Cutting Corners

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The cost of worker’s compensation insurance varies widely according to industry and location, not to mention how long a business has been accident-free. The owner of a small business in New Jersey tried to cut costs ($600,000 to be exact) at his electronic recycling company by providing misleading information about his employees in order to qualify for lower worker’s compensation premiums.

The company at the center of today’s ”Fraud of the Day” provides electronics and computer recycling for towns, businesses, schools, hospitals and government entities. While many of the employees were warehouse workers performing higher-risk jobs such as disassembling and refurbishing televisions, computers and other electronic devices, the owner falsely claimed that most of his employees were office workers performing clerical tasks. (The low-risk jobs have cheaper insurance premiums than jobs that have more potential for injury.)

The owner, was not the only person implicated in this case. In addition to his company, five other defendants including three insurance company workers, the insurance company they worked for and a recycling company official also were involved. All seven defendants were charged with conspiracy, insurance fraud and theft by deception. Other charges amongst the defendants included misconduct by a corporate official, falsifying records and false swearing.

The 49-year-old company owner pleaded guilty to second-degree conspiracy and insurance fraud. As part of a plea agreement, the state will recommend a three-year prison sentence for the owner and will require the company to pay a fine of up to $200,000. Both the owner and the company are each liable for $598,282 in restitution.

As part of another plea deal, the additional recycling company official charged in this case truthfully testified for the state. (Well, let’s hope she told the truth.) As a result, the prosecution will recommend probation when sentenced. Charges are still pending against the remaining defendants.

The Worker’s Compensation system is designed to help employees who are injured on-the-job, not fraudsters who want to make some extra money. The National Academy of Social Insurance states that small businesses on average pay about $1.50 per $100 in payroll to provide workers compensation insurance to employees. In the end, the company owner didn’t save much money by cheating his employees and his insurance provider. (In fact, he’ll be paying for this mistake with a blemished record for the rest of his life. So much for cutting corners.)

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”NJ Corporation, Owner Plead Guilty in Workers’ Comp Fraud Scheme that Bilked Nearly $600,000 from Insurance Carrier,” posted on workerscompensation.com on October 12, 2016.

Trenton, NJ (WorkersCompensation.com) – Attorney General Christopher S. Porrino and the Office of the Insurance Fraud Prosecutor (OIFP) announced that an Ocean County electronic recycling company and its owner today admitted they bilked nearly $600,000 from an insurance carrier by providing false and misleading information to obtain lower premiums on workers compensation coverage.

Supreme Asset Management Recovery (SAMR), in Lakewood, and its owner Albert Boufarah, 49, of Toms River, pleaded guilty to second-degree conspiracy and insurance fraud in a hearing before Superior Court Judge Wendel E. Daniels in Ocean County.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.