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California requires all employers to provide workers’ compensation benefits for their employees. The average medical benefit per claim in the state is among the highest in the country with costs more than 90% above the countrywide median, which means employers also pay some of the highest premiums in the nation for workers’ compensation insurance. A Denair, California woman, who owned an employment firm in Modesto, tried to reduce the high cost of insurance premiums by lying about the number of workers she employed. In the process of saving money for her business, she committed workers’ compensation fraud.

The owner and chief executive officer of the Modesto-based firm provided temporary workers for businesses with open positions due to absent employees, seasonal needs or required skills that were hard to find. As required by California State law, the woman purchased a workers’ compensation policy for her company from the State Fund for a two-and-and-half year period.

The State Fund requires employers to submit company payroll records to provide proof of the number of employees and their income. The State Fund uses this information to define the premium rates for workers’ compensation insurance for employers throughout the state. (Just as an FYI, California’s workers’ compensation fund provides coverage to more than 500,000 employers and also pays medical bills and wage replacement to approximately 800,000 injured workers each year.)

The 31-year-old temp firm owner and operator got into trouble following an audit of her policy. The State Fund found that the young business owner had underreported her payroll and the number of employees that worked for her firm. (This inaccurate information allowed her to receive a lower workers’ compensation insurance premium and a bigger profit.)

The business woman pleaded guilty to workers’ compensation fraud for underreporting $2.8 million in payroll. (This cost the state about $525,000 in insurance premiums. It also created an unfair advantage over other firms who could not offer competitive rates.)

The Denair, California woman was sentenced to 120 hours of community service and three years of probation. She must also pay $525,000 in restitution to the California State Compensation Insurance Fund. (While the business owner was able to save a little money up front, she ended up paying for her crime in the end. Wouldn’t it have been easier to just pay what she owed in the first place?)

Today’s “Fraud of the Day” is based on an article entitled, Head of Modesto employment firm convicted of workers’ compensation fraud,” published by The Modesto Bee on March 12, 2018.

A 31-year-old Denair woman has been convicted of workers’ compensation fraud, under-reporting $2.8 million in payroll and costing the state about $525,000 in insurance premiums.

Aileen Ramirez on Feb. 27 pleaded no contest to one count of fraud to obtain insurance at a reduced rate, the Stanislaus County District Attorney’s Office announced in a news release Thursday. Two other counts of insurance fraud were dropped.

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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.