No Good Deals in Fraud

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When people commit fraud against government programs, they’re trying to get something for nothing or otherwise steal from public coffers. What they fail to realize is that they will end up losing much more than they could gain.

One common method of workers’ compensation fraud happens when business owners underreport their payroll to obtain lower premiums on their state workers’ compensation insurance. The problem is, 1) that’s a felony and 2) they end up paying much more in restitution and legal fees than what they would have paid in premiums. (No one said fraud is smart!)

In one recent workers’ compensation fraud case in Modesto, Calif., a 47-year-old man pleaded no contest in November to charges that he defrauded the state program of nearly $1 million. Prosecutors said he underreported payroll at his temporary employment agency by $4.9 million. (So, this was a much bigger business than he reported.)

The man must now repay $944,000 and perform 180 hours (four-and-a-half work weeks) of community service. And, he is on three years of probation (so noncompliance will get him time behind bars).

In another California case, in 2018, another owner of a temp agency (seeing a pattern?) was charged with workers’ compensation fraud, also from underreporting payroll. The Denair woman was forced to repay $525,000 in restitution. She also received probation and had to perform community service.

Businesses that underreport payroll create a competitive advantage that puts other businesses at risk, California Insurance Commissioner Ricardo Lara said in a news release.

Today’s Fraud of the Day comes from the article, “Owner of Modesto temp job agency is ordered to pay back nearly $1 million. Here’s why,” published Dec. 11, 2019 in the Modesto (Calif.) Bee.

The former owner of a Modesto temporary employment agency has been convicted of fraud and ordered to pay back nearly $1 million after underreporting about $4.9 million in payroll to get a lower workers’ compensation insurance premium from the state.

Michael Zendejas, 47, of Turlock was the owner and president of Trinity Personnel Inc., according to state officials. His agency provided temporary workers to cover absences, skill shortages and seasonal workloads for client companies.

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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.