A Minnesota construction firm is being charged with insurance fraud and theft by swindle, after its owners allegedly pocketed hundreds of thousands of dollars by not paying for workers compensation insurance.
Hennepin County Attorney Mike Freeman and Department of Commerce Commissioner Steve Kelley announced three charges filed against Leroy and Joyce Mehr, former owners of Merit Drywall in Clearwater.
According to Freeman, the company would list otherwise full-time employees as independent contractors, thus negating the requirement for the company to buy workers compensation insurance.
Workers compensation insurance is mandatory for Minnesota companies with some exceptions, with Freeman saying the "intentional miscategorization put at least $300,000 in the pocket of Mr. and Mrs. Mehr."
He said that that fraud such as this is "not new" but "it's rarely seen on the level we have here."
"It cheats workers from the healthcare insurance they're entitled too, it cheats insurance companies who are supposed to provide the coverage, and thirdly it cheats companies who compete with the fraudulent corporation, because they can bid cheaper or take more money home," Freeman said.
Kelley said that the owners of Merit Drywall were involved in an "elaborate scheme to enrich themselves, defraud their insurance provider of tens of thousands of dollars, and leave their employees unprotected."
Fortunately for the company's employees, none of them got hurt on the job and as such they didn't need to make a claim for workers compensation.
But Freeman said that not only did the company not classify employees properly, they would actively assist their workers to apply for licensure with the state as contractors, so they could "perpetuate the fraud."
"The case against the former owners of Merit Drywall shows the strength of the construction community when we stand together and demand action when workers complain of wage theft and worker misclassification," said Dan McConnell, business manager of the Minneapolis Building and Construction Trades Council.
"Our members have lost their patience with those developers and general contractors who have profited from schemes like the one alleged here. Together, the Building Trades Unions will do everything we can to continue to assist in ensuring that those who are complicit in the exploitation of workers are held accountable."