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Florida Busts Major Workers’ Comp Fraud Scam Involving Multiple Shell Companies

July 15, 2015 by  
Filed under Blog

Six Central Florida insurance fraud arrests that break down an elaborate Central Florida workers’ compensation insurance fraud scheme were made this week, according to an announcement by Florida Chief Financial Officer Jeff Atwater. An investigation led by the Department of Financial Services’ Division of Insurance Fraud revealed a large-scale premium fraud scheme in which these six individuals created multiple shell corporations in order to systematically conceal payroll amounts for the purposes of obtaining low-cost workers’ compensation policies.

Investigators believe that beginning in September 2012, the following Central Florida businesses were opened and operated as shell companies: Alfa Construction, Burgos Construction, Ginel Construction, Rejevaz Services Inc., and PHH Construction. Shell companies are owned by straw owners, or individuals who, for a fee, agree to serve as the legal owner of a business because they have a clean criminal record. These businesses, however, were alternatively run by organizers who directed the day-to-day activities and operations of the illegal activities.

According to DFS’ statement, by grossly deflating accurate payroll amounts, members of this fraud network fraudulently secured low cost workers’ compensation insurance policies. Payroll amounts were concealed through the use of check cashing stores, which circumvented proper bookkeeping measures. After securing certificates of insurance, organizers would ‘rent’ the certificates to work crews for a fee. Since the policies were obtained fraudulently, employees were not covered and therefore left vulnerable to high-dollar medical costs in the event of an on-the-job injury.

To further their scheme, organizers would print and provide fake business cards to these work crews, who were instructed to present them to workers’ compensation compliance investigators who routinely conduct compliance checks at job sites to ensure proper coverage is in place.

This cycle of fraud would continue until an insurance policy expired or was cancelled, at which time organizers would open another shell company under a different name and begin the process again.

The defendants were booked on Organized Scheme to Defraud charges in their respective jurisdictions, either Hillsborough or Orange County, and if convicted, face a maximum possible sentence of 15–30 years in prison. Additional arrests are expected.

Attorney General Pam Bondi’s Office of the Statewide Prosecutor in Hillsborough County assisted in the investigation and is handling the prosecution of these cases.

Source: Florida Department of Financial Services

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