Indicted eleven months ago for workers’ compensation fraud
A scheme to misclassify workers to cheat a workers’ compensation insurer out of premium has landed the perpetrator in jail. On October 7, 2019, Marcello Pompa, 41, an owner of M&M Cleaning, pled guilty to charges against him in connection with his six-year scheme to defraud his workers’ compensation insurer by misclassifying worker payroll. The judge accepting his guilty pleas sentenced Mr. Pompa to serve six months in the county jail and make restitution to the insurer.
In November 2018, a statewide grand jury conducted by the Attorney General indicted Mr. Pompa on five counts of workers compensation insurance fraud (See statute involved below) and five counts of larceny over $250. The grand jury also indicted another owner of M&M cleaning, Marcella Freitas, 43, on two separate counts of workers compensation insurance fraud. See Agency Checklists’ article of November 6, 2018, “Malden Cleaning Company Owners Indicted For Workers’ Compensation Insurance Premium Fraud.”
Mr. Pompa misreported over $2.8 million in workers’
compensation audits
The indictments alleged that between 2010 and 2016, Mr.
Pompa had falsely claimed that his cleaning company, M&M Cleaning, Inc., of
452 Pleasant Street, Malden, used three sub-contractors in its operations. As a
result, M&M Cleaning concealed more than $2.8 million in its payroll and
thereby fraudulently paying $74 thousand less in workers’ compensation premiums
than it should have paid.
As a result of this alleged intentional misclassification, Mr. Pompa’s company, M&M Cleaning, was able to win municipal contracts throughout Massachusetts by offering substantially lower bids for their cleaning services than their competitors during the public bidding process.
Sentenced to one year in the Middlesex House of Correction
with six months to serve
In Middlesex Superior Court on Monday, October 7, 2019, Judge Laurence Pierce sentenced Mr. Pompa to one year in the Middlesex County House of Correction with him having to serve six months, and the remaining six months of the jail sentence suspended for two years.
Besides incarcerating Mr. Pompa, Judge Pierce also ordered that Mr. Pompa repay the $74 thousand in lower workers’ compensation insurance premiums he stole from his insurer as restitution and that, upon his release, he not work on municipal contracts or participate in any municipal bidding process for two years.
Attorney General and the Insurance Fraud Bureau pursue worker
misclassification fraud
“Worker misclassification is a serious issue that cheats our state out of needed resources,” said Attorney General Maura Healey in announcing Mr. Pompa’s conviction. “Employers need to follow the law and pay their fair share.”
“The IFB’s Workers’ Compensation Unit vigorously pursues premium evasion cases because it places a financial drain on the system and creates an unfair playing field for dishonest businesses,” said Anthony DiPaolo, Chief of Investigations at the Massachusetts Insurance Fraud Bureau. “This indictment shows the commitment by the IFB and AG Healey’s office to combat this type of fraud.”
Misclassification of workers is a growing workers’
compensation fraud issue
According to the Attorney General and the IFB, “misclassification
is an increasingly common way for employers to avoid their legal obligations to
employees and to unfairly compete in the marketplace. Employers that
misclassify their workers avoid paying their fair share of unemployment
insurance, payroll taxes, and worker’s compensation contribution.
Misclassification not only puts at risk a much-needed safety net for workers
injured on the job but also raises costs for other employers.”
Misclassification of workers is a felony with a possible five-year
prisons sentence
The workers’ compensation statute, M.G.L. c. 152, § 14(3)
makes it a felony for anyone who:
“Knowingly makes any false or misleading statement, representation or submission …for the purpose of obtaining…coverage, or…who knowingly misclassifies employees or engages in deceptive employee leasing practices for the purpose of avoiding full payment of insurance premiums.”
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.”
Attorney General’s Office and Insurance Fraud Bureau worked jointly on
Assistant Attorney General Geoff Wood handled Mr. Pompa’s prosecution with
assistance from Michelle Silva, both of AG Healey’s Insurance and Unemployment
Fraud Unit and from investigators at the Insurance Fraud Bureau.
Attorney General Healey’s Insurance and Unemployment Fraud Unit has among
its charges the responsibility of protecting the integrity of the
Commonwealth’s insurance system by investigating and prosecuting crimes
involving fraud against any insurer or insurance system, including the
commonwealth’s unemployment insurance and workers’ compensation systems.
About the Insurance Fraud Bureau
The Insurance Fraud Bureau of Massachusetts is an investigative agency
authorized by an Act of the Massachusetts Legislature signed into law in 1990.
The Insurance Fraud Bureau conducts criminal investigations and refers
appropriate cases for criminal prosecution.
By law, automobile and workers’ compensation insurers fund the Insurance
Fraud Bureau in Massachusetts. In addition to the investigative division, the
Insurance Fraud Bureau has legal, analytic and administrative divisions.
Insurance Fraud Bureau personnel receive referrals and follow up with insurance
companies’ special investigation units and claims staffs; local, state, and federal law enforcement and prosecution
agencies to accomplish its mission to prevent, detect and deter suspected
fraudulent insurance transactions in Massachusetts.
