employer fraudulent tactics abound. Workers beware of the following:

Recorded statements taken by worker’s compensation carrier adjuster while employee is under medication or in the hospital still suffering from the injury. Questions such as “It’s true you had (low back pain, arm pain, fill in the blank pain, etc.) before your work injury, correct? You’ve had lots more pain from (your motor vehicle accident, sports injury, etc.) than you’re experiencing from your work injury, correct?
Employer “channeling” a worker to its “Return to Work Clinic” (doctors on company payroll whose opinion is “like some athletic coaches, ‘rub some dirt on it and get back in the game’”).
Telling employees to take sick leave rather than claim worker’s compensation.
Telling employees to file medical bills under their group insurance, not worker’s comp.
Nurse Case Manager who initially befriends the employee but later makes every attempt with the worker’s doctor to prematurely return the worker to the job before a healing occurs.
Employer paying worker in cash with no payroll stub (or gives workers a Form 1099 rather than a W-2). Continue reading →

Workers' Compensation Watch