On October 2, 2017, the owner of a temporary employment agency that operated under at least three different names pleaded guilty to 23 counts of insurance fraud and tax evasion in the United States District Court.
Souleang Kane, 48, of Swansea, appeared before Judge Douglas P. Woodlock and waived indictment and pleaded guilty to 23 counts of insurance fraud and tax evasion. The 23 counts she pleaded guilty to included five counts of mail fraud involving workers’ compensation insurance where Ms. Kane defrauded insurers of $165,000.00 in premiums and additionally failing to report and pay over to the IRS almost $1.3 million in withholding and other taxes due from her companies for the temporary workers she provided to Massachusetts agricultural companies.
Three Different Names used for the same business
Ms Kane operated her temporary employment staffing agency under the names “Expert Staffing”, “Affordable Staffing”, and “M&K Temp., Inc.” The agency operating under these various names provided temporary workers to agricultural businesses in Massachusetts but from 2010 through 2014, it primarily provided temporary labor to Plantation Products, an international seed company headquartered in Norton, Massachusetts, that produces over 150 million seed packets annually.
To facilitate her fraud, Ms. Kane changed her company’s operating names. She used “Expert Staffing” from 2010 to 2013; “Affordable Staffing” in 2013, and “M&K Temp, Inc.” from 2014 to 2015.
Consistent with legitimate temporary employment agencies, Ms. Kane’s agency handled the administrative and accounting tasks associated with the hiring and employment process of the workers she supplied while her client companies would direct the workers assigned to them in their day to day work.
Ms. Kane’s agency, under its various names, was also responsible for paying the employees their wages, paying state and federal employment taxes and processing payroll deductions for withholding taxes, Social Security obligations and any health care benefits. And Ms. Kane’s staffing agency had to provide workers’ compensation insurance for the temporary employees furnished to her clients.
The fees paid to Ms. Kane’s agencies most commonly were based on a fixed hourly rate for the work done by each temporary employee provided to the client. This rate would reimburse Ms. Kane for the actual wages paid to the worker, added costs such as employment taxes, unemployment insurance, and workers’ compensation insurance plus her agency’s profit margin
Workers’ compensation fraud through misstating payroll and cancelling coverage
Ms. Kane’s temporary employment agency provided statutory workers’ compensation insurance for its employees while they were assigned to work for a client.
In obtaining workers’ compensation insurance for her agency, Ms. Kane’s provided estimates of the anticipated payroll for her temporary employment agency for the policy period and information regarding the job classifications of her employees. Based on these statements, she paid an estimated premium subject to audit of her actual payroll.
Although, Ms. Kane was responsible for accurately providing the insurance companies that wrote her workers’ compensation insurance her company’s true receipts primarily from Plantation Products and the true circumstances of her employee’s work classifications to determine the correct workers’ compensation premiums owed. She admitted at her plea hearing that during the period she was is period she did not truthfully report these facts and gave false information to avoid paying the proper premiums due from her businesses.
She also admitted cancelling her agencies’ workers’ compensation coverages before the end of the policy year without notifying Plantation Products of the cancellation. By way of her cancelling the policies mid-term she obtained refund checks from the insurers issuing the policies through her false evidence that her companies were due a return premium.
In the four years workers’ compensation policies were in effect, Ms. Kane, through her fraudulent representations and actions, induced the insurance companies issuing her companies’ workers’ compensation policies to erroneously bill her for workers’ compensation premiums that were $165,000.00 less than what her companies actually owed.
The five counts of insurance fraud by using the mails alleged that the companies defrauded were The Travelers, The Hartford, and AIM Mutual.
Evading $1.3 million in employment taxes
Besides the workers compensation fraud, Ms. Kane failed to report to the IRS approximately $4.3 million that her agencies paid in employee wages. She did not properly report or pay the taxes required to be withheld from her employees’ wages nor the matching taxes required to be paid by her as their employer. Instead, for the years she was in operation, she converted approximately $1.3 million of money due state and federal governments to her own use.
And for each company she pleaded guilty to failure to pay over federal income taxes required to be withheld and the FICA taxes due and owing on behalf of Expert Staffing, Counts 6 to 15, Affordable Staffing, Count 16, and M&K Temp., Inc., Counts 17 to 23.
Sentencing scheduled for January 9, 2018
During the hearing on the Court accepting her plea, Ms. Kane stated under oath she had knowingly and voluntarily committed the acts alleged in the information. After accepting Ms. Kane’s plea of guilty to all 23 counts, Judge Woodlock scheduled sentencing for January 9, 2018.
The Court released Ms. Kane on $25,000 personal surety, conditioned upon her surrounding her passport and confining her travel to New England.
The United States Attorney’s Office has not yet filed its recommendations on sentencing with the Court, however, each count of 16 counts of failure to collect and pay over federal taxes provides for a sentence of no greater than five years in prison, three years of supervised release and a fine of $250,000. Each count of insurance fraud by use of the mails provides for a sentence of no greater than 20 years in prison, five years of supervised release and a fine of $250,000.
In the federal system, sentences are imposed by federal judges based upon the U.S. Sentencing Guidelines and other statutory factors.
Besides criminal penalties, the government seeks forfeiture of fraudulent premiums
As part of the information, the Acting United States Attorney also has sought an order at sentencing that Ms. Kane, besides any criminal penalties, forfeit to the United States government the $165,000.00 that Ms. Kane received through her fraud against the insurers.
In addition, beside any jail sentence and fines, the Court will likely order restitution to the insurers.
The collection of Ms. Kane’s unpaid taxes plus interest and penalties are handled by the IRS separately from the criminal prosecution.
US Attorney and Insurance Fraud Bureau worked on prosecution
Acting United States Attorney William D. Weinreb; Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston; and Anthony DiPaolo, Chief of Investigations of the Massachusetts Insurance Fraud Bureau, made the announcement. Assistant U.S. Attorney Victor A. Wild of Weinreb’s Economic Crimes Unit prosecuted the case.