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Woman Arrested in Workers’ Compensation Fraud Scheme

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A West Palm Beach woman has been arrested after being charged by the State of Florida with insurance fraud. Authorities say that the woman intentionally misrepresented her business’s payroll in order to avoid paying workers’ compensation premiums. The woman claimed that she made less than $50,000 in order to avoid paying $51,000 in workers’ compensation premiums. Her business reportedly earned around $7.5 million over the two years she is accused of committing insurance fraud.

She is charged with two counts of concealing payroll to avoid workers’ compensation premiums and two counts of application fraud. These are all felonies.

Insurance Fraud and Workers’ Compensation 

Concealing payroll to avoid paying workers’ compensation premiums is not as rare as you may imagine. It has traditionally been a problem for states like Florida that operate on a no-fault system. The insurance companies that provide coverage for their employees have costs driven up by companies that can pay the premiums but try to wiggle their way out of it. This results in waste in the system, expensive premiums, and drives up the cost of doing in business in the state.

As a result, states like Florida have gone out of their way to investigate companies that claim their payroll isn’t large enough to force them to carry workers’ compensation insurance, and shady corporate structures are the way they do it.

Funky Corporate Structures Used to Hide Employees 

Let’s say that there is a threshold for how much a company can pay out in their payroll in order to avoid paying workers’ compensation insurance. Once the company grows beyond this threshold, they must begin paying into the system. If they fail to do this, they are breaking the law. If they misreport their payroll to avoid paying into workers’ compensation then they are committing fraud. All of this is relatively straightforward.

Now, what happens if a company, each time they approach the threshold past which they will be required to pay workers’ compensation premiums, suddenly becomes two companies, each with payrolls that are beneath the workers’ compensation threshold?

One of the interesting things about LLCs is that they can act as a container for other LLCs. A parent LLC can hold a number of chain LLCs within them. In other words, the chain LLCs are property of the parent LLCs. Each of these companies can have a payroll which, in and of itself, is under the workers’ compensation threshold. But meanwhile, the money is all being funneled from the shell companies to the parent company in tidy dividends.

This is just one among many ways that companies attempt to evade paying workers’ compensation premiums. According to authorities, companies find a number of creative ways to misrepresent their information to the state. This includes misrepresenting workers as contractors or claiming they are doing “safer” worker than they are.

Talk to a West Palm Beach Criminal Defense Attorney 

If you’ve been charged with a crime, the Skier Law Firm P.A. can help. Scott Skier has worked on several white-collar criminal cases defending clients on a broad spectrum of charges. Give us a call or talk to us online for more information.

Resources:

insurancefraud.org/IFNS-detail.htm?key=25041

insurancejournal.com/news/southeast/2018/10/04/503329.htm

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