(Source: AG Martha Coakley) - BOSTON – A Woburn business owner has pleaded guilty in connection with failing to accurately report his total payroll or number of employees to his insurance provider to avoid paying the proper insurance premium, Attorney General Martha Coakley announced today.
Edward App, 50, pleaded guilty in Middlesex Superior Court to charges of Workers’ Compensation Fraud (4 counts) and Larceny Over $250 (3 counts). After the plea was entered Judge Kathe Tutman sentenced App to two-and-a-half years in the House of Correction, suspended for two years, and two years probation. App was also ordered to pay full restitution.
“The defendant undermined the safety of his workers by intentionally making false representations to his insurance company to avoid paying the proper premium for his workforce,” AG Coakley said. “We bring these cases to protect employees and to level the playing field for businesses that play by the rules.”
“This type of insurance fraud is a priority of the Insurance Fraud Bureau of Massachusetts because it impacts all citizens and businesses of Massachusetts,” said Daniel J. Johnston, Executive Director of the Insurance Fraud Bureau of Massachusetts (IFB). “When a business owner lies about the company’s payroll, this artificially lowers the workers’ compensation insurance premium, sometimes dramatically. This gives that business owner an unfair advantage over honest businesses when competing for work.”
App is the owner and sole proprietor of App Tree Inc., a tree service company based in Woburn. The IFB referred this case to the Attorney General’s Office after an investigation into an insurance claim filed by an employee who was injured in a life threatening accident when he was crushed by a falling tree.
App Tree was assigned to AIM Mutual Insurance Company (AIM) through the Assigned Risk Pool for workers’ compensation insurance in 1999. In an effort to evade high insurance premiums, App reported that he was the sole employee of the company and failed to disclose any information about additional employees.
App was granted the minimum premium rate on his policy. As a result, App placed AIM at risk to cover any undisclosed employees for injuries that occurred or might have occurred during the policy periods.
Contrary to reports made to his insurance provider, App employed at least two full-time employees and a number of sporadic part-time workers at various times between 2005 and 2009. As a result of this scheme, App underpaid his workers’ compensation insurer a total of $39,236 in premium payments. Additionally, AIM paid more than $700,000 in medical and disability payments to the injured employee.
A Special Statewide Grand Jury returned indictments against App on June 15. App was arraigned on July 24 in Middlesex Superior Court where he pleaded not guilty and was released on personal recognizance. App pleaded guilty Monday in Middlesex Superior Court and was sentenced and ordered to pay restitution.
AG Coakley’s Insurance and Unemployment Fraud Division (IUFD) works to protect consumers and the integrity of the insurance system by investigating and prosecuting those who commit fraud against all types of insurers, including the Commonwealth’s unemployment insurance and workers’ compensation system. The prosecution of insurance fraud helps prevent the increase in premiums and taxes that are the result of fraudulent insurance claims. In 2011, the IUFD obtained more than $5.5 million in restitution orders in 33 matters.
Assistant Attorney General Jennifer Adreani of AG Coakley’s IUFD prosecuted this case with assistance from the IFB.