Employee Leasing Scams

Employee Leasing Scams - Buyer Beware.

This article highlights what can go wrong when signing up your small or midsize business with an employee leasing company or professional employer organization without doing your homework. The damage done (and potential liability) by not performing the proper due diligence can have a devastating effect

After almost 6 years, prosecutors are finally bringing to justice (after appeals) 3 more individuals whose audacity and greed ruined the lives of business owners and their employees in Florida, New Jersey, New York and the Midwest.

The Florida Times-Union
By Paul Pinkham

Judge sentences business men to prison

Three business owners who cheated millions of U.S. workers out of insurance benefits were sentenced to a total of 55 years in prison by a Jacksonville judge Thursday in what one investigator called Florida's biggest insurance fraud case. U.S. District Judge Virginia Hernandez Covington also ordered the men to forfeit $75 million in assets to the government to partially repay their victims. She said she was "repulsed" by the crimes and hopes the sentences send a message to the business community that fraud won't be tolerated.

Greed got the better of you," Covington told the defendants, all in their 50s.

In February, after a five-week trial, jurors convicted Donald Edward Touchet, Richard E. Standridge and Robert J. Jennings of mail fraud, wire fraud and money laundering. Prosecutors said the men used sham insurance companies to defraud tens of thousands of small business owners into paying premiums for nonexistent workers comp coverage. Five of the victimized businesses were in Jacksonville. As a result, millions of workers were left without insurance, and some suffered catastrophic financial setbacks, said Assistant U.S. Attorney Mark Devereaux. They included a Missouri man who lost both legs in a construction accident and was only able to get one replaced because the insurance, which he thought he had, never paid for the first one. Another victim, a Lake Butler trucker, suffered brain damage from a job accident but got no salary or hospitalization benefits. He lost his home and his marriage, according to trial testimony.

Covington sentenced Touchet, 54, of El Cajon, Calif., to 22 years in prison and ordered him to forfeit $35 million and property in San Diego County, Calif., to the government. Standridge, 59, a Tempe, Ariz., physician, was sentenced to 18 years in prison and ordered to forfeit $19 million, a $400,000 bank account and four vehicles. Jennings, 59, of Danville, Ill., was sentenced to 15 years and ordered to forfeit $21 million, property in Danville and a motor vehicle. He is dying of cancer, his lawyer said.

Fourteen people have been convicted in the insurance scam, which FBI Special Agent Doug Mathews called the biggest ever in Florida. A 15th defendant is at large in England, and another died while under investigation. Devereaux said prosecutors are proceeding with forfeiture against his New Jersey employee leasing company. The national FBI investigation spun out of the Jacksonville prosecution of Thomas King, president of the Jacksonville employee leasing firm Miralink Group, which collapsed in 2002. King is serving a 14-year sentence. Touchet owned a California employee leasing firm, Jennings ran an administrative services company and Standridge operated several medical corporations. They provided the administrative functions of the sham insurance that King and others purchased, Devereaux said.

In court Thursday, the three men claimed to have been victims themselves, but Covington didn't buy it. "I don't think this had to do with being naive," she said. "I think this had to do with being greedy." Although all three said they sympathized with the victims, Devereaux said their actions and testimony at trial show differently. "You don't get any more serious of a white-collar crime," he told Covington. "This is almost like an Enron where people's life savings are gone, and they [the defendants] just don't care. ... The amount of loss here is absolutely tremendous."

The defendants plan to appeal.