workers comp fraud in the staffing industry

Staffing Workers’ Compensation Fraud in Action: Claims Examples

Insurance fraud is a pervasive issue in the workers’ compensation insurance world. Those who commit fraud may be employers, employees, vendors, or temporary employees in the workers’ compensation system. While the vast majority of claims for workers’ compensation are on the level, fraudulent claims make up a major portion of payments made by insurance companies when it comes to overall cost.

According to multiple sources, fraudulent claims make up about $6 billion of the estimated $60 billion paid out every year. False claims can end up directly affecting the premiums that are paid out by those insured, including staffing agencies. This also comes on top of the costs it takes to replace an employee for the time they’re off work and for training.

Here are some examples of illegal claims that were made by fraudsters who ended up getting caught.

A Firm Fraud

In Modesto, California, the head of a temporary staffing firm was convicted of felony workers’ compensation insurance premium fraud. The owner and CEO of Quality Employment Services LLC, Aileen Ramirez, obtained a workers’ compensation policy for her business from the state’s compensation insurance fund in February 2012, keeping that policy for two and a half years.

A State Fund audit conducted by the District Attorney’s office found that Ramirez underreported her payroll and total number of employees in order to receive a lower workers’ compensation insurance premium. Altogether, she reported $2.8 million in payroll, which ended up at a loss to the State Fund of more than $525,000 in insurance premiums.

Using Different Names

Some fraudsters feel that if they change their names, they won’t be found out. This turned out to not be true as the owner of a temporary employment agency who operated under at least three different names ended up pleading guilty to 23 counts of insurance fraud and tax evasion.

The convicted person waived indictment and pleaded guilty to insurance fraud and tax evasion, including five counts of mail fraud involving workers’ compensation where she defrauded insurers of $165,000. She also failed to report and pay nearly $1.3 million to the IRS in withholding and other taxes due from her companies.

A Family Affair

Two brothers and one cousin ended up having to pay more than $1.1 million after they plead guilty to charges coming from a workers’ compensation scam through their staffing agency, Diamond Bar.

The Los Angeles-based family members misrepresented payroll to AIG in order to secure the insurance policies before passing along forged certificates to smaller companies. This left those companies uninsured.

Workers’ compensation fraud can have a chilling effect on the industry, putting a squeeze on more than just the funds of those who end up in harm’s way. While these fraudsters were caught and had to pay the price, billions of dollars are taken every year in the industry, sinking businesses in the process.