Ex field auditor pleads guilty in connection to workers comp fra - Beckley, Bluefield & Lewisburg News, Weather, Sports

Ex-field auditor pleads guilty in connection to workers comp fraud

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A former BrickStreet Mutual Insurance Company field auditor pleaded guilty March 27 in connection to his role in a multimillion-dollar workers compensation fraud against the company.

Arville W. Sargent, 52, of Chapmanville, pleaded guilty to honest services mail fraud and tax evasion, U.S. Attorney Booth Goodwin's office said.

Two other co-defendants pleaded guilty in connection to their roles in the scheme.

Jerome Eddie Russell, 50, of Williamson and Frelin Workman, 58, of Belfrey, Ky., each pleaded guilty to honest services mail fraud and tax evasion. 

Federal prosecutors say both Russell and Workman — who were principals of Aracoma Contracting LLC —  paid a several of their employees in cash to avoid payroll taxes.

According to the news release, both Russell and Workman said they paid Sargent approximately $1 million in bribes to falsify audits performed for the Workers' Compensation Commission and BrickStreet.

Over the course of the scheme, Russell and Workman estimate that the commission and BrickStreet lost $4 million in premiums, the news release continues.

Workman previously pleaded guilty March 26 to aiding and abetting honest mail fraud and tax evasion, admitting he used a similar payroll system to evade payroll taxes, the news release states.

Federal prosecutors allege that from Oct 1, 2007 through June 30, 2009, Workman structured approximately $800,000 in cash out of Community Trust Bank and used the funds to pay employees in cash.

The news release continues, saying Workman is accused of underpaying approximately $280,000 in premiums owed to BrickStreet.

A fifth co-defendant, Arthur J. White, Jr. 60, of Lenore, also pleaded guilty to tax evasion and structuring. Federal prosecutors say White paid a portion of payroll for T&W Services LLC through a shell company.

The plea agreement states White estimates he skimmed 15 percent of the premium owed to BrickStreet over a four-year period resulting in a loss of approximately $154,527 to BrickStreet. Court documents state Sargent participated the scheme from January 2006 through February 2011. In the scheme, federal prosecutors allege Sargent allowed certain policyholders operating in the coal mining industry to drastically underreport their payroll during annual field audits he conducted for BrickStreet.

The purpose, the news release continues, is to confirm the policyholders were paying accurate workers' compensation insurance premiums.

Federal prosecutors further alleged Sargent allowed four employee leasing companies — Aracoma Contracting LLC, Christian Contracting, Newhall Contracting and T&W Services LLC — to falsify documents, drastically understating their actual payroll.

The news release noted these companies provide labor on a contract basis to coal companies in southern West Virginia.

In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreet, federal prosecutors further allege Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including a Yamaha Rhino all-terrain vehicle.  

Sargent could face up to 25 years in prison and a $500,000 fine when he is sentenced July 8.

Russell, Frelin Workman and Randy Workman each could face up to 25 years in prison and a $500,000 fine when they are sentenced July 2.

White, meanwhile, could face up to 10 years in prison and a $500,000 fine when he is sentenced July 11.