Dive Brief:
- The Brooklyn (NY) District Attorney's office has charged a local contractor with underreporting his company's income, allegedly cheating the state workers' compensation fund out of $64,000, according to Gowanus Patch.
- Prosecutors claim that during a workers' compensation premium audit, Vasillios Georgiadis reported to the New York State Insurance Fund that his painting company, Coronet Gotham, made only $58,000 during the audit period when it actually brought in revenue of more than $628,000. The insurance fund calculates premiums based on sales.
- The District Attorney's office said Georgiadis also failed to maintain workers' compensation coverage. He faces up to 15 years in prison.
Dive Insight:
State workers' compensation funds are typically an option for companies that have histories of accidents or cannot get reasonably priced insurance from private companies for a variety of reasons. They can be marginally more expensive than other policies, but can fill the need for companies required to carry workers' compensation.
New York calculates premiums based on sales, but many other states determine how much to charge based on employee payroll. This leads fraudsters in some states to pay workers via unrecorded cash payments or use various check-cashing schemes to avoid paying the correct amounts for insurance. In one case, two Florida men were arrested last year and charged with setting up a fake construction company through which they funneled $7.4 million in pay for undocumented workers. Both now face years-long prison sentences and massive fines.
These scams can ensnare both companies and individuals setting out to commit fraud. While companies push back against the sometimes prohibitive costs, workers' compensation insurance can save them big money down the line. Still, crackdowns on fraud are on the rise, and the publicity that such cases attract may continue to act as a deterrent to businesses that might otherwise have turned to illegal practices.
