How Comp Fraud Probe at Florida’s Guarantee Insurance Led to Payroll and Tax Convictions

The name Guarantee Insurance is not likely to be fondly remembered by many Floridians. The workers’ compensation carrier in 2017 was declared insolvent, a rarity in what is one of the most profitable lines of insurance.

Guarantee was run by Steve Mariano, who was also the majority owner of Patriot National, a now bankrupt South Florida technology and insurance group. State regulators have accused Guarantee of improperly transferring millions of dollars to Mariano and its associated companies, leaving the compensation insurer severely underfunded.

But one thing Guarantee could have done right ultimately led to a years-long investigation by state and federal authorities into one of South Florida’s biggest payroll fraud schemes, the chief justice said. private investigation firm that helped unravel the scheme. The program provided off-book construction labor, avoided millions in federal tax payments, and defrauded the insurer of more than $1 million in premiums.

Guillermo Inamagua and Mayra Velasquez pleaded guilty to the crimes in early 2022. Inamagua was sentenced in July to nearly four years in prison and must pay more than $6 million in restitution and confiscate two homes.

Linn

“One of the reasons this exploded into millions of dollars in restitution is because all three disciplines came together,” said Jason Linn, president of Contego Investigative Services. “Premium fraudsters did their thing, surveillance did theirs, and the SIU team packed it up and worked with law enforcement to solve it.”

Orlando-based Contego, one of the nation’s largest insurance investigation firms, was the hired Special Investigative Unit, or SIU, for Guarantee Insurance in 2014 when questions began to surface at the about payroll fraud. Ahead of the International Association of Special Investigative Units’ annual conference this week in San Diego, the Insurance Journal spoke with Linn about the investigation and the new tools insurance SIUs are using to detect activity. fraudulent employers and applicants.

Linn said red flags arose as injured workers at the Inamagua Labor Company began filing what appeared to be an unusually high number of claims.

“They were processing requests at a volume and type that they shouldn’t have been,” Linn said. “It turned out far too many claims for a small business.”

Guaranty’s claims management team, adjusters and Contego investigators decided that further investigation was required. They sent observers to construction sites for which the Inamauga company had supplied workers, counted the workers, and found the number to be close to typical large commercial construction sites of a similar nature.

Soon it became clear that the alleged fraud was not just a small operation. The SIU called in the Investigations and Fraud Unit of the Florida Department of Financial Services, which then contacted the US Department of Justice and the Internal Revenue Service.

Authorities later determined that the Inamagua company had only one insurance certificate, supposedly covering about 12 employees, but had paid up to 160 workers, most of them undeclared. The plan cost Guaranteed Insurance some $1.4 million in premiums and deprived the IRS of more than $6 million in payroll taxes, prosecutors said. Part of the refund will be used to help pay claims from the now liquidated guarantee insurance, Linn said.

Linn had these words of wisdom for insurance companies and their SIUs struggling with what can seem like a never-ending stream of underreported workers’ compensation payroll and premium fraud:

“The best thing is to start having conversations. Some big carriers are so siloed that no one talks to each other,” Linn said. “If a bunch of claims come in and they don’t fit the policy, does somebody grab that data and say, ‘Doesn’t that make sense?’ Or do they just handle complaints?”

He also said that building a well-documented case is crucial. Contego was able to present state DFS investigators with strong evidence, which helped lead to the federal charges. He noted that Contego had several former Florida DFS investigators on staff, which helped rally state authorities.

SIUs now have another trick that has made fraud easier to spot. Contego was purchased this year by Charles Taylor, the London-based insurance and claims management company. And Charles Taylor recently acquired an Argentinian company known as Fraud Keeper, one of several companies that make software that can detect unusual activity in claims, Linn explained.

“It sits above the claims platform and can enter our case management system,” he said. “And it does exactly that – looks for trends, the number of claims for a certain policy and looks at what’s expected within the policy limits.”

Linn also said one way to deter premium and payroll fraud in workers’ compensation is to toughen penalties for fabricating insurance certificates.

“Printing fake COIs must be a crime,” he said. “It’s pure fraud. You don’t cover employees and the state is responsible for that. Employees think they are covered and job sites think they are covered, but they are not.

A few years ago, the insurance industry was in a frenzy saying that certificates could be made infallible through the use of blockchain technology, the digital basis that allows all cryptocurrency transactions to be traced, making counterfeiting difficult, if not impossible. But Linn said while some employers and insurers are now using the method, many construction companies, contractors and trucking companies have yet to adopt the technology.

SIUs have not yet widely used technology to flag potentially fraudulent property insurance claims, which have plagued the Florida insurance market in recent years. Some units may use drones to check the condition of the roof after a roof claim is filed, he said. But more often than not, investigators use computers to sift through records, check building permits, or search for a pattern, such as evidence of a bankrupt business when a fire destroys commercial property.

“We look behind the scenes: did anyone have an ax to grind? Did someone make a threat on social media, or did they go through a tough divorce, or did they have a business problem and needed the insurance money” , did he declare.

Topics
Fraud in Florida

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