Dallas Janitorial Company Guilty of Workers’ Comp Fraud

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AM-KO Inc., a janitorial company providing services for the City of Dallas, entered a plea of “no contest” to a third degree felony for defrauding the Texas Workers’ Compensation Insurance Fund (Texas Fund) in one of the state’s biggest cases of workers’ compensation premium fraud. As part of the plea agreement, AM-KO paid the Texas Fund over $500,000 in restitution.

According to the Texas Fund, Dallas-based AM-KO, with branch offices in Austin, Houston and Kansas City, attempted to evade paying insurance premiums by representing itself as a small operation with only 18 employees. AM-KO allegedly hid from the Texas Fund the fact that its operations also included another company with over 200 employees, Dyna Maint USA. Although legally separate, the companies operated as a single business enterprise.

The Texas Fund pursued criminal charges after an undercover Texas Fund investigator obtained a taped interview and certified documents from AM-KO that showed the true size of its operations. The investigation revealed that AM-KO had said its annual payroll was only $80 thousand, when in fact, it was over $1.4 million.

Donna Crosby, the Travis County assistant district attorney prosecuting the case, said AM-KO’s crime affected its competitors as much as the Texas Fund, since by misrepresenting itself, AM-KO could have underbid other companies on important contracts. An agreement between the Texas Fund and the Travis County District Attorney’s office allows Crosby to dedicate her entire caseload to Texas Fund-related fraud cases. As part of the agreement, the Texas Fund helps with the expense of prosecution. The Texas Fund maintains three teams of investigators permanently assigned to investigate fraud allegations.

TDI Fines Companies Over $90,000 for Workers’ Comp Tax Violations

“Failure to make required refunds of workers’ compensation maintenance tax surcharges” topped the Texas Department of Insurance’s (TDI’s) list of violations that garnered the most fines from the agency in June 2001. In total, TDI assessed $90,500 in fines to 15 companies for the violation. The list of agency’s June enforcement actions was released July 11.

Two companies-Safeco Insurance Company of America, Seattle, and Hanover Insurance Co. of Worchester, Mass. – headed the list for the greatest individual fines, each garnering a $17,000 fine. General Insurance Company of America of Seattle was fined $13,000 and Seattle’s First National Insurance Company of America came in next with a $10,000 Fine. They were followed by GAN National Insurance Co. (now known as Rampart Insurance Co.) of New York, NY, which was fined $9,000, and Allianz Insurance Co. of Burbank, Calif. and Cumis Insurance Society Inc. of Madison, Wis., with fines of $7,500 and $7,000. Massachusetts Bay Insurance Co., also of Worchester received a $5,000 fine. Progressive Casualty Insurance Co. and National Continental Insurance Co., both of Mayfield Village, Ohio; and Hanover Lloyds Insurance Co., Worchester were each assessed fines of $1,000. Rounding out the list with fines of $500 each were Western Continental Insurance Co. and Cedar Hill Assurance Co. of Scottsdale, Ariz.; National American Insurance Company of California, Rancho Dallas, Calif.; and Commercial Indemnity Insurance Co. of Austin.

In all, TDI Commissioner José Montemayor issed fines and restitution totaling $216,249 in June final orders. In addition to monetary penalties, other actions included five license revocations, one qualified inspector’s appointment cancellation, and one qualified inspector’s appointment suspension. Copies of Montemayor’s orders may be obtained by calling the TDI public information office at 512-463-6425.

An overview of TDI’s June enforcement actions is available through the agency’s website at http://www.tdi.state.tx.us/.

Topics Texas Fraud Workers' Compensation

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