Category Archives: Employer Fraud

Photo by State Library of Queensland, Australia on Foter.com / No known copyright restrictions
Employer Fraud

Court Order Sought in Monte Cristo Ballroom Case

A default judgment order has been requested from the Snohomish County Superior Court in the Monte Cristo Ballroom case. The state Attorney General’s Office (AGO) and Department of Labor & Industries (L&I) want a court to order Monte Cristo Ballroom LLC and its owner, Anthony Reeves, to repay wages owed former employees.

We wrote about this case in a prior post, MONTE CRISTO BALLROOM HIT WITH WAGE THEFT CHARGES.

The state agencies will file a motion for a default judgment on October 8, 2020 in Snohomish County Superior Court. If granted, the court’s order would become a legally enforceable tool for L&I to go after wages owed to 156 employees. The order, for example, could be the foundation for legal actions such as property liens and levies against bank accounts held by the company or owner.

“Workers deserve to be paid fairly for their work, period,” said state Attorney General Bob Ferguson. “Employers do not have the right to deduct whatever they want from their employees’ paychecks without their consent.

“When Washington workers’ rights are violated, L&I and my office will partner to enforce the law and hold them accountable,” he said. “Our action brings us one step closer to accountability and justice for the impacted workers.”

The initial complaint, filed in December 2019, stemmed from Reeves’ taking a $2.99 “meal” charge from 156 employees during each shift worked between December 2016 and April 2019. The Monte Cristo owner took the money from workers’ paychecks without their permission in return for allowing them to eat leftovers from catered events — whether the workers wanted to eat the food or not.

In all, the deductions covered 4,100 shifts and totaled $12,386.86.

“This order gives us another way to get employees the wages they earned,” said L&I Director Joel Sacks. “While the amount of money taken from individual workers each shift may seem relatively small, in the end it added up to thousands of dollars that should have gone to employees and their families and not into the owner’s pockets.”

Employees filed complaints

The Monte Cristo Ballroom LLC, 1507 Wall St. in Everett, stopped operating in October 2019. Since the sudden closure, more workers have filed wage complaints with L&I.

L&I attempted to settle with Monte Cristo for the wages owed the workers. An agreement drafted in September 2019 set out a payment schedule through October 2020, and ordered the restaurant to stop taking money without the employee’s consent. Reeves never signed that document.

As part of the court filing, the agencies are asking for attorney’s fees and processing fees. If approved, that would add about $2,700 to the wages and interest owed.

L&I oversees the state’s wage-and-hour laws. The agency investigates all wage-payment complaints. More information on wages or filing a complaint is available on L&I’s wage-and-hour webpage. Employers and workers may also call 360-902-5316 or 1-866-219-7321.

Prior Posts on Related Topics
Employer Fraud

Back Wages Owed by Construction Company

Construction company must pay nearly $100,000 in back wages, and over $28,000 in fines.

The owner of a Maple Valley construction company must pay several employees nearly $100,000 in back wages for work on a Tacoma public housing project.

The state Department of Labor & Industries (L&I) cited Alejandro Sandoval for not paying the required wages and failure to file payroll records. He faces being barred from bidding on any future public projects until the workers are paid.

Sandoval has appealed the L&I citation. Late last month, the Office of Administrative Hearings scheduled the appeal for Aug. 10-14, 2020.

Sandoval Construction was hired to perform wall and roof framing and other carpentry work on the Valhalla Apartment Project for the City of Tacoma in 2017. In all, 25 workers are owed a little more than $92,500 in back wages because the company didn’t pay the required rate of $40.66 per hour for residential carpenters. The company also owes $28,500 in fines.

“This company has an established history of not paying workers what they’re owed,” said Jim Christensen, L&I’s Prevailing Wage Program manager. “We had to take this action after years of educating the company about their requirements under state law.”

