Check cashing scheme hurts workers' comp rates

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Bogus policies, little centralized oversight and an increasingly elaborate network of fraud is permeating the workers’ compensation insurance market and sapping millions in state revenue, a House panel heard Tuesday, writes Michael Peltier of the News Service of Florida.

But a workgroup said meaningful remedies remain elusive as various, often competing interests hold their ground and shift blame to others in a scheme that is costing legitimate business hundreds of millions of dollars in higher premiums.

Created by Chief Financial Officer Jeff Atwater, the workgroup began meeting in August to come up with a slate of recommendations to reduce a new type of fraud that involves shell companies, check cashing businesses and “entrepreneurial fraudsters” who use lax regulations to their advantage to peddle workers’ comp insurance coverage that doesn’t really exist to businesses scrambling to compete.

The fake companies buy a cheap workers comp policy for a company that allows them to get a certificate of insurance. The person behind the scam then provide the same certificate to several subcontractors who can present the certificate to general contractors as “proof” they have workers comp. The subcontractors have the general contractors make out checks to the shell companies, which cash them at check cashing stores. Essentially, the shell companies are renting their name and certificate of insurance to uninsured subcontractors.

By having the general contractors make checks out to the shell companies, and using check cashing stores, the fake company can then pay subcontract workers in cash, keeping the whole operation underground, avoiding social security and taxes.

The working group, which presented its findings Wednesday to the House Insurance and Banking Subcommittee, did make a number of recommendations on making it easier for law enforcement to track violators engaged in illegal activity, such as creating a database for all large check cashing transactions.

The workgroup, however, was unable to reach accord on more proactive measures to reduce the frequency of fraud targeting check cashing and other money services businesses.

“It’s time we move beyond (prosecution) to policy change,” said Ashley Mayer, Atwater’s director of policy research and legislative affairs. “As much as I enjoy pulling these people off the streets, they are coming faster than we can handle them.”

Consensus fixes included allowing state regulators to conduct unannounced visits to check cashing establishments. Regulators must now give such money service business 15 days notice before conducting an examination. The work group also called for establishing a statewide data-base for transactions in excess of $1,000.

Other recommendations did not have the support of the entire working group. Included in a list of recommendations not fully embraced were enhanced licensure requirements for the check cashing industry, restrictions on the cashing of third party checks and central reporting requirements for workers’ compensation insurance information.

The inability to reach consensus Wednesday rubbed some Banking and Insurance Subcommittee members the wrong way.

“I’m disappointed in the recommendations,” said Rep. John Wood,” R-Winter Haven. “I would like them to come back with something stronger.”

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including SaintPetersBlog.com, FloridaPolitics.com, ContextFlorida.com, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.