In a statement obtained by ILN, the US Attorney’s Office in Charleston said Arville Sargent, 52, of Logan County, plead guilty to honest services mail fraud and tax evasion March 27 for his role in orchestrating the fraud against the state's leading workers' comp provider.
According to the agency headed by Booth Goodwin, two other co-defendants also involved in the scheme were principals for "employee leasing" companies Aracoma Contracting. Jerome Eddie Russell, 50, and Frelin Workman, 58, have both plead guilty to honest services mail fraud and tax evasion.
“Russell and Workman admitted to paying a significant number of their employees in cash as part of a tax evasion scheme to avoid the associated payroll taxes owed to BrickStreet,” officials said.
“Both defendants 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 Workman estimated that the Workers' Comp Commission and BrickStreet were defrauded approximately $4 million in lost premiums over the course of the fraud scheme.”
Also, Goodwin said, 36-year-old Randy Workman pleaded guilty on March 26 to aiding and abetting honest mail fraud and tax evasion for his involvement in the ring, and admitted to using a similar cash payroll scheme to evade payroll taxes.
“Workman … admitted that from October 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,” the office said.
“Workman also admitted that he underpaid approximately $280,000 in premiums owed to BrickStreet.”
A fifth co-defendant has pleaded guilty to tax evasion and structuring stemming from a scheme to defraud BrickStreet. Arthur White Jr, 60, admitted to paying a portion of payroll for T&W Services through a shell company to avoid paying taxes.
According to his plea agreement, White estimated he skimmed about 15% of the premium owed to BrickStreet over four years, resulting in a loss of $154,527.
Sargent, Goodwin said, was the keystone of the setup.
“[He] admitted that from its inception in January 2006 until at least February 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,” he said.
Sargent also has admitted to purposely allowing the "employee leasing" companies – Aracoma, Christian Contracting, Newhall Contracting and T&W Services – to falsify documents that would significantly understate actual payroll totals.
“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,” the US Attorney’s Office said.
Sargent faces up to 25 years in prison and a $500,000 fine. His sentencing has been scheduled for July 8 before US District Judge John Copenhaver Jr.
Russell, Frelin Workman and Randy Workman also are facing 25 years each for their crimes as well as a $500,000 fine when they are sentenced on July 2.
White could receive 10 years in prison and a $500,000 fine at his July 11 sentencing.
The FBI, the IRS, the West Virginia State Police and the West Virginia Insurance Commission conducted the investigations, and the probe was 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.