A history of problems

After a 2016 investigation, Sandoval pleaded guilty last year to false reporting and first-degree theft in a separate construction case. He owed a dozen workers more than $25,000 in unpaid wages involving framing of residential projects in Seattle and King County. Under separate civil proceedings, he also owed at least $197,000 in unpaid workers’ compensation insurance premiums, interest and penalties. As a result of plea agreements signed earlier this year, the company repaid the wages and is on a plan to repay $35,000 in premiums by June 2020.

Details of recent investigation

The recent investigation started in January 2018. L&I found Sandoval filed paperwork that stated only nine workers were employed on the project, and that Sandoval did not file other required payroll records. The 25 workers are owed between $20 and $9,500 each, depending on how long they worked on the project.

“Sandoval deliberately tried to circumvent record-keeping rules and cut corners in paying his workers,” Christensen said. “He issued checks that bounced, also leaving employees faced with paying bank fees.”

The Valhalla Apartment Project, on Martin Luther King Jr. Way in the Hilltop Neighborhood, includes retail space. RAFN Company was the prime contractor.

The state’s prevailing wage law is triggered when construction projects use public funds. The law covers workers on schools, roads, and other types of public projects. L&I enforces the law, which protects workers from substandard earnings and preserves local wage standards. The law also ensures contractors have a level playing field when bidding on public projects.

Prior post: BELLEVUE, WA FIRM BARRED FROM PUBLIC PROJECTS; FAILED TO PAY $140,000 TO WORKERS

Employer Fraud

Monte Cristo Ballroom Hit With wage theft Charges

The state Attorney General’s Office (AGO) and Department of Labor & Industries (L&I) announced they have filed wage theft charges on December 16, 2019 against the Monte Cristo Ballroom LLC, of Everett, WA, and its owner, Anthony Reeves.

Deductions from Pay Led to Wage Theft Charges

The complaint, filed in Snohomish County Superior Court, stems from Reeves’ taking a $2.99 “meal” charge from 156 employees during each shift worked between December 2016-April 2019. The Monte Cristo owner was taking the money from workers’ paychecks without their permission, in return for allowing them to eat extra food from catered events — whether the workers wanted to eat the food or not.

In all, the deductions covered 4,100 shifts and totaled $12,386.86.

“Employers do not have the right to deduct whatever they want from their employees’ paychecks without their consent,” said Attorney General Bob Ferguson. “If you have concerns about deductions on your paycheck, you should reach out to the Department of Labor & Industries. When Washington workers’ rights are violated, L&I and my office will partner to enforce the law.”

Double Damages and Attorney Fees Sought

Only deductions authorized under law or taken with advance written permission of the employee are allowed. Even with permission, the deductions must benefit the worker, not the employer. Because the deductions were intentional, the state is asking for double the damages and attorney fees.

“Reeves took money workers earned and used it for his own benefit,” L&I Director Joel Sacks said. “Working with the Attorney General’s Office gives us additional tools to stand up for employees and make sure they’re being treated fairly. While the amount of money taken from individual workers each shift may seem relatively small, in the end it added up to thousands of dollars that should have gone to employees and their families and not into the owner’s pockets.”

Employees filed complaints

The Monte Cristo Ballroom LLC, 1507 Wall St. in Everett, stopped operating in October. Since the sudden closure, more workers have filed wage complaints with L&I.

The business has had a history of wage complaints. From 2015-19, there were 10 complaints filed against the company for just over $3,300 in wages.

L&I attempted to settle with Monte Cristo for the wages owed workers. An agreement drafted in September set out a payment schedule through October 2020, and ordered the restaurant to stop taking money for employee meals without the employee’s consent. Reeves never signed the final document.

L&I oversees the state’s wage-and-hour laws. The agency investigates all wage-payment complaints. More information on wages or filing a complaint is available on L&I’s wage and hour webpage (www.Lni.wa.gov/wages). Employers and workers may also call 360-902-5316 or 1-866-219-7321.

