11th Circuit upholds convictions in nationwide comp fraud conspiracy
Case name: United States v. Jennings, et al., No. 08-13434 (11th Cir. 03/16/10).
Ruling: The 11th U.S. Circuit Court of Appeals upheld the convictions and sentencing of two coconspirators on numerous counts of conspiracy, mail and wire fraud, and money laundering for their participation in a scheme to sell fraudulent workers' compensation insurance.
What it means: Workers' compensation carriers must be "admitted" to operate in a state. They must satisfy various financial and administrative requirements and pay into the guaranty fund. Holding oneself out as a representative and convincing companies to pay for coverage from a known unadmitted carrier is an element of fraud.
Summary: Two coconspirators were convicted of participating in a nationwide scheme to defraud professional employer organizations and their clients through the sale of sham workers' compensation insurance. The government alleged that along with others, they sold unlicensed and unregulated insurance to client companies. The fraud left the companies' employees without workers' compensation insurance, and many injured and disabled employees were unable to collect compensation and were abandoned without financial recourse. The 11th Circuit upheld the conspirators' convictions and sentences. It also determined the government presented sufficient evidence for the court to enhance their sentences, taking into account each coconspirator's position in the scheme, decision-making abilities in carrying out the fraud, and the sophisticated means by which at least one coconspirator set up shell corporations to issue the illegitimate workers' compensation insurance. The 11th Circuit affirmed the imposition of one coconspirator's 216-month sentence and the other's 264-month sentence.
The fraud began when the conspirators learned that a PEO's carrier had become insolvent. The conspirators convinced the PEO to obtain coverage through a purported insurance company that was unadmitted in the United States. They fraudulently represented to the client companies that the companies' employees were legitimately covered under the PEO's workers' compensation policy, knowing the alleged carrier did not have authority to transact business or provide coverage.
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April 22, 2010
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