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Temp Firm Executives Charged with Workers’ Compensation Insurance Fraud

justice-2071539_1920-300x225Three executives from a Southern California staffing firm have been charged with workers’ compensation and tax fraud. The defendants claim they are innocent and have filed a civil action lawsuit against their insurance company.

Luis Perez, age 49, was owner and operator of BaronHR LLC, a temporary employee staffing company. Scott Smith, age 36, acted as his director of safety, and Veronica Lake, age 47, was the company’s controller. Perez owned several staffing companies. Smith was also the sole director, CEO, CFO, and secretary of another staffing company, Titan Personnel Inc.

The Orange County District Attorney’s Office alleges that Perez carried on running BaronHR after its workers’ compensation insurance lapsed in July 2013. BaronHR continued to supply companies with temporary employees after this time.

According to the filing, BaronHR claimed its injured employees were actually employed by Smith’s company, Titan Personnel. Unlike BaronHR, Titan Personnel carried workers’ compensation insurance. Between December 2013 and September 2014, Titan Personnel’s workers’ compensation insurance provider, American International Group Inc. (AIG), received claims from 47 individuals who were in fact employed by BaronHR.

In this way, BaronHR not only avoided any liability for its injured employees, but the defendants were also able to hide BaronHR’s lack of workers’ compensation coverage. AIG paid $393,000 to cover the claims of these injured employees–employees who should not have been covered by Titan Personnel’s policy.

Perez, Lake, and Smith are also alleged to have failed to withhold, pay, and report personal and employment income tax for 36 of BaronHR’s employees.

BaronHR released a statement saying the company had already been formally audited and that these issues had been resolved. These issues were also dealt with during a civil court case. According to the press release, “At no time has BaronHR failed to prevail when the exact same subject matter was brought in civil court. In fact, AIG has been bound to its coverage obligations at all relevant times by civil courts.”

BaronHR has filed a civil case against AIG, claiming that the insurance giant is “double dipping” by trying to gain the outcome it had hoped to achieve in the civil case. BaronHR claims AIG unfairly used its influence with the district attorney’s office or with the “Insurance Fraud” division to bring the case.

An increasing number of companies have been found to have misclassified or misrepresented their employees in order to avoid paying workers compensation insurance premiums. In recent weeks, I have reported on similar cases across the United States. For example, the owners of a Massachusetts cleaning company were recently charged with concealing more than $2.8 million in payroll from the state in order to reduce their workers’ compensation premiums. In another case, a business owner in Ohio claimed he had no employees in order to avoid paying $43,000 in workers’ compensation insurance premiums.

BaronHR’s press release continued: “Our business partners, including banks, professional employer organizations and insurance companies are supportive of our approach in dealing with these unsubstantiated allegations. … We are confident that the matter will ultimately resolve in our favor.”

The defendants are facing 15 felony charges, including nine counts of Theft by False Pretenses, four counts of Failing to Withhold and Pay Employment Taxes, and two counts of Making Fraudulent Statements to an Insurer. If they are found guilty, the defendants face sentences of up to 16 years and eight months in prison.

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.

Sources

2018-08-24 Southern California Staffing Firm Execs Charged with Tax and Workers’ Comp Draud, Defendants Claim Insurer Double-Dipping

2018-08-18 Three Defendants Charged with Tax Fraud and Workers’ Compensation Insurance Fraud for Misrepresenting Employee Status of Injured Workers