Owners of M&M Cleaning in MA Indicted for Work Comp Fraud

Malden, MA (Workerscompensation.com) - Owners of M&M Cleaning have been charged for misclassifying their employees, and concealing more than $2.8 million in payroll, according to an announcement made by Attorney General Maura Healey late last month.

One of the sole owners and corporate officers of the Malden-based janitorial and building maintenance provider, Marcelia Freitas, was indicted on two counts of work comp insurance fraud. Co-owner Marcello Pompa was also charged by the same jury on five counts of work comp insurance fraud, and five counts of larceny for more than $250.

To read the original WorkersCompensation.com release on the fraud news, click here, and here. 

According to Commonwealth Statement of the Case documents obtained by WorkersCompensation.com, Freitas and Pompa falsely claimed that from 2010 and 2016 they utilized three subcontractors, so they could lower their work comp insurance premiums.

Pompa and Freitas, during their yearly audits, were allegedly able to defraud three insurance companies under five separate insurance policies. The pair alleged the subcontractors were employing their workers; which eliminated the requirement to cover employees with work comp insurance.

A&R Services, Inc. was one of the subcontractors that Pompa said they used. However, A&R was owned and operated by both Pompa and Freitas and not a separate entity. The company was used as a “straw man” to pay their workers. According to the Black Law dictionary, a straw man is a “third party used as cover in illegal or shady deals.” 

Owner of A&L, Luis Andrade, and the owner of another “subcontractor,” R.A. Lapierre Contracting, Inc., had never heard of M&M, Freitas, or Pompa, and had never worked with them. 

Another “contractor,” CM Cleaning, was said to have been managed by an employee of M&M for several years, Alfredo Peyneau. However, he never worked as a subcontractor for M&M, Poma, or Freitas. For his tenure at M&M Cleaning, he was paid strictly as an hourly laborer. The actual owner of CM Cleaning had also never heard of M&M, or it’s owners.

Pompa was asked by his insurance carriers about these “subcontractors,” and provided them with certification of insurance, which had allegedly been forged. Pompa also stated that all of those subcontractors were independent entities with whom M&M Cleaning worked with, and said they were all independently and adequately insured. 

Pompa, on at least five different occasions, provided either altered or forged certificates of insurance to his carriers, and during that period, Freitas had been listed as the secretary and the treasurer at M&M. They allegedly received checks from both A&R and M&M. She assisted with the operation of the business and delivered paychecks to their employees on a regular basis.

Freitas and Pompa were able to win multiple contracts, which included several municipal contracts in the Massachusetts area, because of these misclassifications. The business owners were able to offer significantly lower prices than their cleaning service competitors during the bidding process.

The government contracts that were secured generated a substantial income for the business owners and included work for the cities of Boston, Cambridge, Chelsea, Medford, and the Towns of Chelmsford and North Andover.

M&M also won bids with the Housing Authorities in Gloucester, Malden, Melrose, and New Bedford. Between 2011 and 2016, Freitas and Pompa managed to conceal more than $2.8 million in M&M payroll by falsifying information about who was actually performing work tasks. They both claimed that the work was completed by said subcontractors, thus evading requirements to pay more than $74,000 in work comp insurance premiums.

In a news release, AG Healey said, “Misclassification is an increasingly common way for employers to avoid their legal obligations to employees and to unfairly compete in the marketplace.”

Employers in Massachusetts have certain obligations under Massachusetts General Laws, Chapter 152, the Workers' Compensation Act, including all employers are required by state law to carry work comp insurance covering their workers, including themselves if they are an employee of their company. This is required regardless of the number of hours workers by their employees any given week, except that of domestic service employees. They must work a minimum of 16 hours per week in order to require coverage.

A spokesperson with the AG’s Office told WorkersCompensation.com that the Workers’ Compensation Insurance Fraud charges both Freitas and Pompa face if convicted will carry no less than six months and no longer than 2.5 years in a correctional institution. They could also face up to five years in state prison and could be fined anywhere between $1,000 to $10,000. They added that Pompa could also face up to two years in a correctional institution or up to five years in state prison for the larceny charges, and a fine of up to $25,000.

Assistant AG Geoff Wood will prosecute the case with assistance from Michelle Silver of the AG Healey’s Insurance and Unemployment Fraud Unit, and investigators from the Insurance Fraud Bureau.

*This article was updated as of 11/09/18. 

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