Nantucket Business Owner Pleads Guilty to Charges of Workers' Compensation Fraud

Boston, MA (WorkersCompensation.com) - A Nantucket business owner has pleaded guilty to charges he failed to accurately report his total payroll, number of employees, and misclassified his business to avoid paying thousands of dollars in insurance premiums, Attorney General Martha Coakley announced today.

“Premium avoidance is a serious crime that undermines the insurance system and puts lawful employers at a disadvantage,” AG Coakley said. “The prosecution of these schemes prevents the increase in insurance premiums that often result from these crimes.”

James Lydon, 63, pleaded guilty in Suffolk Superior Court to the charge of Workers' Compensation Fraud (5 counts). After the plea was entered Judge Francis McIntyre sentenced Lydon two years of probation and ordered him to pay a lump sum of $42,000 in restitution.

Lydon is the owner of James Lydon, Sons & Daughters (Lydon & Sons), a roofing and siding company based on Nantucket.

Lydon & Sons was insured by Travelers Companies, Inc. (Travelers) from November 2000 through November 2008 and by Liberty Mutual from November 2008 through November 2010 and to the present. In an effort to evade high insurance premiums, Lydon misrepresented to his insurance companies the true number of employees and misclassified the work performed by his employees.

Based on his reporting, Lydon was granted the minimum premium rate on his policy. As a result of this scheme, Lydon put Travelers and Liberty Mutual unknowingly at risk to cover any employees who were not disclosed for injuries that occurred or may have occurred during the policy periods.

Contrary to reports made to his insurance providers, Lydon employed at least four full-time between 2005 and 2009 and misclassified the work of his company during the same period. As a result of this premium avoidance scheme, Lydon underpaid his workers' compensation insurer thousands of dollars in premium payments.

A Special Statewide Grand Jury returned indictments against Lydon on January 24. Lydon was arraigned today in Suffolk Superior Court where he pleaded guilty and was sentenced.

The Insurance Fraud Bureau of Massachusetts (IFB) referred this case to the Attorney General's Office after an investigation into reports that the company was committing insurance fraud.

AG Coakley's Insurance and Unemployment Fraud Division works to protect consumers and the integrity of the insurance system by investigating and prosecuting those who commit fraud against all types of insurers, including the Commonwealth's unemployment insurance and workers' compensation system. The prosecution of insurance fraud helps prevent the increase in premiums and taxes that are the result of fraudulent insurance claims. In 2012, the IUFD obtained more than $1,647,000 in restitution orders in 32 matters.

Assistant Attorney General Jennifer Cotter of Attorney General Martha Coakley's Insurance and Unemployment Fraud Division prosecuted this case with assistance from the IFB.

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