CHARLESTON — Several local men pleaded guilty to federal charges of orchestrating a multimillion-dollar fraud against the state’s leading workers’ compensation provider.
U.S. Attorney Booth Goodwin announced that Arville W. Sargent, 52, of Chapmanville; Jerome Eddie Russell, 50, of Williamson; Frelin Workman, 58, of Belfry, Ky.; Randy Workman, 36, of Belfry, Ky.; and Arthur J. White, Jr., 60, of Lenore; pleaded guilty this week, Tuesday, Wednesday and Thursday, to frauding BrickStreet Mutual Insurance Company.
Sargent, previously employed by Brickstreet, pleaded guilty to honest services mail fraud and tax evasion.
Sargent admitted that, from its inception in January 2006 until at least Feb. 1, 2011, he led a scheme to defraud BrickStreet by allowing certain policyholders operating in the coal mining industry to drastically underreport their payroll during annual field audits he conducted on behalf of BrickStreet for the intended purpose of confirming those policyholders were paying accurate workers’ compensation insurance premiums.
Sargent further admitted that he purposely allowed four “employee leasing” companies, Aracoma Contracting, LCC., Christian Contracting, Newhall Contracting and T&W Services, LLC., all of whom provided labor on a contract basis to coal companies in southern West Virginia, to falsify documents drastically understating their actual payroll.
In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreeet, Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including a Yamaha Rhino all-terrain vehicle.
Russell and Frelin Workman, who own Aracoma, also pleaded guilty the same charges. The pair admitted to paying a significant number of their employees in cash as part of a tax evasion scheme to avoid the associated premiums owed to BrickStreet. Both men admitted that they paid Sargent approximately $1 million in cash bribes to falsify the audits performed for the Workers’ Comp Commission and then BrickStreet.
Russell and Frelin Workman estimated that the Workers’ Comp Commission and BrickStreet were defrauded approximately $4 million in lost premiums over the course of the fraud scheme.
Randy Workman, Frelin’s brother, who owns Christian Contracting, pleaded guilty to aiding and abetting honest mail fraud and tax evasion. He admitted that he utilized a similar cash payroll scheme to evade payroll taxes. Workman further admitted that from Oct. 1, 2007 through June 30, 2009, he structured approximately $800,000 in cash out of Community Trust Bank and used the funds to pay employees in cash. He also admitted that he underpaid approximately $280,000 in premiums owed to BrickStreet.
White Jr., owner of T&W, pleaded guilty to tax evasion and structuring in connection with a scheme to defraud BrickStreet. He admitted that he paid a portion of the payroll for T&W through a shell company, thereby evading taxes. According to his plea agreement, White Jr., estimated that he skimmed approximately 15 percent of the premium actually owed to BrickStreet over a four-year period, resulting in a loss of approximately $154,527 to BrickStreet.
Sargent faces up to 25 years in prison and a $500,000 fine when he is sentenced on July 8, 2013 by United States District Judge John T. Copenhaver, Jr. Russell, Frelin Workman and Randy Workman each face up to 25 years in prison and a $500,000 fine when they are sentenced on July 2, 2013. White faces up to 10 years in prison and a $500,000 fine when he is sentenced on July 11, 2013.
The FBI, IRS, West Virginia State Police and West Virginia Insurance Commission conducted the investigations. It was also handled in coordination with the United States Attorney’s Office for the Western District of Virginia and the IRS’s local Abingdon, Virginia Resident Agency. Assistant United States Attorney Thomas Ryan is in charge of the prosecutions.