Bellflower, Calif.-based Staffing Services Inc. has been ordered by the Los Angeles County Superior Court to pay $20 million in restitution after a plea bargain was reached Jan. 15 in a workers’ compensation insurance fraud case, the California Department of Insurance reported.
Staffing Services Inc. is a temporary employment agency holding contracts for thousands of employees. The California Department of Insurance (CDI) launched an investigation into Staffing Services after the State Compensation Insurance Fund (State Fund) notified CDI of the suspected fraud. Following a two-and-a-half year CDI investigation, charges against Staffing Services were filed Nov. 26, 2008, alleging an attempt to defraud State Fund of more than $18 million in workers’ compensation insurance premiums owed from 2002 to 2005. With penalties, the amount negotiated during the plea bargaining amounted to $20 million, CDI said.
It was alleged that Staffing Services purposely misrepresented the types and number of employees to pay a smaller amount in premiums.
Ronald A. Ziff and Drew E. Pomerance, attorneys for Staffing Services LLC, confirmed that the lawsuits against the temporary employment company have been categorically and satisfactorily resolved.
“We have reached a successful global settlement in a case that has spanned a three-year period and one that took nearly a year of discussion, deliberation, negotiation and compromise in order to reach a viable agreement,” Ziff said. “The final result is a settlement arrangement that involves the best interests of all parties.”
However, according to Ziff, the $20 million restitution figure represents a settlement number only. “In actuality, the net effect of what Staffing Services is required to payout is an agreed upon amount of $5 million over a 24-year period,” he explained. “Provided the incremental payments of the $5 million settlement are made on time and in full, that $5 million amount will bring about full restitution by Staffing Services, as well as a release of all claims against the corporation.”
“Having finally come to resolution in this complex matter, it now allows my client to focus more fully on those business activities that have been consistently of benefit to the temporary help industry and the community it serves,” Ziff added.
The Los Angeles County District Attorney’s Office prosecuted the case.
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