Authorities Uncover Complicated Workers’ Compensation Fraud Scheme

Authorities Uncover Complicated Workers’ Compensation Fraud Scheme

48-year-old Orquidea Quezada of Orlando will spend the next 18 months in federal prison after she pleaded guilty to a sprawling workers’ compensation fraud scheme that involved an elaborate employee renting arrangement. U.S. District Judge Henry Lee Adams, Jr. also entered a $585,000 money judgement against Ms. Quezada.

According to investigators, Orquicely Construction, LLC fabricated payroll records to obtain various workers’ compensation insurance policies from May 2013 to May 2016. Although the policies covered only two to seven workers, Ms. Quezada “rented” such policies to construction companies that employed hundreds of people, including many undocumented immigrants. The companies then paid their workers in cash and gave Ms. Quezada a kickback. Effectively, they had proof of insurance without paying for it and did not pay taxes on their payrolls. “HSI special agents will continue to identify, disrupt, and eliminate the criminal schemes used to exploit our financial industry and to garner profit from the labor of undocumented aliens,” declared Homeland Security Investigation Special Agent Susan McCormick. Furthermore, “when bad actors save thousands by not paying for insurance policies, they can skew the competitive market by bidding on projects at a much cheaper rate—making it difficult for the law-abiding employers to win job contracts,” she added.

As part of the plea agreement, Ms. Quezada must also forfeit almost $200,000 in cash and a Honda Accord.

Employer Fraud

The workers’ compensation system will cost about $1 trillion over the next ten years. Rep. Henry Waxman (D-CA) fears that this financial giant will create a fertile environment for fraudulent activity. His concerns are probably justified. Despite implications that the media and insurance companies make, employer fraud is a much more serious problem than worker fraud. According to some estimates, employer fraud may cost up to 20 times more than worker fraud. Some common schemes include:

  • Misclassification: If a housing contractor has 50 roofers and 10 clerical workers, the boss may classify all the workers as clerical employees, thus paying lower premiums and denying money to injured workers.
  • Denial: At the initial settlement conference, employers nearly always argue that the victims’ injuries are not covered. These employers then hope that the workers get discouraged and abandon their claims.
  • Miscalculation: Many employers intentionally miscalculate the victims’ average weekly wage, a process that is laid out below.

Florida is actually one of the most aggressive states in the Union in terms of prosecuting employer fraud. But that is not saying much because officials obtain fewer than 150 convictions a year out of more than 50,000 verified complaints. Often, the punishment is only a fine that barely exceeds the amount of money that the employer illegally saved.

Lost Wages

Lost wages are perhaps the largest component of many workers’ compensation claims. Typically, victims who are temporarily injured receive two-thirds of their average weekly wage until they can return to work. The AWW usually includes bonuses, overtime, and certain non-cash compensation on top of regular weekly earnings.

In 2005, Florida lawmakers cut the recovery period to 104 weeks. AWW payments ended at that point, whether the victim could return to work or not. Furthermore, since they could not prove permanent injuries, they were ineligible for any other kind of benefit. In 2016, the Florida Supreme Court overturned that portion of the law and reinstated the former 260-week recovery period, so AWW benefits are now available for five years while victims recover from their injuries.

Many workers reach their MMIs (maximum medical improvements) before they can return to work at full strength, leaving them with permanent disabilities. Many of these victims must accept lower-paying jobs or voluntarily reduce their hours at work. If the new compensation is more than 20% lower than the old compensation, permanent disability benefits may be available. Victims who are unable to work at all may be eligible for larger permanent disability annuities, a one-time lump sum payment, and/or other government benefits from the Social Security Administration.

Medical Expenses

The average injury-related hospital bill is about $20,000, a figure that does not include physical rehabilitation, followup doctor visits, subsequent surgical care, and other significant expenses. Workers’ compensation pays all these costs according to a Medicaid-like schedule, and victims are not responsible for any unpaid charges. Perhaps best of all, the work is all performed by professionals who have experience with that particular type of injury, so there is no guesswork as to the quality of medical care.

For more information about the types of injuries covered, contact Barnett, Lerner, Karsen & Frankel.