As an employer, you know the importance of protecting your team and bottom line with workers compensation coverage. Furthermore, accurate reporting on your end is a very serious matter when it comes to this type of insurance. Failure to comply could result in some rather significant consequences, as one construction operator in Palm Beach discovered when he was caught engaging in fraudulent activity.
Here’s why accurate reporting matters so much for workers compensation coverage.
It may have seemed like a clever idea when Juan Jose Castro decided to establish a shell corporation to shield his actual business from the full burden of expenses associated with complying with workers compensation laws in Florida.
Castro obtained a workers compensation policy for JACM Building Corporation on April 25, 2017. When acquiring the policy, Castro allegedly reported the organization operated with an estimated annual payroll of $112,000 for a variety of functions within the definitions of wallboard installation and carpentry tasks, with the intention of defrauding his workers compensation insurance provider.
However, unbeknownst to Castro, the state’s Division of Economic Services’ Bureau of Workers’ Comp Fraud and the Broward Sheriff’s Workplace were conducting a surveillance operation at one of the cash-service businesses he employed. There, Castro was observed cashing some $127,000 in business-to-business checks.
Taken on its own, this wouldn’t have been a big deal, but when authorities noted this amount exceeded his reported annual payroll by some $16,000, some rather serious red flags went up. Things for Castro took an even sharper turn for the worse when supplemental investigations revealed this particular transaction was more than just an anomaly. In fact, investigators found over the period from Feb. 12, 2016, to Aug. 6, 2017, Mr. Castro had cashed more than $8.4 million in payroll checks at various money-service businesses around the state of Florida.
Running the numbers, it was calculated if Castro had accurately reported his payroll obligations, his company’s annual workers compensation insurance premium would have totaled some $424,000.00. Castro had apparently defrauded his insurance company to the tune of nearly $300,000 in premium payments. Further, it was deduced Castro had set up JACM Building Corporation as a shell company—specifically for this purpose.
If the term “shell company” is new to you, these are entities conducting no significant business operations. In many cases, they exist solely to serve as a vehicle for the conduct of surreptitious activities—usually in an effort to maintain distance between the illegalities being performed (which are typically financial in nature) and the actual company structure within which the legitimate business dealings are conducted.
The Florida Bureau of Workers Comp Fraud, working in conjunction with the Broward Sheriff’s Office (BSO) Money Laundering Task Force and the BSO Workers Compensation Fraud Task Force arrested Castro on August 11, 2017 in Palm Beach County. Charged with workers comp premium fraud, Mr. Castro could face up to 10 years in prison.
This is but one example of why accurate reporting matters for workers compensation coverage. Your business can’t afford to go without it. Get affordable rates and thorough coverage with help from CoverHound.