Oliver Bruce Hurley of Speedwell, Tenn., and Charles William Johnson, of Tazewell, Tenn., have been sentenced to 26 months in prison four months after pleading to mail fraud related a scheme to hide employees from workers’ compensation insurance companies. At the same trial, Slater’s wife, Anita Carol Slater, was found not guilty of the same charges.
The men were sentenced by U.S. District Judge Jennifer Coffman in Lexington, Ky. in a scheme to defraud insurance companies of more than $6 million. In August, a third person, Gary Slater, of Harrowgate, Tenn., was fund guilty of mail fraud and money laundering. Slater will appear for sentencing on Dec. 16.
Slater owned a company that provided temporary employees to coal mines in Middlesboro, Tenn. The company employed more than 100 miners, but paid workers’ compensation insurance for only 15, U.S. Attorney Gregory Ban Tatenhove told the Middlesboro Daily News.
Van Tatenhove said the scheme involved creating two separate companies on paper with similar names. These companies changed their names several times, adding to the confusion. One employed about 10 percent of the miners, and the other employed 90 percent of them. An insurance policy would be purchased for the smaller of the companies, drastically reducing the amount of their worker’s compensation insurance premium.
Because the companies had very similar names, coal mine operators using the employees were fooled into believing everyone was covered. Between October 1999 and June 2004 the names Carol Dale Contracting Inc., Carol-Dale Inc., B&G Contracting Inc., B&G Inc., Cumberland Gap Contracting Inc. and Cumberland Gap Inc. were used for the companies.
“Whenever an employee was injured, the company would either arrange to pay off the injured worker to avoid filing a claim, or they would file the claim in the name of the covered company,” Van Tatenhove said in a press release.
“Between 1999 and 2004, the companies were able to defraud two insurance companies, Kentucky Employers Mutual Insurance Company of Lexington, and the American International Group Inc. of New York, of over $6 million.”
Evidence at Slater’s trial also showed that the men engaged in an elaborate scheme to avoid paying taxes on the profits of the employment service, according to Van Tatenhove. They accomplished this by creating false business expenses and invoices from fictitious trucking companies. Money was moved from one company account to another, before being cashed at Gambrel’s Grocery in Arjay, with the use of fictitious gasoline purchase invoices.
In addition to the prison sentences, Coffman fined Johnston $250,000 and ordered him to pay $1 million in restitution to the insurance companies–he has 60 days to pay and told the court the money would come from the sale of his business, J & J Accounting–and Hurley was ordered to pay $500,000 in restitution, which he paid several weeks ago.
In a related case, Coffman sentenced Carolyn Gambrel to six months of home incarceration for laundering money from the scheme at her grocery store in Arjay. Gambrel, also was fined $30,000 and placed on three years of probation.
In January, federal officers seized or placed under court ordered restraint numerous assets belonging to Slater and Hurley, including cash, certificates of deposit, vehicles, airplanes, homes and personal assets. The total amount seized approached the $6 million involved in the crime.
The investigation leading to the indictments in this case was a joint effort by a number of private and government entities. The investigation began with in-house auditing and questioning by officials at KEMI. Later, the matter was turned over to the investigating arm of the Kentucky Department of Insurance and ultimately to the United States Postal Inspection Service. Officials from AIG were alerted that they were potential victims and also provided support to the investigation.
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