Fraud is Common and Widespread
In three years one billion dollars of cash was funneled by just ten construction companies and check cashing businesses into the Florida construction industry. The largest loss was workers compensation premiums-about $200 million. That is according to a 2007 presentation by the Department of Financial Services Division of Insurance Fraud and the Eighteenth Statewide Grand Jury report on money laundering by check cashers released in March of 2008. The net result was a loss of $409 million in workers compensation premiums and state and federal employment taxes.
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Who the Fraud Harms
- The rule of law
- Workers' compensation carriers, due to loss of premiums
- Hospitals and area health-care providers, obligated to treat uninsured workers
- Legitimate businesses are obligated to pay more to make up for premiums and tax revenue lost to the underground economy
- Florida loses state unemployment tax revenue
- The federal government loses income and employment tax revenue
- Law-abiding contractors and their employees lose good construction jobs
- Essential standards designed to protect employees and their families are eroded, such as: Workers' compensation, unemployment insurance, Social Security and Medicare
What Needs to Be Done
Existing Florida law punishes workers compensation premium fraud with significant fines, imprisonment, and forfeiture of assets. It also covers conspiracy and racketeering.
Prosecution of corrupt labor brokers is a good start, however, they are easily replaced. Thorough investigations and prosecutions need to tie the labor brokers "subcontractors" to the primary contractors that often facilitate the conspiracy.
With enforcement and significant penalties, the industry will be encouraged to police itself. To accomplish this goal the industry needs:
- A requirement to disclose the information page for workers' compensation insurance policies
- Adequate funding for the Division of Insurance Fraud to attract and keep talented investigators
- Dedicated state-wide prosecutors with in-depth knowledge of financial crime laws
- Focus of enforcement assets in key construction markets throughout Florida
Conclusion
Our intent is two fold. First, we are seeking a level playing field where contractors compete on the basis of their skill and productivity and not on their cunningness in evading the law. Second, we want a construction industry that benefits responsible employers who provide the basic protections to construction workers and their families. This is nothing more than what the current law requires.
To report suspected fraud in Florida, Click Here
For more information, please contact Miguel A. Fuentes