Attorney General, Maura Healey announced on March 24, 2015, that a Worcester County Grand Jury had returned true bills against the owners of Byron Construction, Nationwide Construction Corporation, and First Nationwide Construction Corporation in 2012
Indictments for seven felony counts of workers’ compensation insurance premium fraud and four felony counts of grand larceny
The indictments charged Segundo Nicolas Muyubisnay Cungachi (Cungachi), 31, of Milford with five counts of Workers’ Compensation Fraud and two counts of Grand Larceny. Maria Alegria Morocho Munoz (Morocho), 29, also of Milford was indicted on two counts of Workers’ Compensation Fraud and two counts of Grand Larceny.
Cungachi and Morocho allegedly formed three Milford area roofing companies between 2008 and 2014: Byron Construction in 2008, Nationwide Construction Corporation in 2010, and First Nationwide Construction Corporation in 2012. Byron Construction and Nationwide Construction Corporation do not appear in the Massachusetts Secretary of State’s database as valid corporations. First Nationwide Construction Corporation was incorporated in 2012 with Cungachi as the sole officer and director.
The indictments allege that Cungachi’s and Morocho’s companies falsely reported employee data and employee remuneration for their workers’ compensation insurance obtain lower premiums on their policies. As a result of this alleged scheme, Cungachi and Morocho allegedly avoided paying more than $615,000 in workers’ compensation insurance premiums that they would have paid if they had not falsely reported their employee and payroll information.
False statements to obtain coverage and to misclassify employees violate workers’ compensation statute
The workers’ compensation statute, M.G.L. c. 152, § 14(3) makes it a felony to:
…knowingly [make] any false or misleading statement, representation or submission …for the purpose of obtaining…coverage… [or for] any person or employer…knowingly misclassify[ing] employees …
The violation of §14 carries a state prison sentence of up to five years or a jail sentence of “not less than six months nor more than two and one-half years” and a fine of up to ten thousand dollars. Additionally, the same statute provides that
A person found guilty of violating this section [§14(3)] shall, in all cases, upon conviction, in addition to any other punishment, be ordered to make restitution for any financial loss sustained to an aggrieved person as a result of the commission of the crime….
The grand larceny indictments also are felonies that carry a possible state prison sentence for not more than five years, and a fine of not more than twenty-five thousand dollars
Workers’ compensation insurance fraud leaves lawful employers at a cost disadvantage
In making the announcement of the indictments obtained by Geoffrey Wood, an Assistant Attorney General, in her Insurance and Unemployment Fraud Division, Attorney General Maura Healey said: “Premium avoidance and insurance fraud leaves lawful employers at a disadvantage and undermines the insurance system,” as well as “Insurance fraud has the potential to negatively affect everyone by raising rates and damaging the integrity of the system.”
The Insurance Fraud Bureau of Massachusetts (IFB) referred the cases for prosecution to the Attorney General’s Office after an investigation into reports that the companies run by Cungachi and Morocho were committing fraud by substantially underreporting their payroll and employee headcount for workers’ compensation insurance purposes.
“Workers Compensation insurance fraud places a financial drain on the system, and particularly onto honest policyholders who play by the rules,” said Daniel Johnston, Executive Director of the Insurance Fraud Bureau. “The Insurance Fraud Bureau will continue to work with AG Healey’s office, and investigate all schemes of this type that defraud the system and circumvent the rules.”
The arraignment of Cungachi and Morocho in Worcester Superior Court is to be scheduled sometime in April.