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Florida Construction Company Owner Arrested for Workers’ Compensation Fraud

worker-694267_1920-300x199A construction company owner based in Jacksonville, Florida has been arrested for her part in an alleged workers’ compensation insurance fraud scheme.

Andrea Karau, age 50, is the owner of Andies Construction and has been charged with money laundering, organized fraud, and structuring transactions to evade reporting or registration requirements in addition to workers’ compensation fraud. The investigation into Karau’s business practices was carried out by the Florida Department of Financial Services’ Bureau of Insurance Fraud.

Investigators showed that Karau obtained a workers’ compensation insurance policy in 2016 from the Builders Mutual Insurance Company. Karau claimed her company’s payroll was only $20,000. This, the investigation showed, was less than 1 percent of her actual payroll.

From December 2016 through December 2017, it is alleged that Karau deliberately sought to conceal her company’s true payroll from her insurer. She also took measures to avoid reporting financial transactions as she was required to do according to Florida Law.

During this period, Karau wrote approximately 500 payroll checks amounting to $2.3 million. In addition, she made out $246,000 in checks to subcontractors who had no insurance coverage. Another $310,000 across almost 100 checks was made out to cash and used to cover additional payroll expenses.

In addition to concealing payroll, Karau misclassified her workers in order to further reduce her workers’ compensation insurance premiums. Although all her Karau’s employees should have been classified as carpenters, she claimed they worked in debris removal. The 2018 rate for debris removal in Florida was $9.99 while the rates for the carpentry classifications can be considerably higher.

This misclassification, coupled with the underreporting of her payroll, meant Karau’s workers’ compensation insurance premium at this time was only $2,200. According to investigators, “the premium loss on the workers’ compensation policy to Builders Insurance Group was $346,792.” She also underpaid her general liability policy by more than $100,000.

In addition to this, all financial transactions over $10,000 must be reported according to state law. The investigation discovered that Karau had avoided this requirement by writing several checks to the same individual on the same day.

Cases like this are rampant. For example, siblings Gloria and Enrique Vera defrauded California’s State Fund of $6.3 million by concealing the true payroll of their construction company, Ultimate Inc., in order to lower their workers’ compensation insurance premiums. The siblings pleaded guilty and are awaiting sentencing. In Massachusetts, Tam Vuong underreported payroll of his employment agency, UT Services Inc., and in so doing, avoided paying over $500,000 in workers’ compensation dues. Vuong is facing up to 20 years in prison.

In Florida, meanwhile, I reported on the case of Vanessa Arreguin of West Palm Beach whose company, V&G Concrete, carried out $7.5 million in business over a two-year period while Arreguin claimed her company had made less than $50,000. If she is convicted of all the charges against her, Arreguin faces 20 years in prison.

Karau was arrested on May 12, and her bond was set at $200,000. She is scheduled for an arraignment hearing on June 4.

Florida Workers’ Compensation Fraud Defense Attorney

If you are involved in a worker’s compensation fraud investigation, then you should hire a lawyer. Contact us to set up a free initial consultation and work with one of Florida’s most experienced workers’ compensation fraud defense attorneys.

Source

2019-05-15 Construction Company Owner Arrested for Fraud