400% ROI on Payroll Reporting?

The top story in WorkCompCentral this morning involves a massive check cashing/premium fraud scheme that highlights the extent that businesses will go to lower their workers' compensation costs, of course to the detriment of the rest of the law abiding community.

Involving 19 people in two different federal cases, it is estimated that the schemes defrauded the former West Virginia Workers' Compensation Commission and its private market replacement BrickStreet Mutual Insurance Co., and mining companies in both Virginia and West Virginia, of millions of dollars since at least 2005.

The schemes of course were complex, and highlight the vigor some will exercise to escape paying for workers' compensation insurance and the creativity of criminals intent on making something for nothing.

The basics of the cases involve a "field auditor" for BrickStreet - someone who's job it is to validate an employer's payroll to ensure that it is properly reported for establishing premiums.

Mining companies paid this auditor "commissions" to adjust their payroll.

In one instance one mining company operator estimated he paid the auditor about $70,000 over the course of time which saved the company some $280,000 in premiums.

That's a 400% return on investment!

The check cashing scheme involved bookkeeping businesses that would inflate invoices for supplies to mining companies and then providing cash to staffing firms who used the money to pay employees to evade taxes which would also lower payroll reporting.

It seems these schemes were pretty well orchestrated with several of the members behind them being related, at least in surname, which likely helped with the coordination of the fraud.

I like thieves as much as the next guy. There is hardly anything more vile to me than someone who steals, lies and cheats.

Everyday we read and view stories about employees trying to pull off unsophisticated scams to increase their take out of workers' compensation programs. And it always seems that worker fraud is the focus of prosecutors.

For instance, even in this very same issue of WorkCompCentral, it was reported that Oklahoma Attorney General Scott Pruitt is heading on a road trip to tell employers about his plans to aggressively prosecute workers' compensation fraud.

Yesterday it was reported that an Ohio man was sentenced for returning to work as a truck driver while receiving temporary disability benefits for a prior workplace injury - he had to pay restitution of nearly $2,000 and a suspended six months of jail time for community service.

And in California a McDonald's employee was charged with work comp fraud for allegedly claiming to have suffered a foot injury despite seeking treatment for the condition prior to filing her claim.

I could go on and on - worker fraud stories are reported every day, and typically don't involve a lot of money.

The larger cases, such as this BrickStreet case, are obviously more sophisticated, more egregious, more sensational.

And fortunately also get attention reminding us that while there may be more worker fraud cases, the real money involves much bigger schemes.