Workers' Comp Investigation Leads to Tax Evasion, Mail Fraud Pleas

PORTLAND, Maine, January 3, 2002 – A Portland man who had claimed a disabling back injury while secretly working as a carpenter pleaded guilty today in U.S. District Court to tax evasion and mail fraud.

Royce Gould, 49, of Portland, was accused of defrauding workers' compensation company, Maine Employers' Mutual Insurance Company, of more than $70,000 over a period from 1997 to 2000. Gould claimed to be disabled by a back injury but continued to collect workers' compensation payments after he was secretly able to begin performing small carpentry jobs. Gould later indicated on a form mailed to the insurance company that he hadn't performed such work since his original injury. In addition, the U.S. Attorney's office and the Internal Revenue Service found that Gould failed to file tax returns in 1997, 1998 and 1999, despite receiving thousands of dollars in income for his carpentry work.

"It's wrong to cheat the workers' comp system and it's especially stupid if MEMIC is involved," said MEMIC President and Chief Executive Officer John T. