Florida Targets Check Cashing Firms for Aiding Workers’ Comp Fraud

By | August 30, 2011

Florida officials, law enforcement officers and trade groups are lining up in an effort to stop checking cashing companies from facilitating workers’ compensation fraud in the construction industry.

Headed up by Chief Financial Officer Jeff Atwater, officials held the first meeting of a working group to investigate the role of check cashing companies with an eye on developing legislative recommendations to be considered year.

Atwater said the various check cashing schemes are becoming endemic around the state and hurting both employers and injured workers.

“Those who are breaking the law are putting the workers of Florida at risk and they’re damaging the entire market dynamic for those honest players out there,” Atwater said.

Florida Division of Insurance Fraud head Geoffrey Branch said the involvement of checking cashing firms in workers’ compensation fraud has become a sophisticated criminal enterprise. He said the schemes involve people who set up fake companies that purchase a minimal workers´ compensation policy. Subcontractors then pay the shell company to use the policy and obtain a certificate of insurance to show general contractors they have insurance.

Once the job is completed, the general contractor then writes a check to the shell company, which in turned is cashed by the check cashing company for a fee. The subcontractor and their employees are then paid in cash with the shell company taking a percentage for the use of the certificate of insurance.

Branch estimated that the shell companies hid $1 billion in undeclared payroll over the last several years, which translates into $200 million in evaded workers’ compensation premiums.

“The check cashing stores involved have chosen to participate in this,” Branch said. “They know that many times, the shell company doesn’t exist.”

Miguel Fuentes, political director for the Florida Carpenters Regional Council, said the fraud had turned parts of the construction industry into the “wild west” as fraudulent companies outbid legitimate companies for jobs.

“There is a cheat to compete mentality,” Fuentes said.