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Texas Company Ordered to Pay $250,000 after Workers’ Compensation Scam

skyline-1509136_1920-300x231A company based in Houston, Texas has been ordered to pay a quarter of a million dollars after it was found to be involved in a workers’ compensation insurance scam.

The conviction was obtained by the prosecution unit of the Department of Insurance, Division of Workers’ Compensation (DWC). The DWC’s investigation showed that, in the four-year period between 2008 and 2012, John Stergion, an employee of Alpha Mar, had both misrepresented the number of people employed by the company and also concealed payroll. Stergion’s actions resulted in reduced workers’ compensation insurance rates.

Alpha Mar was founded in the 1980s as a company catering to the maritime and petrochemical industries. Their areas of expertise include ship repair and modification. On their website, Alpha Mar is described as “one of the most reliable organizations in the marine and manufacturing industries in the world.”

In recent months I have reported on several similar cases. In December last year, I wrote about the arrest of Florida businesswoman Vanessa Arreguin who underreported her company’s payroll by almost $7.5 million in order to avoid paying $51,000 in workers’ compensation insurance. In October, I reported on James Miller of Barrett Business Services in Washington state, who was charged with underreporting workers compensation expenses to the tune of $12 million.

I also wrote about Luis Perez, who was charged with running BaronHR without having any coverage for his employees. He claimed his workers were in fact employed by another company in order to use that company’s workers’ compensation insurance benefits and so to avoid having to pay any premiums for his company.

Alpha Mar began misrepresenting payroll and the number of employees in 2008 at the start of the financial crisis. At the best of times, businesses face a great deal of overheads, and workers’ compensation insurance premiums are not cheap. At that time, pressures were even greater. In Texas in 2018, had premium index rate of $1.21 for every $100 of payroll. While this average rate is among the lowest in the country—only eight states have a lower index rate—it’s important to remember that this is just an average. For companies such as Alpha Mar that are involved in construction or other high-risk work, the rate will be considerably higher.

Last year, Ohio businessman Craig Snee was found guilty of misclassifying workers and underreporting payroll. Attempting to explain his client’s actions, Snee’s lawyer stressed how difficult it was for small businesses to stay afloat. “What should he have done instead?” he asked. “I guess he should have just shut the company down or laid off employees. … There’s that pressure that’s on you—the pressure to find a way.”

Debra Knight, deputy commissioner of compliance and investigations at DWC, issued a statement explaining the department’s stance on Alpha Mar’s actions. “When companies commit premium or payroll fraud,” she said, “they can put their employee’s coverage at risk. It gives dishonest companies a business advantage over ethical companies that are paying the full cost of their premiums.”

Alpha Mar has been ordered to pay $250,000 to the Texas Mutual Insurance Company, the state’s insurer of last resort for companies unable to find workers’ compensation insurance elsewhere.

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

2019-01-23 Houston Company to Pay $250K in Workers’ Comp Fraud Case