Read a related article: WAGE THEFT CASE RESULTS IN BIG SETTLEMENT

Photo Credit: Sabel Blanco

Employer Fraud

Highway 99 Tunnel Subcontractor Owes Workers More Than $370,000 in Unpaid Wages

A company hired to dispose of dirt from the Highway 99 tunnel project through Seattle has been cited by the state Department of Labor & Industries (L&I) for underpaying workers by more than $370,000.

Glacier Northwest contracted with Seattle Tunnel Partners (STP), the public project’s prime contractor, for an estimated $28 million. Glacier disposed of dirt and other materials excavated by Bertha, the tunnel-boring machine. Glacier and STP recently appealed the citation.

This was the only project that the Glacier Northwest disposal site was accepting dirt from, so L&I was able to identify the specific workers and hours worked. Because the tunnel is a public works project, those workers are entitled to prevailing wages, which they did not get.

“Many workers aren’t aware of the specific wages they must be paid when working on public projects like this one,” said Jim Christensen, L&I’s Prevailing Wage Program manager. “The law is clear in this case: The use of public funds means Glacier has the responsibility of paying proper prevailing wages.”

L&I enforces the state’s prevailing wage law, which protects workers by setting wages for specific work. The law helps ensure that contractors have a level playing field when bidding on public projects.

Some workers owed thousands
The L&I investigation found that Glacier Northwest owes 46 employees approximately $370,600 for their work spreading an estimated 2.2 million tons of dirt at the former Mats Mats Quarry near Port Ludlow. They were paid $27.69–$31.34 per hour but should have received $49.48 per hour running cranes, skid loaders, dump trucks, dozers, and excavators.

The amount owed to individual workers depends on how long they worked; it ranges from nearly $90 to more than $30,500.

Work at the disposal site involved setting and operating two floating cranes to offload hundreds of barges, all carrying dirt from the Highway 99 tunnel project. The dirt was then moved to the quarry using conveyors, trucks and other equipment. The contract precluded dirt from any other project to be dumped at the location.

In 2018, L&I industrial relations agents investigated and closed 300 cases involving the payment of prevailing wages and returned $1,461,452 to workers.

Photo by State Library of Queensland, Australia on Foter.com / No known copyright restrictions

Employer Fraud

Bellevue, WA Firm Barred from Public Projects; Failed to Pay $140,000 to Workers

Quality Construction has been barred from seeking contracts on public works projects after failing to pay workers more than $140,000 for their work on two elementary schools.

The Bellevue-based firm did not appeal the formal order the Washington State Department of Labor & Industries (L&I) issued recently that also suspended its contractor’s license. The investigation covered work that started in spring 2015.

“Our investigation showed Quality Construction shorted the workers on both public projects, paying them less than what they were owed,” said Jim Christensen, Prevailing Wage Program manager for L&I. “These repeated violations of state law by the company showed it wasn’t just a mistake in filing paperwork.”

Prime contractors agree to pay shorted workers.

As a result of the L&I investigation, prime contractors on both projects paid the wages Quality owed its workers. In all, more than $140,000 was paid to 27 workers.

Cornerstone General Contractors Inc., of Bothell, paid $40,500 for work on the Sunny Hills Elementary School in the Issaquah School District.

Bayley Construction, of Mercer Island, paid $102,000 for work on Seattle Public Schools’ Arbor Heights Elementary School. L&I reached an agreement late in May with Bayley to pay the wages.

“The prime contractors should get credit for stepping up and fixing the problem,” Christensen said. “It was unfortunate they were left with problems Quality created.”

Workers paid at wrong rates and records falsified

In both construction cases, the employees were doing carpentry work on the schools but were paid at lower, apprenticeship wages, even though they weren’t state-registered apprentices. The firm also falsified payroll documents relating to the work that took place, according to the investigation.

The state’s prevailing wage law, triggered when construction uses public funds, covers workers on projects such as schools, roads, and buildings. L&I enforces the law, which protects employees by setting the wages for specific work. The law ensures contractors have a level playing field when bidding on public projects.

