Auditor, four others charged in workers' comp scheme
CHARLESTON, W.Va. -- A Logan County field auditor for BrickStreet Mutual Insurance has been charged with orchestrating a multi-million dollar fraud on his employer by altering workers' compensation premiums and pocketing cash bribes.
Arville W. Sargent, 52, of Chapmanville was indicted by a federal grand jury, according to U.S. District Attorney Booth Goodwin. He was charged with mail fraud and tax evasion.
According to court documents, from January 2006 until at least February 2011, Sargent engaged in 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.
Sargent allowed four leasing companies, Aracoma Contracting LLC, Christian Contracting, Newhall Contracting and T&W Services, LLC, to falsify documents drastically understating their actual payroll. Those companies provided labor on a contract basis to coal companies in Southern West Virginia.
In exchange for saving those policyholders millions of dollars in insurance premiums owed to BrickStreet, Sargent accepted hundreds of thousands of dollars in cash bribes and other gifts, including an all-terrain vehicle.
Principals of those companies who collaborated with Sargent have been also been charged. They are: Jerome Eddie Russell, 50, of Williamson; Frelin Workman, 58, of Belfrey, Kentucky; Randy Workman, 36, of Belfrey, Kentucky; and Arthur White Jr., 60, of Lenore.
Those employers paid a significant number of their employees in cash to avoid payroll taxes or paid a portion of the payroll through a shell company, avoiding taxes.
White faces 10 years in prison and the others face a possible 25 years in prison for the scheme.
Greg Burton, president of BrickStreet, said his company cooperated in the investigation. Sargent is no longer an employee there, he said.
"No BrickSteet policyholder lost money because of this crime," he said of the fraud which involved several companies owned or controlled by one family. "We will continue to cooperate and support the prosecution of any individuals or companies who may be found to be involved with this incident, to the fullest extent of the law."
Goodwin said, "Mine safety is unquestionably a priority of my office. Today's filings underscore my commitment to approach this important issue from every angle.
"Employees in the coal mining industry who cheat the workers' compensation insurance system are really only cheating the hard-working miners who risk injury to perform dangerous jobs to provide for their families," Goodwin said.
"Failing to honestly and accurately report employment information to insurance companies like BrickStreet potentially exposes those coal miners to devastating financial misfortune if they get hurt on the job," he said.
"These charges are even more disturbing because these crooked operators were able to compromise the one person entrusted to make sure the employees are properly accounted for - the insurance company's auditor," Goodwin said.
"This type of corruption has long plagued the coal mining industry in southern West Virginia and must be stopped," he said.
The FBI and the IRS are handling the investigation.
Fraud by an insider is one of the most difficult crimes to detect because the insider knows all of the rules and safeguards and deliberately circumvents them.