Midland Business Pleads Guilty to Hiding Payroll from Texas Mutual

Texas Mutual Insurance Company reported today that AB Abatement, Inc. of Midland, Texas, pled to workers’ compensation fraud-related charges. A Travis County district court ordered AB Abatement, Inc. to pay $70,000 in restitution to Texas Mutual and a $1,000 fine.

Vanco Insulation, Inc., owned by Robert Crow of Midland, obtained workers’ compensation coverage through Texas Mutual from April 2003 to October 2006. During that time, related company, AB Abatement, Inc., misrepresented numbers of employees and payroll associated with the Vanco Insulation, Inc. policies to Texas Mutual.

Because workers’ compensation insurance premium is based, in part, on payroll, this type of scheme results in an employer being charged a lower premium than it actually owes. By hiding payroll, an employer can gain an unfair advantage over competitors.

Preventing Workers’ Comp Fraud

The majority of workers’ comp claims filed in Texas and other states stem from real instances of on-the-job injuries. Unfortunately, the people who cheat the system drive up costs for employers, consumers and insurers.

As a corporate executive once noted, if workers’ comp fraud were a legitimate business in the United States, it would rank among the Fortune 500 companies. Indeed, according to the National Insurance Crime Bureau, workers’ comp fraud totals $7.2 billion a year. The Texas Department of Insurance notes that insurance fraud is the second most profitable crime after drug trafficking.

Fraud is

Fraud is lying for financial gain. Claimant fraud is the most common type of fraud. Claimant fraud happens when workers:

• Fake or exaggerate injuries
• Collect benefits for injuries that were not work-related
• Double-dip, or continue to collect benefits after returning to work
• Engage in activities that are inconsistent with their injuries

Fraud is not

Delayed recovery. Some injured workers take longer than expected to recover and return to work. This is not fraud. Injured workers do not have to return to the job until their treating doctor releases them.

Recreational activities. Injured workers can participate in recreational activities that are consistent with their medical restrictions.

Suspicion without evidence. To prove fraud, a carrier must have evidence that the injured worker knowingly collected benefits he or she was not entitled to. Evidence includes medical records, witness testimony, business records and surveillance video.

Village Mills Man Sentenced to Jail Time for Workers’ Comp Fraud

Texas Mutual Insurance Company reported today that a Travis County court sentenced Clifford K. Franklin of Village Mills, Texas on workers’ compensation fraud-related charges. Franklin fraudulently received $1,453 in benefits. The court sentenced Franklin to 180 days in jail and ordered him to pay court costs.

Franklin reported a job-related injury while working as an equipment operator for Odin Demolition and Asset Recovery, Inc. in Deer Park, Texas. He claimed he was unable to work as a result of the injury, and Texas Mutual began paying income benefits to him.

Meanwhile, Texas Mutual uncovered evidence that Franklin was working as an equipment operator for another employer while receiving income benefits.

Investigators call this type of scam double-dipping because the claimant collects benefits for being too injured to work when he or she is, in fact, gainfully employed. Texas law requires claimants to contact their workers’ comp carrier when they return to work.

Left unchecked, double-dipping and other workers’ comp fraud can lead to higher premiums for all Texas employers.

Premium Fraud Indictments

A Travis County grand jury recently indicted Premrock Commercial Drywall Ltd. Co., Timothy Castonguay of Arlington and Carlos Aguilar of Ft. Worth on workers’ compensation fraud-related charges.

Castonguay and Aguilar own and operate Premrock Commercial Drywall Ltd. Co., a Dallas- area drywall contractor. The indictments allege that the individuals intentionally misrepresented the payroll of Premrock Commercial Drywall Ltd. Co. between December 26, 2006, and May 14, 2007. The misrepresentation allowed the company to fraudulently obtain lower premiums from Texas Mutual.

Workers’ compensation insurance premium is based, in part, on payroll. An employer who intentionally underreports payroll is charged a lower premium than it actually owes. By fraudulently concealing or underreporting payroll, an employer gains an unfair advantage over competitors.

If you’re interested in learning more about the fight against workers’ comp fraud, visit the Fighting Fraud section of our website.  It includes fraud articles, red flags for fraud and copies of our FraudStoppers posters in English and Spanish.

Note: A grand jury indictment is a formal accusation, not a conviction, of criminal conduct.