Wired’ Fraud

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A failure to correctly classify employees may help an employer get ahead in the short term, but, ultimately, everybody gets short-circuited. Consider the owner of an electrical contracting company in New York, who zapped more than $94,000 from the state by paying his employees under the table as a way to reduce his workers’ compensation insurance bill, and by neglecting to file his personal income taxes for three years, reports The Daily Freeman. (Time to pull the plug.)

According to the story, a union tip off around potential labor law violations is what first drove investigators to check up on a particular businessman in upstate New York, who hired various workers to keep his electrical company afloat. They soon discovered a sneaky scammer who had ”rewired” his company’s workers’ compensation records to reflect fewer employees than he actually had on staff, which effectively lowered his company’s workers’ compensation insurance payments. (Who’s shocked by this?)The investigation also uncovered that he had failed to file personal income taxes from 2011 through 2013. He faced felony charges for both crimes. (Lights out!)

What makes this man’s scheme so dark is that his company had also won various public works projects, which the state typically awards to the lowest bidder. Not paying his taxes and ripping off his workers’ compensation insurer gave him the financial cushion to reduce costs that other businesses could not, offering him an unfair advantage as a bidder. As part of his plea agreement, the 61-year-old offender made restitution payments of $34,744 to the state Department of Taxation and $59,319 to his insurance carrier and was sentenced to three years of probation (and we hope, some enlightenment.)

This crooked contractor cheated not only the state by not paying his income taxes, but also his workers’ compensation insurer, his undocumented employees who were otherwise entitled to workers’ compensation insurance and his competitors, who lost bids for being ethical and following the law. He also cheated himself out of a future as a successful contractor, because once you manage to upset the labor unions AND get caught stealing from the government, your power might never be restored.

Source: Today’s ”Fraud of the Day” is based on ”Orange County contractor gets probation for breaking tax and workers comp laws,” a staff article published by The Daily Freeman on February 4, 2016.

Duffie pleaded guilty on Nov. 23, 2015, before Orange County Court Judge Nicholas De Rosa to repeated failure to file personal income tax returns, in violation of the state tax law, and fraudulent practices, in violation of the Workers Compensation Law, both felonies.

At the time of his guilty pleas, Duffie, the owner of Duffie Electric, an electrical contracting business, admitted he failed to file personal income tax returns from 2011 through 2013 and cheated his Workers Compensation insurance carrier by understating his payroll, Hoovler said.

As part of a plea agreement, and prior to being sentenced Wednesday by De Rosa, Duffie paid $34,744 in restitution to the state Department of Taxation and Finance and $59,319 to The Hartford Insurance Co., his Workers Compensation insurance carrier, according to a press release from Hoovler.

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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.