Check Cashing Workers’ Comp Fraud Scheme Busted in Florida

A recent press release from the Florida Department of Financial Services announced multiple arrests in “Operation Dirty Money” conducted by Florida’s Workers’ Compensation Fraud Task Force.  Eight people have been charged with workers’ compensation fraud and money laundering.

The Workers’ Compensation Fraud Task Force was formed last summer under the state’s Chief Financial Officer, Jeff Atwater, with the primary goal of investigating workers’ compensation fraud and working with law enforcement to bring the state’s worst offenders to justice.  Over the past year, they have found over $140 million of illegal transactions committed through 12 shell companies and check cashing stores.

We have written about this kind of scheme and its widespread use several times.  A contractor will submit a bid for a job using a company name which lists only a few employees – just enough to obtain a small workers’ compensation policy.  The contractor will then take checks paid to that company by the general contractor to a check cashing store to cash them so that most of the workers can be paid in cash.  The contractor does not list as employees the majority of the workforce and does not pay workers’ compensation on their behalf.

According to the release:

“Hugo Rodriguez, owner of the Oto Group, Inc., was the ‘ring leader’ of seven individuals and the facilitator of 10 known shell companies that funneled in excess of $70 million in undeclared and undetected payroll through different money service businesses.  By using shell companies, Rodriguez was able to run a large construction operation and avoid paying the cost of workers’ compensation coverage, leaving employees at risk and scamming legitimate businesses.

“Arrests of these individuals were made in multiple counties including Broward, Miami-Dade, Palm Beach and Polk.”

Last November, a report was issued following a study of this type of scheme with recommendations for the Florida legislature to consider during their 2012 session.  The press release reports that:

“During the 2012 Legislative Session, reforms equipped regulators and law enforcement officials with critical tools, including the ability to make unannounced examinations and outlawing the possession of thumbprint stamps or other items used to forge payment authorization.  New provisions are helping detect workers’ compensation insurance fraud more quickly, protecting the honest players in the marketplace while ensuring those responsible for diverting more than a billion dollars from Florida’s economy are caught and held accountable.”

The Department of Financial Services has a tip line where anyone may report incidents of suspected insurance fraud.  Anyone with information may call 1-800-378-0445, and may remain anonymous if preferred.