Gary Linsey Slater has been sentenced by U.S. District Judge Jennifer Coffman in Lexington, Ky. to 108 months in prison and ordered to pay more than $5 million restitution to two insurance companies he defrauded in a workers’ compensation scheme.
Slater, 47, of Harrowgate, Tenn. was bound guilty last August by a jury in Lexington of mail fraud and money laundering based on his efforts to hide from insurance companies the number of employees that were working for a temporary employment service to reduce the insurance premium, according to a joint announcement by the U.S. Attorney for the Eastern District of Kentucky and Guy Cottrell, Postal Inspector in Charge, U.S. Postal Inspection Service, Pittsburgh Division.
Evidence presented at Slater’s trial showed that he and two other men engaged in an elaborate scheme to avoid paying taxes on the profits of the employment service. 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, Ky. using fictitious gasoline purchase invoices.
The defendant owned and operated a company which provided temporary employees to coal mines in the Middlesboro area. The company, which changed names several times, generally employed over 100 miners, but paid insurance based upon declarations to the insurance companies that they employed around 15.
The scheme primarily involved creating two separate companies on paper. One company would employ approximately 10 percent of the employees and the other the remaining 90 percent. An insurance policy would be purchased only for the small company. The companies had very similar names so that they were able to fool coal mine operators into believing that the policy covered all of the employees of both companies.
Between October, 1999 and June, 2004, the men used the names Carol Dale Contracting Inc., Carol-Dale Inc., B&G Contracting Inc., B&G Inc., Cumberland Gap Contracting Inc., and Cumberland Gap Inc. 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. Between 1999 and 2004, the companies were able to defraud two insurance companies, Kentucky Employers Mutual Insurance Co. (KEMI) of Lexington, and the American International Group Inc. (AIG) of New York, of over $6 million of premium.
In January of this year, federal officers seized or placed under court ordered restraint numerous assets belonging to Slater 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 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 thereafter provided support to the investigation.
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