Seven People And 11 Corporations Charged In Million-Dollar Workers' Compensation Fraud

Trenton, NJ (CompNewsNetwork) – Attorney General Anne Milgram and Criminal Justice Director Deborah L. Gramiccioni announced that a total of seven people and 11 corporations have been charged in two separate indictments for their alleged roles in two workers' compensation scams that netted as much as $1.5 million for the defendants.

The indictments allege that the defendants lied on insurance applications and failed to remit insurance premiums to the insurance companies, instead keeping the money for themselves. It is also charged that the defendants laundered money so that the scheme would go undetected. As a result, many people were allegedly left without workers' compensation insurance.

According to Insurance Fraud Prosecutor Greta Gooden Brown, one indictment, handed up yesterday, charged Justin M. Sciarra, 59, of Medford, Paul Brown, 43, of Bellmawr, Michael Magee, 34, of Berlin, James Maconaghy, 41, of Mt. Laurel and William Griffith, 53, of Reading, Pa., as well as four corporations: Q-Town, Inc., TJAX Investment Corp., Bay Enterprises, Inc., and 3D Assurance Brokerage, LLC. These defendants were variously charged with conspiracy, racketeering, insurance fraud, theft by failure to make required disposition of property received (all 2nd degree) and fourth-degree workers' compensation insurance fraud.

Q-Town and TJAX, in Audubon, were owned by Sciarra and operated by Brown. Sciarra, Magee and Maconaghy were the owners and operators of Bay Enterprises, located in Marlton. Maconaghy operated 3D Assurance in Audubon. Brown, Maconaghy and Griffith are all currently-licensed insurance brokers. All the defendants except Griffith owned and/or were involved in the operation of professional employer organizations (PEOs). A PEO is a business organization primarily engaged in providing human resources and personnel functions to client companies.

The indictment alleges that between June 2003 and September 2007, Sciarra, a former licensed insurance producer, and his co-defendants fraudulently avoided premium payments for workers' compensation insurance they obtained for clients. The defendants allegedly submitted falsified applications for workers' compensation insurance by misrepresenting and omitting information in the applications. These misrepresentations included understating the number of employees leased, the kind of work those employees did and the number of past injury claims involving the employers, all factors that are relevant to determining the cost of workers' compensation insurance. The defendants also are charged with failing to turn over money that was provided by clients of the PEOs to pay for insurance premiums.

The indictment alleges that as a result of the misrepresentations, the defendants committed insurance fraud by avoiding payment of $304,244 in workers' compensation insurance premiums. The defendants are also charged with misappropriating as much as $745,207 from clients of the PEOs by failing to remit the money to the insurance companies.

A second state grand jury indictment returned on June 20, 2007 was unsealed yesterday. The indictment charged Sciarra, Brown, and Paul Hopkins, 58, of Marlton, with conspiracy to commit racketeering, racketeering, conspiracy, theft by failure to make required disposition of property received, theft of services, misconduct by a corporate official and financial facilitation of criminal activity. Sciarra and Brown were additionally charged with workers' compensation insurance fraud, and Sciarra alone was charged with failure to carry workers' compensation insurance. Hopkins's wife, Adrienne Hopkins, 48, of Marlton, was charged with conspiracy to commit racketeering, racketeering, conspiracy, misconduct by a corporate official, and financial facilitation of criminal activity.

Eight corporations were charged in the second indictment: Sciarra Insurance Agency; AJAX Enterprises, a.k.a. AJAX Leasing, Inc.; AJEX Enterprises, Inc., UJEX Enterprises; Inc., Q-Town, Inc.; and Homestead Assurance Brokerage, all formerly located in Audubon, as well as America's PEO, Inc., a.k.a. America's PEO Holdings, Inc., a.k.a. Staff America, formerly of Cherry Hill; and PTD Financial, Ltd., formerly of Mt. Laurel.

The unsealed indictment alleges that Sciarra, Brown, and the Hopkinses fraudulently obtained workers' compensation insurance through AJAX, AJEX, and the other PEOs between 1996 and June 2002. The unsealed indictment involves allegations that the named defendants falsified workers' compensation insurance applications, evaded payment of premiums, and failed to remit money to insurers, which had been provided by clients to pay for insurance premiums.

The indictment also charges Sciarra and one of his PEOs, AJEX, with failing to provide workers' compensation insurance for the employees of clients. Sciarra and AJEX allegedly issued falsified certificates of insurance to their clients to conceal that no insurance had been obtained. The defendants also allegedly falsified and withheld material information from auditors to evade full payment of premiums. It is charged that the defendants even submitted workers' compensation claims with false or misleading information in an effort to get insurance carriers to pay benefits. The defendants allegedly engaged in money laundering to conceal as much as $500,000 of the proceeds obtained from those alleged criminal activities.

Detective Andrea Hayes, Analyst Terri Drumm and Deputy Attorney General Peter W. Lee were assigned to the investigation. Deputy Attorney General Lee presented the case to the state grand jury. The Department of Banking and Insurance routinely assists the Office of the Insurance Fraud Prosecutor with the investigation and prosecution of licensed insurance agents. Prosecutor Brown thanked the Department of Banking and Insurance for their assistance.

The indictments are merely accusations and the defendants are presumed innocent until proven guilty. Second-degree crimes carry a maximum sentence of 10 years in state prison and a criminal fine of $150,000, while crimes of the fourth degree carry a maximum sentence of 18 months in state prison and a criminal fine of $10,000. The defendants may also face civil insurance fraud fines.

Read More

Request a Demo

To request a free demo of one of our products, please fill in this form. Our sales team will get back to you shortly.