N.Y. Contractor Sentenced to 6 Mos. for Work Comp Premium Fraud Scheme

By Insurance Journal staff | September 20, 2023

A drywall contractor has been sentenced to six months in jail for defrauding the New York State Workers’ Compensation Insurance Fund out of almost $3 million in premiums over an eight-year period.

The Manhattan District Attorney announced the sentence this week for Juan Escobar, 46, who had pleaded guilty to insurance fraud by significantly underreporting his payroll and falsifying worker injury information. Escobar also was ordered to pay $400,000 to the state’s assigned-risk insurance fund, known as NYSIF.

Escobar’s companies, including Infinity Drywall Corp., JMC Drywall Corp. and JJM Builders, had previously pleaded guilty to conspiracy and were placed on three years of conditional discharge.

“Juan Escobar went to great lengths to defraud New York State in order to increase his own bottom line,” District Attorney Alvin Bragg said in a news release. “Hardworking New Yorkers should not be used as pawns by their employers in the pursuit of profit.”

From 2013 to October 2021, Escobar and his companies reported much fewer employees to NYSIF than he actually had, and concealed his true payroll and worker injuries through elaborate means. The contractor would issue cashier’s checks to shell companies in the name of family members.

The checks were made to appear as legitimate payments to subcontractors, but the cash was then funneled to his off-the-books payroll, which was typically as much $50,000 a week, Bragg said. Like other unscrupulous contractors around the country have been convicted of doing, Escobar paid employees cash, handed out in envelopes.

In addition, the contractor directed injured workers “to falsely claim workplace injuries occurred elsewhere, told them to avoid detection from site safety inspectors, or gave workers cash in exchange for failing to file workers’ compensation claims,” the prosecutor said.

Escobar also failed to report worker injuries to NYSIF. When a workers’ compensation claim did get filed, he would misrepresent the worker’s employment status.

Bragg said the investigation began when investigators from his office uncovered extensive and suspicious financial transactions directed by Escobar and his companies. Investigators found that Escobar and companies had cashed more than $26 million in checks across Manhattan and Queens, an amount that was much more than what he claimed in payroll to the insurance fund.

NYSIF officials assisted in the investigation.

Escobar’s sentencing came four months after the DA announced the indictment of eight construction company officials and the indictment of an accountant for similar and other types of fraud.

“Insurance fraud, including workers’ compensation fraud, costs honest companies and employees tens of millions of dollars every year,” Gaurav Vasisht, executive director and CEO of the New York State Insurance Fund said at the time.

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