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.?
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