Massachusetts authorities, acting on insurance fraud indictments in California, have arrested executives at a company that helps courier services cut payroll expenses by making their drivers independent contractors instead of employees.
Thomas McGrath, the owner and president of Braintree, Mass.-based NICA Inc., was arrested by state troopers Wednesday along with seven current and former employees on charges of defrauding California's workers' compensation insurance fund, said Ernie Marugg, a San Diego County deputy district attorney.
Each was charged with 50 counts of conspiracy, fraudulent purchase of workers' comp insurance and the filing of false claims for benefits, Marugg said. All eight are free on bond pending an arraignment in San Diego County Superior Court sometime this month.
NICA allegedly filed about $600,000 in fraudulent claims against California's State Compensation Insurance Fund on behalf of injured couriers, Marugg said.
The claims ranged from a few hundred dollars to more than $100,000 and involved payments for medical care and temporary and permanent disability benefits.
Prosecutors allege that the claims violated the state's insurance laws because the couriers didn't work directly for NICA. If convicted on all counts, the suspects could be sentenced to as much as 59 years in prison and fined $1.2 million, according to the San Diego County district attorney's office.
Among those indicted along with McGrath were NICA Chief Operating Officer Andrew Rogantino, Controller David Kenyon and Western Regional Director Timothy Bergin.
Calls to McGrath and the others were referred by NICA to attorneys, who did not return telephone calls seeking comment.
NICA helps courier companies make the switch by providing payroll services, so-called occupational accident insurance and liability coverage. NICA said late last year that it served approximately 400 courier companies with 16,000 drivers in 42 states. About a third of its business is in California.
The charges arose in part from an ongoing investigation of NICA by the California Department of Insurance and the California Employment Development Department. In October, agents of the departments served search warrants on NICA's offices.
The investigation is part of a crackdown by state regulators on courier companies that avoid paying workers' compensation and unemployment insurance premiums by reclassifying their drivers as independent contractors.
