Northeast Regional Insurance Auditors Association: News
Attorney General Martha Coakley’s Office Announces Guilty Plea and Sentence of a Holliston Man and His Business on Insurance and Tax Fraud Charges
Friday, 15 January 2010
WOBURN – Today, a Holliston man and his business pled guilty in Middlesex Superior Court on charges they provided inaccurate payroll information to their insurer and payroll administrator to secure a lower workers’ compensation insurance premium and to avoid paying the full amount of unemployment insurance and state income tax. Paul McKunes, age 52, and his business M&M Equipment Services, Inc., doing business as d/b/a Earth Designs (M&M), located in Ashland, pled guilty to charges of Unemployment Insurance Fraud (10 counts), Failure to Withhold State Income Tax (3 counts), Workers’ Compensation Fraud (3 counts), and Larceny Over $250 (3 counts). Following the change of plea, Suffolk Superior Court Judge Howard J. Whitehead sentenced McKunes to 18 months in the House of Correction with the sentence suspended for five years with supervised probation and ordered him to pay $59,502.06 in restitution. M&M was ordered to pay $51,850 in restitution to its insurance provider and pay a $20,000 fine on the charge of Unemployment Insurance Fraud.
The Insurance Fraud Bureau of Massachusetts (IFB) referred the case to the Attorney General’s Office in September 2008 after an investigation into the company’s payroll and an insurance claim filed by an M&M employee who was not on the company payroll. McKunes and M&M purchased workers’ compensation insurance from Atlantic Charter Insurance Company (Atlantic) for the policy years from September 2002 to September 2005. In an effort to obtain a lower workers’ compensation premium, McKunes and M&M underreported its actual payroll by not reporting approximately $800,000 in payments to undisclosed employees and not reporting overtime compensation. Gross payroll (whether by cash or check) is an integral component in the calculation of a workers’ compensation policy premium. This matter was referred to IFB for investigation after an auditor from Atlantic discovered corporate tax returns filed by McKunes and M&M for nearly $400,000 in payments to subcontractors, which were not disclosed in the premium audit. As a result of this premium avoidance scheme, McKunes and M&M underpaid its workers’ compensation insurer a total of $51,850 in premium payments.
By underreporting its payroll to its payroll administrator during the relevant dates, McKunes and M&M underpaid the Executive Office of Labor and Workforce Development’s Division of Unemployment Assistance (EOLWD\DUA) in the amount of $21,180.51 of unpaid assessments and failed to withhold over $38,321.55 in state income taxes to the Department of Revenue (DOR).
A Middlesex Grand Jury returned indictments against McKunes and M&M on July 30, 2009. McKunes and his company were both arraigned on July 16, 2009, in Middlesex Superior Court where they entered pleas of not guilty and he was released on personal recognizance. Today, McKunes and his business each entered individual changes of pleas to guilty and were sentenced in Middlesex Superior Court.
Assistant Attorney General Michael J. Walsh of Attorney General Martha Coakley’s Insurance and Unemployment Fraud Division prosecuted this case with assistance from the IFB.