Photo on Foter.com

Employer Fraud

Wage Theft Claim Results in Fines for Evasion of Workers’ Comp Insurance

Employer who tried to skip out on paying workers’ comp must repay L&I nearly $12K 

The co-owner of a Mill Creek, WA housecleaning business has been ordered to pay the state more than $11,700 for trying to evade workers’ comp insurance bills.

Blake Joseph Standley, of Bothell, pleaded guilty last Thursday to third-degree theft and attempted false reporting, both gross misdemeanor offenses.

Snohomish County Superior Court Judge Richard Okrent sentenced Standley to 364 days in jail, but suspended all but 15 days, which were converted to community service.  Standley will face additional penalties if he commits a new crime or fails to follow restitution requirements in the next two years.

The Washington Attorney General’s Office prosecuted the case based on an investigation by the Washington State Department of Labor & Industries (L&I).

Charges are still pending against Monica Ann Covey-Standley, who was married to Blake at the time of the incidents, and ran their company’s daily operations. 

Paper trail, worker interviews

Standley filed reports to L&I in 2013 and 2014, claiming he had no employees in his housecleaning business, known as Kogaty Interiors.

However, an L&I investigation uncovered bank records showing the company was paying employees to clean houses during that time. Employees told investigators they worked for the company, and provided wage and tax statements, along with time sheets as proof.

According to charging papers, the couple should have paid nearly $12,000 in workers’ comp premiums.

Theft of wages

The theft charge stems from Standley’s failure to pay an employee for about two weeks’ worth of work cleaning houses in 2014. The worker told investigators that the couple ignored her emails and messages, and hung up whenever she called.

She filed a wage complaint to L&I, which determined the Standleys owed her about $1,000. Last week, Blake Standley paid the worker half of the wages, $515. Prosecutors will seek the remainder from Covey-Standley, who is scheduled to be tried on June 9.

Workers’ comp fraud raises costs

L&I administers the state workers’ comp system that provides medical and other services to help workers who are injured on the job heal and return to work. Employers and employees fund the system, and if some don’t pay, that raises rates for everyone else.

Report workers’ comp fraud at www.Lni.wa.gov/Fraud or call 1-888-811-5974.

 

Photo credit: janwillemsen via Foter.com / CC BY-NC-SA 

 

Employer Fraud

Eastern Washington Painter Accused of Illegal Contracting Agrees to Stop

A Colville, WA painter facing criminal charges of unregistered contracting agreed this week to stop working illegally.

Terry Foster, 82, agreed in court that he must register with the state and pay court fees if he works as a construction contractor. He’s accused of working as a painter without registering with the Department of Labor & Industries (L&I) and, in the past, has received nine civil infractions for unregistered contracting.

If Foster follows through with the agreement, breaks no criminal laws and pays $300 in court fees, criminal charges against him will be dismissed in two years, according to the Washington Attorney General’s Office.

If he violates any conditions of the agreement, the case will be reset for trial.

Faced three charges

Foster had faced three charges of unregistered contracting in Stevens County District Court in Colville, about 70 miles north of Spokane. Each is a gross misdemeanor punishable by up to 364 days in jail, a $5,000 fine or both.

He had been doing business under his own name and as “Terry the Consultant” and “Terry the Painter.” He served on the Colville City Council from late 2010 through April 2015.  

Tips from frustrated contractors

The case resulted from an L&I investigation. According to charging papers, L&I inspectors caught Foster or his son painting in Colville in 2013 and 2015 and in Chewelah in 2014. Contractors who were frustrated at having to compete against an unregistered contractor tipped off L&I to the job sites.

Since 2008, L&I has issued Foster nine civil infractions for unregistered contracting. The department is trying to collect more than $30,000 in fines and more than $130,000 for workers’ compensation insurance premiums that he owes L&I.

Law protects consumers, legal contractors

State law requires construction contractors to register with L&I, which confirms they are insured and bonded and meet other requirements. L&I can issue violators a civil infraction, refer them for criminal prosecution or both.

