CDI Fines Agents over Work Comp Policies

California Insurance Commissioner John Garamendi has imposed discipline upon two agents and the companies they work for over their marketing of an illegal tribal-based insurance product. The actions taken by the commissioner include fines, cost reimbursement and a restriction on one agent's license.

The case involves an employee staffing product offered by Mainstay Business Solutions, which is owned by the Blue Lake Rancheria, an American Indian tribe. The agents allegedly introduced the product to a potential customer as workers' compensation coverage, even though Mainstay is not authorized to provide workers' comp coverage in California.

The California Labor Code requires that every employer secure workers' comp coverage through an authorized insurer, or provide proof to the state Department of Industrial Relations of the employer's ability to self-insure. Businesses that have purchased the Mainstay product in lieu of authorized workers' comp coverage face potential criminal liability, penalties up to $100,000 and civil lawsuits from employees.

Several American Indian tribal entities have established employee leasing companies, temporary staffing agencies and/or professional employer organizations offering this type of "alternative" workers' comp coverage.

This unauthorized "alternative" is reportedly just one component of a bundle of services that may include human resources management, payroll services, tax filing and insurance administration.

In this case, John David Evans, an agent of Hall-Schenk Inc. in Camarillo, and Christian Oliver Muller, an agent of Barlocker Insurance Agency Inc., in Salinas, allegedly attempted to sell Mainstay's product to a potential customer, offering it to her as workers' comp insurance. Once the customer determined that the product was tribal-based, she declined to purchase it.

Evans, of Camarillo, had his license revoked by the Department of Insurance and was issued a one-year restricted license. His employer, Hall-Schenk Inc., agreed to pay a $4,000 penalty and $6,000 in cost reimbursements. The company and Evans agreed not to sell, market or solicit any PEO products that do not provide coverage from a California admitted insurer.

Muller agreed to a $4,000 penalty and is also prohibited from selling non-admitted products. Barlocker Insurance paid a cost reimbursement of $5,000 and agreed not to sell non-admitted products.

Calif. Man Arrested on Workers' Comp, Embezzlement Charges

On Jan. 31, Gregg Leo Curwick, of Rancho Cucamonga, Calif., surrendered himself in Bakersfield to investigators from the CDI's Fraud Division and the Kern County District Attorney's Office. Curwick was taken into custody on a felony arrest warrant for one count of misrepresenting facts to obtain workers' comp insurance, one count of grand theft and one count of embezzlement.

If convicted on all counts, Curwick could face up to eight years in state prison and a maximum fine of $202,000. His arrest was the result of a joint CDI-district attorney investigation with significant assistance from the State Compensation Insurance Fund.

From 2001 through 2002, Curwick managed two different temporary employment businesses before becoming the co-owner and operations manager of A-1 Staffing in February 2003. All three business enterprises involving Curwick were in Bakersfield.

In November 2003, Curwick allegedly produced two fictitious workers' comp coverage certificates to construction business clients of A-1 Staffing, claiming that A-1 Staffing employees were covered by workers' comp insurance.

After receiving the certificates, both construction businesses learned from SCIF that A-1 Staffing's workers' comp policy was cancelled in October 2003. When investigators contacted SCIF regarding the alleged fictitious coverage certificates, they also learned that Curwick's two prior temporary employment businesses reportedly terminated operations while owing SCIF approximately $33,000.

The ensuing investigation was assisted by A-1 Staffing's other co-owner, who was not involved in Curwick's allegedly fraudulent activities. The investigation indicated that Curwick allegedly pocketed monies paid by clients for workers' comp insurance premiums and employee income taxes. Curwick also allegedly underreported A-1 Staffing's monthly payroll and job classifications to SCIF to avoid paying additional workers' comp premium payments.

Some A-1 Staffing clients who had workers' comp policies with SCIF for regular employees and had already paid A-1 Staffing for workers' comp coverage were required to reimburse SCIF for temporary employees hired through A-1 Staffing. Losses to SCIF and A-1 Staffing clients are estimated at more than $76,000.

LAPD Cop Nabbed in Workers' Comp Fraud Case

A Los Angeles Police Department officer who worked as an armed security guard at Staples Center and Dodger Stadium while collecting disability benefits for on-duty injuries was convicted of workers' comp fraud, the District Attorney's office announced.

The verdict marks the first time an LAPD officer has been convicted of workers' comp fraud.

Deputy District Attorney Renee Korn of the Workers' Compensation Fraud Division said the jury deliberated about a half-hour before convicting Mariana Gallegos of the three felony counts.

Superior Court Judge Anita Dymant, who presided over the jury trial, scheduled sentencing for March 1. Korn said the defendant faces a possible maximum term of five years in state prison. Although Korn asked the court to remand the defendant to custody following the conviction, Gallegos remains free on $30,000 bond.

Gallegos was charged in January 2004 after an investigation by the LAPD's Internal Affairs Division. It was alleged that she was an armed security guard at the parking lot at Staples Center and the concession area of Dodger Stadium in the summer of 2003. At the time, she was collecting benefits because she could not perform her duties as a police officer due to an on-duty injury that caused her to be off duty on total temporary disability.

At the time she was charged, Gallegos was working in the Internal Affairs Division. She had been with Internal Affairs for more than two years.