Last week, I wrote an article about a workers' compensation premium fraud case out of Orange County, California. I discussed the fact that we can expect more of these cases -- large and small. I then realized that I neglected to reference a recent case out of Los Angeles that was filed last month.
On April 15, 2009, Ousama ("Sam") Karawia, the owner and president of International Protective Services Inc. (IPS), a security company that employs 1,500 workers statewide was charged by the Los Angeles County District Attorney’s Office with workers’ compensation fraud. Two vice-presidents of the company, Allen Bailey and Larry Finley, were also charged. See Los Angeles County Superior Court Case No. BA355163. This case is being handled by the Healthcare Fraud Division (formerly known as the Workers’ Compensation Fraud Division) of the L.A. District Attorney’s Office.
The allegations are that the three individuals in this security company conspired to hide the true number of IPS employees by creating a shell company, International Armored Solutions Inc., in order to avoid paying higher workers compensation insurance premiums to the State Compensation Insurance Fund. It is alleged that there was $9.5 million in lost workers' compensation premiums. The three men are charged with one count each of conspiracy and grand theft and six counts each of making false statements. Karawia and Finley also are charged with additional counts of insurance fraud.
Attorney Commentary: One factor that may have contributed to the filing of this case is ISP's prior legal issues in New York. In 2003, Bunce Pierce, senior vice president of ISP, pleaded guilty in Manhattan Supreme Court to a single count of hiring an unregistered security guard.
The allegations in that case were that ISP defrauded New York by supplying unqualified guards -- some convicted of serious crimes -- to public places such as Camp Smith in Westchester County, where the state's Division of Military and Naval Affairs conducts weapons training and stores munitions. The criminal plea paved the way for civil settlement in New York v. International Protective Services, 02-402799. Under the settlement negotiated with defense lawyers, the company forfeited the right to do business in New York state for five years, and paid $1.1 million in reimbursed fees and penalties.
One reason to do business with a compliance plan in regulated industries is that a fraud charge -- although unproven -- can cost business. After this case was filed, the city of Oakland, Calif., dropped its plan to hire security firm ISP to patrol high-crime districts after the company's founder and two other executives were charged with fraud.
Post-Script/Follow-Up Workers' Compensation Fraud Attorney Commentary:
Post-Script/Follow-Up Workers' Compensation Fraud Attorney Commentary:
- It took over 3 years for this case to go to trial. Only Mr. Bailey and Mr. Karawia went to trial. On December 13, 2012, Mr. Karawia was convicted of seven felony counts, including grand theft of labor, one count of insurance fraud, and four counts of illegal possession of assault weapons. Mr. Bailey was convicted of four counts of failure to file tax returns and one count of illegal possession of an assault weapon.
Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates, Attorneys at Law, Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings including for workers' compensation audits, workers' compensation fraud investigations and workers' compensation premium fraud investigations.