The registration requirement gives consumers some recourse if they have problems with a contractor, and prevents unregistered contractors from gaining an unfair advantage over law-abiding contractors.

 

Consumers can check whether contractors are registered at www.Lni.wa.gov/Verify.

 

Photo credit: Alain Wibert via Foter.com / CC BY-ND

Employer Fraud, fighting fraud, Insurance, Workers' Compensation

$46 Million Stolen: 2013’s Top Ten Workers’ Compensation Fraud Cases

Professor Leonard T. Jernigan Jr. has compiled a list of 2013’s Top 10 Workers’ Compensation Fraud Cases

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

Employer Fraud Cases (9):$44,064,492.00
Employee Fraud Cases (1): $1,500,000.00
Total: $45,564,492.00

Every year we hear about fraud in Workers’ Compensation cases and the public believes the fraud is employee driven. However, in 2009 I began tracking the Top Ten Fraud Cases and 100% of the Top Ten between 2009-2012 involved employers or shady characters posing as legitimate businesses. The amount of employer fraud is staggering. In 2013 one employee fraud case did crack the Top Ten, so the record is now 49-1 (employer fraud v. employee fraud) over the past five years.

  1. Florida: Owners of Diaz Supermarkets in Miami-Dade are Accused of $35 Million Fraud (4/16/13)

    John Diaz and his wife Mercedes Avila-Diaz owned and operated four supermarkets in the Miami-Dade area. They have been arrested and accused of workers’ compensation fraud and other fraudulent transactions totaling $35 million. One business they operated had no coverage for employees for ten years. They allegedly engaged in a scam to help subcontractors obtain false certificates of insurance that allowed the subs to work for general contractors who required the certificates.

  2. California: Hanford Farm Labor Contractor Convicted of Fraud in the Amount of $4,195,900 (12/6/2013)

    Richard Escamilla, Jr.

    Richard Escamilla, Jr. (47), owner of ROC Harvesting, misrepresented information to workers’ compensation insurance carriers by using new business names to obtain insurance and avoid providing a claim history. Escamilla pleaded guilty on October 29th and was sentenced to pay restitution of $4.1 million and serve six years in prison.

  3. Michigan: Insurance Executive Embezzled $2.6 Million from Workers’ Comp TPA (06/06/2013)

    Jerry Stage

    Jerry Stage (67), the former CEO of a non-profit workers’ compensation insurance company, and George Bauer (55), the bookkeeper, both pleaded guilty to embezzling from the Compensation Advisory Organization of Michigan (CAOM) for more than a decade. Mr. Stage embezzled $2.6 million from the company and conspired with Mr. Bauer to cover up the embezzlement.

  4. California: Employee Wasn’t Wheelchair Bound After All – Fraudulently Took $1.5 Million in Benefits (8/9/13)

    Yolandi Kohrumel

    Yolandi Kohrumel, 35, claimed for nine years that she was wheelchair bound after complications from toe surgery, but after she had collected $1.5 million in benefits it was revealed her claim was false. Her father, a South African native, was also engaged in the scam. Both pleaded guilty to insurance fraud, grand theft and perjury. Ms Kohrumel was sentenced to one year in jail, plus restitution.

  5. California: Father and Son Landscapers Accused of $1.45 Million in Insurance Fraud (5/7/13)

    Sunshine Landscaping

    Jesse Garcia Contreras (57) and Carlos Contreras (33), who operate a Thousand Palms landscaping business, are accused of committing $1.45 million in insurance fraud. They are accused of defrauding the California State Compensation Insurance Fund by misclassifying employees from January 2008 to March 2012. Mr. Jesse Contreras is the president and CEO of Sunshine Landscaping and his son is Director of Accounting. If convicted, they each face up to 19 years and 8 months in prison.

