UPDATE: 3 Sentenced in W.Va. Workers' Comp Fraud Scheme

By: WSAZ News Staf, The Associated Press Email
By: WSAZ News Staf, The Associated Press Email

UPDATE 10/3/13
CHARLESTON, W.Va. (AP) - A West Virginia man and two Kentucky residents have been sentenced for their roles in a workers' compensation scheme.

Jerome Edward Russell, of Williamson, Frelin R. Workman, of Belfry, Ky., and his son, Randy Workman, of Belfry, each pleaded guilty Wednesday to tax evasion and aiding in the scheme.

U.S. District Judge John Copenhaver sentenced both Russell and Frelin Workman to 30 months in prison. Randy Workman received a 15-month sentence.

Russell and Frelin Workman are principals in Aracoma Contracting LLC.

Prosecutors say former BrickStreet Mutual Insurance Company auditor Arville Sargent of Chapmanville allowed Aracoma and three other companies to under report their payroll in exchange for cash and other items.

Sargent pleaded guilty in March to mail fraud and tax evasion charges.



UPDATE 3/29/13
CHARLESTON, W.Va. (WSAZ) -- A former workers’ compensation insurance premium field auditor for BrickStreet Insurance has pleaded guilty to a multimillion-dollar fraud against the company.

Federal prosecutors say Arville W. Sargent, 52, of Chapmanville, W.Va., pleaded guilty to mail fraud and tax evasion on Wednesday.

Two other co-defendants, Jerome Eddie Russell, 50, of Williamson, W.Va., and Frelin Workman, 58, of Belfry, Ky. also pleaded guilty to fraud and tax evasion.

Russell and Workman were the principals of “employee leasing” company Aracoma Contracting.

Prosecutors say the men admitted to paying a significant number of their employees in cash as part of a tax evasion scheme to avoid the associated premiums owed to BrickStreet.

Both also admitted to paying Sargent approximately $1 million in cash bribes to falsify the audits performed for the Workers’ Comp Commission and then BrickStreet.

Russell and Workman estimated that the Workers’ Comp Commission and BrickStreet were defrauded approximately $4 million in lost premiums over the course of the fraud scheme.

Additionally, Randy Workman, 36, of Belfry, Ky., pleaded guilty on Tuesday to aiding and abetting mail fraud and tax evasion.

Workman admitted that he utilized a similar cash payroll scheme to evade payroll taxes. He further admitted that from October 1, 2007 through June 30, 2009, he withdrew about $800,000 in cash out of a local bank and used the funds to pay employees in cash. Workman also admitted that he underpaid approximately $280,000 in premiums owed to BrickStreet.

A fifth co-defendant, Arthur J. White, Jr., 60, of Lenore, W. Va., pleaded guilty Thursday to tax evasion and structuring in connection with a scheme to defraud BrickStreet.

White admitted that he paid a portion of the payroll for T&W Services, LLC through a shell company, thereby evading taxes.

According to his plea agreement, White estimated that he skimmed approximately 15 percent of the premium actually owed to BrickStreet over a four-year period, resulting in a loss of approximately $154,527 to BrickStreet.

Sargent admitted that from its inception in January 2006 until at least February 1, 2011, he led a scheme to defraud BrickStreet by allowing certain policyholders operating in the coal mining industry to drastically underreport their payroll during annual field audits he conducted on behalf of BrickStreet for the intended purpose of confirming those policyholders were paying accurate workers’ compensation insurance premiums.

Sargent further admitted that he allowed four “employee leasing” companies, Aracoma, Christian Contracting, Newhall Contracting and T&W Services, LLC, all of whom provided labor on a contract basis to coal companies in southern West Virginia, to falsify documents drastically understating their actual payroll. In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreeet,

Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including an all-terrain vehicle.

Sargent faces up to 25 years in prison and a $500,000 fine when he is sentenced in July.

Russell, Frelin Workman and Randy Workman each face up to 25 years in prison and a $500,000 fine when they are sentenced in July.

White faces up to 10 years in prison and a $500,000 fine when he is sentenced in July.



ORIGINAL STORY 2/12/13
CHARLESTON, W.Va. (WSAZ) -- Federal prosecutors have charged five men in connection with what they are calling a major workers’ compensation insurance fraud scheme.

U.S. Attorney Booth Goodwin says Arville W. Sargent, 52, of Chapmanville, orchestrated the multimillion-dollar fraud on his employer, BrickStreet Mutual Insurance Company.

Sergent was employed as a workers’ compensation insurance premium field auditor for the company. The two-count information charges him with honest services mail fraud and tax evasion.

According to a court document, from January 2006 until at least February 2011, Sargent allowed certain policyholders operating in the coal mining industry to drastically under-report their payroll during annual field audits he conducted on behalf of BrickStreet.

According to a news release, Sargent purposely allowed four “employee leasing” companies, Aracoma Contracting, Christian Contracting, Newhall Contracting and T&W Services, all of whom provided labor on a contract basis to coal companies in southern West Virginia, to falsify documents drastically understating their actual payroll.

In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreeet, Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including an all-terrain vehicle, according to the release.

In addition to defrauding BrickStreet, the principals of Aracoma, Jerome Eddie Russell, 50, of Williamson, W.Va., and Frelin Workman, 58, of Belfry, Ky., admitted to paying a significant number of their employees in cash as part of a tax evasion scheme to avoid the associated payroll taxes, according to the release.

Prosecutors also said that Randy Workman, 36, of Belfry, Ky., similarly utilized a significant cash payroll to evade payroll taxes. They also said that Arthur White, Jr., 60, of Lenore, W.Va., paid a portion of the payroll for T&W Services through a shell company, thereby evading taxes.

Sargent, Russell, Frelin Workman and Randy Workman each face up to 25 years in prison and a $500,000 fine. White faces up to 10 years in prison and a $500,000 fine.

“Failing to honestly and accurately report employment information to insurance companies like BrickStreet potentially exposes those coal miners to devastating financial misfortune if they get hurt on the job. These charges are even more disturbing because these crooked operators were able to compromise the one person entrusted to make sure the employees are properly accounted for: the insurance company’s auditor. This type of corruption has long plagued the coal industry in southern West Virginia and must be stopped,” said Goodwin.

"No BrickStreet policyholder lost money because of this crime," according to a statement issued from Brickstreet Insurance.

Statement from Greg Burton, President & CEO BrickStreet Insurance
“BrickStreet has been informed that it is one of the victims of a crime committed by a former employee working with a very small number of our policyholders, nearly all of which were owned or controlled by one family in Southern West Virginia. BrickStreet has been fully cooperating with and assisting the authorities in this investigation since we were first informed of it in August 2012. No BrickStreet policyholder lost money because of this crime. We are thankful to U.S. Attorney Booth Goodwin and his office for the plea agreements that have been secured to date. We will continue to cooperate and support the prosecution of any individuals or companies who may be found to be involved with this incident to the fullest extent of the law. We are committed to fighting fraudulent activity that may impact our policyholders and we will take this same aggressive approach any time fraud is committed against BrickStreet.”


Comments are posted from viewers like you and do not always reflect the views of this station.
powered by Disqus
WSAZ NewsChannel 3 645 Fifth Avenue Huntington, WV 25701 304-697-4780 WSAZ Charleston 111 Columbia Avenue Charleston, WV 25302 304-344-3521
Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 190888661 - wsaz.com/a?a=190888661
Gray Television, Inc.