NJ Business Owner Sentenced to Jail for Workers' Comp Insurance Fraud

                               

New Jersey has a strong fraud statute, and it applies both to employees and employers.  Most of the cases that have been highlighted in this blog have concerned employees.  However, in a recent development, a Spring Lake, New Jersey man, was sentenced to 180 days in jail, 150 days of community service, and three years of probation, for workers' compensation fraud.  He was also ordered to pay full restitution for his participation in third degree insurance fraud.

Charles Kelcy Pegler Sr., 56, was the President of a roofing company called Roof Diagnostics, Inc. (“RDI”), which was located in Wall Township, N.J. As president of the company, which employs nearly 400 people, Pegler indicated in his application for insurance to New Jersey Casualty Insurance Company that RDI was not a roofing company, that RDI did not employ roofers, and that its employees did not engage in the repair or maintenance of roofs.  The facts were otherwise.  Between June 11, 2003 and October 5, 2009, RDI paid $265,044 less in workers' compensation insurance premiums than the company would have paid had Pegler accurately represented the nature of the business.

Additionally, Pegler falsely represented the nature of RDI's business to USF Insurance Company, currently named Atain Insurance Company, claiming that all roofing services performed by RDI were carried out by subcontractors. RDI thereby avoided $134,087 in general liability insurance premiums that it legally owed to USF.

Pegler was charged on December 19, 2013 in a State Grand Jury indictment and entered a guilty plea on April 17, 2014 before the Honorable Anthony J. Mellaci of the Superior Court of New Jersey. The Acting Attorney General, John J. Hoffman, made the following comments:

This defendant had a legal and moral obligation to provide full and adequate workers' compensation insurance coverage for his employees. By failing in this duty, Mr. Pegler defrauded not just his employees and his insurance company, but also honest, hard-working New Jerseyans who are forced to pay increased premiums to cover the costs of the fraud.

New Jersey's Acting Insurance Fraud Prosecutor Ronald Chillemi warned, “The jail time imposed upon this defendant should act as a deterrent to anyone who fails to provide adequate and lawful workers' compensation insurance.”  He added, “Such frauds will not be tolerated and will be investigated and prosecuted to the fullest extent of the law.”

This case serves as a clear reminder to employers that misrepresenting the nature of one's business to lower workers' compensation costs constitutes fraud and will be strongly penalized.

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About the Author

 

John H. Geaney, a shareholder with Capehart Scatchard, began an email newsletter entitled Currents in Workers' Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates. His blog may be read at http://www.njworkerscompblog.com.

Mr. Geaney is a member of the National Workers' Compensation Defense Network.

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