  6. Florida: Workers’ Compensation Check Cashing Operation Charged with $1 Million in Fraud (2/27/13)

    As a result of its investigation of I&T Financial Services, LLC, a company that was allegedly set up to execute a large scale check cashing scheme for the purpose of evading the cost of workers’ compensation coverage. Domenick Pucillo, the ringleader of the fraud scheme, was arrested and charged with filing a false and fraudulent document, forgery, uttering a forged instrument, and operating an unlicensed money service business. If convicted on all charges, he faces up to 45 years in prison. $1 million was seized during this investigation.

  7. West Virginia: Coal Company Contractor in Mingo County Caught in $405,000 Scam to Avoid Workers’ Comp Premiums (11/6/13)

    Bank of Mingo

    Jerame Russell (50), an executive with Aracoma Contracting, LLC, a company that provided labor to coal companies on a contract basis, entered a guilty plea to a scam that involved funneling over $2 million through a local bank to pay employees in cash, thus avoiding payroll taxes and $405,000 in workers’ compensation premiums. Aracoma also bribed an insurance auditor to cover up its true payroll.

  8. Ohio: Roofing Business Owners Guilty of $283,592 in Workers’ Comp Fraud (7/30/2013)

    Frederick Diebert

    The owners of Triple Star Roofing were found guilty of fraud on July 15 for failing to report payroll to the Ohio Bureau or Workers’ Compensation(BWC). The company failed to report to the BWC from 2004 to 2008, resulting in under-reported premiums of $283,592.

  9. Florida: Owner of Staffing Company arrested for $130,000 in Workers’ Comp Fraud

    Preferred Staffing of America, Inc.

    The owner of Preferred Staffing of America, Inc., a temporary staffing agency in Tampa, has been arrested for allegedly running an organized workers’ compensation fraud scheme. Preferred Staffing’s owner misled clients into believing that his company was a licensed professional employer organization (PEO) and could provide workers’ compensation insurance coverage. Employers were reportedly charged more than $130,000 for workers’ compensation insurance and other services that were never provided.

For more information, contact: Leonard T. Jernigan, Jr. Adjunct Professor of Workers’ Compensation N.C. Central School of Law The Jernigan Law Firm 2626 Glenwood Avenue, Suite 330 Raleigh, North Carolina 27608 (919) 833-0299 ltj@jernlaw.com www.jernlaw.com @jernlaw

Employer Fraud, Misclassification

NEOC Awards Whistleblower Client Misclassified as Independent Contractor

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

I was happy to have the chance to represent Theron Chapman in his whistleblower claim against his former employer, Midwest Demolition. While the Lincoln Journal Star headline of “Man chased from job by manager with stun gun awarded back pay” is catchy, the real story here is that an employee who was fired for complaining of legitimately being misclassified as an independent contractor won some measure of justice from the Nebraska Equal Opportunity Commission.

Mr. Chapman had a legitimate grievance about being misclassified as an independent contractor. Nebraska law explicitly prohibits the type of misclassification that he questioned. In 2010, State Sen. Steve Lathrop, who authored the legislation outlawing misclassification in Nebraska, said in his bill’s statement of intent, as quoted in Truckinginfo: the web site of Heavy Duty Trucking magazine, that:

“When a contractor misclassifies an employee, the employee is ineligible for unemployment and workers’ compensation benefits, loses labor-law protections and does not receive employer-provided health insurance. Misclassification creates an unfair advantage to unscrupulous contractors who are able to outbid law-abiding employers who must take into account the payment of taxes and insurance premiums when bidding for jobs. The State’s loss in revenue negatively affects the funding of essential programs such as unemployment benefits.”

The deeper story here is that people on the margins of the workforce can sometimes vindicate their rights in the workplace. My client was hired through a job lottery at the People’s City Mission, a homeless shelter, here in Lincoln. People in his situation are vulnerable to abuse in the workplace. Not every instance of bad behavior by management is legally actionable, but that is true from the executive suite to low-wage workers like my client. But fair-employment laws can protect people who are being abused in the workplace and do sometimes provided protections to the people who need them the most.