Update: Workers Compensation Fraud Task Force Announces Multiple Arrests in Workers Compensation Check Cashing Scheme
On July 30, 2012, Florida Chief Financial Officer Jeff Atwater and Broward County Sheriff Al Lamberti announced multiple arrests in an investigation conducted by the Florida Workers’ Compensation Fraud Task Force known as “Operation Dirty Money.” The arrests come as part of a larger effort of the Florida Department of Financial Services’ Division of Insurance Fraud to combat workers’ compensation fraud facilitated by money services businesses (“MSB”)
As we previously reported here, MSB facilitated workers’ compensation fraud has been in the crosshairs of Florida officials since August of 2011. At that time, the Financial Services Commission of the Florida Office of Financial Regulation issued a cabinet report to Governor Rick Scott regarding MSB facilitated workers’ compensation schemes. The report revealed that MSBs have played an active, critical, and sometimes unknowing part in defrauding the workers’ compensation insurance market in Florida. A complete overview of the fraud scheme can be read here.
As a result of these findings, Florida C.F.O. Atwater announced the creation of the “MSB Facilitated Workers’ Compensation Fraud Workgroup” to develop comprehensive reforms to combat the fraud scheme. The efforts of the Workgroup culminated with its report and recommendations which were presented to the Insurance and Banking Subcommittee of the Florida House of Representatives. A summary of the Workgroup’s report and recommendations can be read in our previous report here.
The efforts of the Workgroup ultimately paid off this past legislative session as the Florida Legislature unanimously passed CS/HB 1277, which adopted many of the the Workgroup’s recommendations. The changes implemented by CS/HB 1277 became effective July 1, 2012. A summary of the new law can be read in our previous report here.
According to officials, “Operation Dirty Money” has resulted in the arrests of eight individuals in Broward, Miami-Dade, and Palm Beach Counties for their involvement in a large-scale check cashing scheme to evade the costs of workers’ compensation coverage. The joint investigation revealed that Hugo Rodriguez was the ring leader of the group. According the authorities, Rodriguez and his company Oto Group, Inc. established 10 shell companies to funnel over $70 million in undeclared payroll through several MSBs in Broward, Miami-Dade, and Palm Beach Counties. Through the use of these shell companies, Rodriguez was able to conduct large construction projects while avoiding the costs associated with paying workers’ compensation premiums. Since the inception of the Florida Workers’ Compensation Fraud Task Force, the State of Florida has shut down 12 shell companies and identified $140 million in fraudulent transactions associated with their operation.
If you have questions pertaining to the Office of Financial Regulations, the BSA, anti-money laundering compliance, or how to ensure that your business maintains regulatory compliance at both the state and federal levels please contact us at contact@fidjlaw.com.