$400,000 Workers Comp Scheme Unraveled

$400,000 Workers’ Compensation Scheme Unraveled

The Workers’ Comp Fraud Blotter Update

Employee or employer fraud – which is the greater problem? Double dippers, false claims, misclassification of workers, and payroll underreporting, are just some of the more common types of fraud we read about in the media and government press releases. But complex insurance fraud schemes, such as premium fraud, can cost up to hundreds of millions of dollars. Healthcare provider fraud also generates losses in the millions of dollars. Each week we will survey what the media, state agencies, insurance companies, and others report in terms of workers’ compensation fraud.

A Chicago insurance agent pleaded guilty this month to four Class 3 felony charges in Lake County Court, the Illinois Department of Insurance (IDI) announced today. The insurance agent, licensed by IDI, operated an insurance agency based in Waukegan.

Working with the Waukegan Police Department and the Lake County State’s Attorney’s office, IDI investigators concluded the agent allegedly fabricated false insurance certificates for 22 north suburban businesses and bilked clients for approximately $400,000 he then used for personal expenses.

“Workers’ compensation fraud imposes unnecessary cost on employers and employees, and will be investigated and prosecuted to the fullest extent of the law,” said Michael T. McRaith, Director of the Illinois Department of Insurance. “We commend the Waukegan Police and the Lake County State’s Attorney for the great work and successful collaboration that led to this conviction.”

According to IDI investigators, the agent “willfully forged hundreds” of insurance certificates, misrepresenting that client payments for premiums had been forwarded to insurers for coverage. Investigators also found many of agency clients paid in cash for workers’ compensation coverage, supposedly receiving a lower, discounted premium for these cash payments.

Bogus policies were renewed when clients’ policy periods were near or past the lapse deadline, with clients visiting the agent personally to make cash payments. When clients needed additional proof of insurance for a specific project, a fraudulent certificate was created. As a result of a guilty plea, the agent was sentenced to 30 months probation with the following conditions:

1. Serve a term of periodic imprisonment and follow all rules of periodic imprisonment, for a period of 12 months. Two months to be served as periodic imprisonment and 10 months to be served on electronic home monitoring.
2. The defendant shall be released for work, specifically released as necessary for his limousine work assignments and his license service business.
3. Make restitution in the total amount of $97,136 divided among 24 separate victims.
4. Be subject to random urine and breathalyzer testing.
5. Provide a DNA sample for testing.

The IDI workers’ compensation fraud unit was created in the workers’ compensation reform law passed in 2005. Throughout the state of Illinois, Department investigators work with local law enforcement and prosecutors, as well as the office of Attorney General. (workersxzcompxzkit)

The objective of IDI’s investigative efforts is to reduce the instances of workers’ compensation fraud and, thereby, improve the cost of premiums for employers and the claims-settlement process for injured workers.

This blog originally appeared on the LexisNexis Workers’ Compensation Law Center.
Reposted with Permission Visit LexisNexis for more information and full reports.
http://law.lexisnexis.com/practiceareas/Workers-Compensation-Law-Blog/Workers-Compensation/Workers-Comp-Fraud-Blotter-712009

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