November 12, 2025 | JacobiJournal.com — Compensation fraud came to light when a business owner from Rockville Centre, New York, pleaded guilty to committing workers’ compensation insurance fraud, underreporting payroll by $3.5 million and avoiding over $600,000 in premiums.
The fraud was uncovered through audits conducted by the New York State Insurance Fund between 2019 and 2022, highlighting ongoing risks of payroll underreporting and the importance of thorough regulatory oversight.
How the Fraud Occurred
Investigators found that the owner deliberately underreported total payroll to reduce the amount owed for workers’ compensation premiums. By misrepresenting wages, the business artificially lowered its insurance costs, violating state insurance regulations and defrauding the insurance fund. Audits revealed the discrepancy between reported and actual payroll figures, exposing the scheme.
What the Implications Are
This case underscores the financial and legal risks of payroll misrepresentation. Businesses engaging in similar practices face:
- Criminal liability and substantial fines.
- Back payments to insurance funds, often with penalties.
- Reputational harm, which can affect client relationships and lending opportunities.
For insurers, accurate payroll reporting is critical for maintaining solvency and ensuring workers’ compensation coverage reflects actual employee risk exposure.
Why It Matters
Workers’ compensation fraud inflates costs for other businesses and can weaken the financial stability of state insurance funds. Regulatory audits and enforcement actions, like those conducted by the New York State Insurance Fund, serve as both deterrents and corrective measures. Employers and insurers are reminded to maintain robust reporting practices, perform internal audits, and stay vigilant against misclassification or underreporting of payroll.
For full coverage of the Rockville Centre case, read more here.
FAQs: Workers’ Compensation Fraud
What is workers’ compensation fraud?
Workers’ compensation fraud occurs when employers or employees intentionally misrepresent information—such as payroll, employee classification, or injury claims—to reduce insurance costs or obtain unentitled benefits.
How did the Rockville Centre business owner commit fraud?
The owner underreported $3.5 million in payroll between 2019 and 2022, which reduced the workers’ compensation premiums owed and defrauded the state insurance fund of over $600,000.
What are the penalties for workers’ compensation fraud?
Penalties can include criminal prosecution, fines, repayment of unpaid premiums, and in severe cases, imprisonment. Regulatory enforcement aims to protect insurance funds and deter future misconduct.
How can employers prevent payroll-related workers’ compensation fraud?
Employers can implement internal audits, maintain accurate payroll records, classify employees correctly, and ensure compliance with state and federal insurance regulations to minimize fraud risk.
Why does payroll underreporting matter to insurers?
Underreporting distorts risk assessment, leads to financial losses for insurance funds, and unfairly increases premiums for other compliant businesses. Accurate reporting ensures fair pricing and program sustainability.
For ongoing coverage of workers’ compensation fraud, regulatory enforcement, and key legal developments affecting businesses and insurers, visit JacobiJournal.com.
🔎 Read More from JacobiJournal.com:
- Funeral Director Pleads Guilty to Fraud and Mishandling Remains
- Fraudulent Claims Under India’s Ayushman Bharat Expose Risks for Large Health-Insurance Programs
- Kaiser Permanente Faces Near $1 Billion Settlement Over Medicare Fraud Allegations
- Employer-Sponsored Health Premiums Rise Sharply in 2025 — Cost Drivers, Compliance Risks, and Fraud Exposure
- Insurer Cannot Escape Massage Therapist’s Coverage Obligations, Court Rules