Larry H. Parker Personal Injury Law Blog on Lawyers.com

Workers' compensation (Workers' Comp.) is a state-defined program to protect employees injured on the job. Essentially formed as a “no-fault” program for workers, it guarantees medical treatment and payment for lost wages during the time an employee is out of work due to work-related injury or illness.

An employee is entitled to benefits without proving the injury was the fault of the employer. By the same token, employers are protected from large jury awards and legal fees that would arise if an employee could sue for work-related injury or illness. But rising costs of workers’ compensation premiums and benefits has led employers to seek creative and often outright illegal ways to avoid paying the high premiums and providing coverage to workers.

On April 15, 2009, the Los Angeles County District Attorney’s Healthcare Fraud Division charged Ousama Karawia, the owner and president of International Protective Services Inc. (IPS), with workers’ compensation fraud. This special unit of the D.A.’s office is dedicated to these types of healthcare fraud investigations. IDP is a security company that employs 1,500 workers statewide. Besides Karawia, two vice-presidents of the company were also charged in Los Angeles County Superior Court.

According to court documents, the three principals of the security company conspired to hide the true number of IPS employees. They created a shell company, International Armored Solutions Inc., for the purpose of avoiding paying higher workers compensation insurance premiums to the State Compensation Insurance Fund. The allegations are that $9.5 million was lost in workers' compensation premiums. The three men are variously charged with conspiracy, grand theft, insurance fraud, and making false statements.

The lesson here seems to be that it’s far cheaper and worth an employer’s freedom to pay those Workers’ Compensation premiums and thereby avoid investigation and possible criminal charges.

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