Federal Guilty Plea from Field Auditor Who Organized Major Workers’ Compensation Insurance Fraud Scheme
Four Co-Defendants Also Admit to Their Roles in a Scheme to Bilk BrickStreet Insurance Out of Millions of Dollars
|U.S. Attorney’s Office March 28, 2013|
CHARLESTON, WV—A former workers’ compensation insurance premium field auditor employed by BrickStreet Mutual Insurance Company (“BrickStreet”) admitted to federal charges in connection with his role in orchestrating a multi-million-dollar fraud against the state’s leading workers’ comp provider, announced U.S. Attorney Booth Goodwin. Arville W. Sargent, 52, of Chapmanville, Logan County, West Virginia, pleaded guilty to honest services mail fraud and tax evasion on March 27, 2013.
Two other co-defendants involved in the scheme to defraud BrickStreet were the principals of “employee leasing” companies Aracoma Contracting LLC (“Aracoma”), Jerome Eddie Russell, 50, of Williamson, West Virginia, and Frelin Workman, 58, of Belfrey, Kentucky. Russell and Workman each pleaded guilty to honest services mail fraud and tax evasion. Russell and Workman admitted to paying a significant number of their employees in cash as part of a tax evasion scheme to avoid the associated premiums owed to BrickStreet. Both defendants admitted that they paid Sargent approximately $1 million in cash bribes to falsify the audits performed for the Workers’ Comp Commission and then BrickStreet. Russell and Workman estimated that the Workers’ Comp Commission and BrickStreet were defrauded approximately $4 million in lost premiums over the course of the fraud scheme.
Additionally, Randy Workman, 36, of Belfrey, Kentucky, pleaded guilty on March 26, 2013, to aiding and abetting honest mail fraud and tax evasion. Workman admitted that he utilized a similar cash payroll scheme to evade payroll taxes. Workman further admitted that from October 1, 2007 through June 30, 2009, he structured approximately $800,000 in cash out of Community Trust Bank and used the funds to pay employees in cash. Workman also admitted that he underpaid approximately $280,000 in premiums owed to BrickStreet.
A fifth co-defendant, Arthur J. White, Jr., 60, of Lenore, West Virginia, pleaded guilty today to tax evasion and structuring in connection with a scheme to defraud BrickStreet. White admitted that he paid a portion of the payroll for T&W Services LLC through a shell company, thereby evading taxes. According to his plea agreement, White estimated that he skimmed approximately 15 percent of the premium actually owed to BrickStreet over a four-year period, resulting in a loss of approximately $154,527 to BrickStreet.
Sargent admitted that from its inception in January 2006 until at least February 1, 2011, he led a scheme to defraud BrickStreet by allowing certain policyholders operating in the coal mining industry to drastically underreport their payroll during annual field audits he conducted on behalf of BrickStreet for the intended purpose of confirming those policyholders were paying accurate workers’ compensation insurance premiums. Sargent further admitted that he purposely allowed four “employee leasing” companies, Aracoma, Christian Contracting, Newhall Contracting, and T&W Services LLC, all of whom provided labor on a contract basis to coal companies in southern West Virginia, to falsify documents drastically understating their actual payroll. In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreeet, Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including a Yamaha Rhino all-terrain vehicle.
Sargent faces up to 25 years in prison and a $500,000 fine when he is sentenced on July 8, 2013, by United States District Judge John T. Copenhaver, Jr.
Russell, Frelin Workman, and Randy Workman each face up to 25 years in prison and a $500,000 fine when they are sentenced on July 2, 2013.
White faces up to 10 years in prison and a $500,000 fine when he is sentenced on July 11, 2013.
The FBI, the IRS, the West Virginia State Police, and the West Virginia Insurance Commission conducted the investigations. This investigation was also handled in coordination with the United States Attorney’s Office for the Western District of Virginia and the IRS’s local Abingdon, Virginia Resident Agency. Assistant United States Attorney Thomas Ryan is in charge of the prosecutions.