Austin, TX – A Houston company recently pleaded guilty to workers’ compensation premium fraud in a case that spanned four years. Alpha Mar, which makes custom parts for various industries, entered the plea in a Travis County District Court. The company was ordered to pay $250,000 to Texas Mutual Insurance Company, the workers’ compensation carrier.
The Texas Department of Insurance, Division of Workers’ Compensation’s (DWC) prosecution unit obtained the conviction. The DWC prosecution unit is embedded in the Travis County District Attorney’s Office.
Workers’ compensation premiums are based on an employer’s payroll, job classification codes, and the employer’s past losses which are used to estimate future losses. Manipulating or misrepresenting one or more of these factors to get lower rates is premium fraud. From 2008 to 2012, John Stergion of Alpha Mar concealed payroll and misrepresented the number of employees the company had. This resulted in a lower workers’ compensation policy premium.
“When companies commit premium or payroll fraud, they can put their employee’s coverage at risk,” said Debra Knight, DWC’s deputy commissioner of Compliance and Investigations. “It gives dishonest companies a business advantage over ethical companies that are paying the full cost of their premiums.”