Workers’ Compensation insurance fraud is a growing trend, which can have serious financial repercussions. If you can learn to recognize common warning signs, you could save yourself from costly issues, like rising premiums, production delays and retraining costs. Read more
Construction fraud is an issue that plagues contractors across the country. In fact, three out of four construction companies surveyed by Kroll Global Fraud Report in 2015 reported that they had experienced fraud within the last year.
Whether you realize it or not, fraud has probably impacted your bottom line. From time theft to fake injuries, these workplace issues can be prevented if you learn how to recognize them. Read more
Workers’ compensation is one of the most useful tools at a business’s disposal. It protects the employees from illness and injury, provides for them after accidents and defends the business against lawsuits and liability. However, there are dishonest people out there who will try to use workers’ comp to their own advantage by abusing the system and committing fraud. Here are some ways to avoid workers’ comp claim fraud.
When contracting companies participate in fraudulent activity, they cheat everyone in the system: their fellow contractors, employees, insurers, consumers, taxpayers, and the government. This type of scenario, which is all too frequent, was evidenced in a recent verdict that found the owner of California-based cabinetry, remodeling, and construction firm Costa Bella Builders, Jeffrey Thranow guilty of committing workers’ compensation insurance premium fraud.
Thranow, along with his daughter, Kathleen Castelli, and her husband, Vittorio Castelli, failed to report employees to their insurance carrier, and to the Employment Development Department (EDD), which constitutes insurance fraud. Costa Bella Builders is a licensed contracting company, but Thranow chose to pay his employees in cash to avoid having to pay for workers’ compensation insurance.
The California Department of Insurance worked in collaboration with the Santa Cruz District Attorney’s Office to investigate and subsequently prosecute Thranow and his family after a Costa Bella Builders employee was injured. The investigation found that Thranow and family convinced their employees to agree to payment in cash, taking advantage of honest workers who were trying to make a living, and depriving them of the insurance protection to which they’re entitled as construction workers.
The employee who was injured needed surgery, and Thranow persuaded the employee against filing a workers’ compensation claim, which would shine a light on Thranow’s fraud. Instead, he offered the employee a State Disability Form, and instructed the employee to claim that the injury happened in the employee’s home.
As a result of their fraud prosecution, Vittorio Castelli was convicted of felony insurance fraud and sentenced to six months in jail, Kathleen Castelli was convicted of misdemeanor insurance fraud and sentenced to one year of probation. Costa Bella Builders was ordered to pay over $47,000 in premium restitution, almost $30,000 in back taxes to the EDD, and $37,000 in restitution for the injured worker’s claim. Thranow was sentenced to one year in jail.
California Insurance Commissioner Dave Jones issued the statement, “Thranow cheated both his workers’ compensation insurer and the State of California out of nearly $100,000, and by doing so passed the cost of his fraud onto consumers across the state.” After closing the book on Thranow, Jones announced that he is awarding $32 million in grants to allow California law enforcement to continue fighting against these kinds of fraud cases. It was this type of funding that allowed the Santa Cruz County DA to investigate and prosecute Thranow. The funds will be distributed to 36 California district attorney offices.
Legitimate contractors take on much of the burden when contractors like Thranow act fraudulently. Bobbie Everett, president of the San Jose-based company The Wood Connection, spoke about the Thranow case; “Our company has been called out to finish so many jobs for homeowners who were conned by fraudulent contractors. . .We are pleased to see enforcement branches of the state and local government take action against unlicensed contractors and the licensed contractors who are cheating, too.”
The Executive Director of the California Professional Association of Specialty Contractors (CALPASC), Brad Diede, also voiced his concerns about fraudulent contractors in the industry; “By looking at [the Costa Bella Builders] website, this trade contractor takes great strides to appear legitimate to potential customers. But clearly from this conviction, this contractor is anything but legitimate in putting employee safety and welfare at great risk.” He continued to express his disappointment in fraudulent contractors taking jobs away from legitimate contractors who do honest work, and said he was appreciative of the enforcement agencies that are working diligently to crack down on the “serial and flagrant violators to combat the underground economy.”