Admits to Defrauding Insurance Carrier of $600,000
A New Jersey business owner pleaded guilty to conspiracy and insurance fraud in connection with a workers’ compensation fraud scheme that allowed the company to reduce its workers’ compensation insurance premiums by nearly $600,000 over a three-year period. According to the criminal complaint, filed by the New Jersey Attorney General’s Office, the business owner conspired with a local insurance agency to intentionally misclassify warehouse workers as office personnel in order to pay lower workers’ compensation insurance premiums.
State officials say that the company had as many as 72 employees at any given time, with most of them working in high-risk occupations where they were disassembling and refurbishing a wide range of electronics products, including computers and televisions. When filing its application for workers’ compensation insurance, and in subsequent reports to the workers’ compensation insurance provider, the company reported that most workers were office staff.
Workers’ compensation insurance premiums are based, in part, on the type of work being performed. The premiums are higher for jobs that are inherently more dangerous. Because the warehouse positions were more dangerous and required a higher premium, the misclassification cost the insurer approximately $600,000.
The owner of the company was sentenced to three years on prison on the fraud count, and the company was ordered to make restitution and pay a $100,000 fine. In addition, another employee of the company and three employees at the insurance agency were charged.
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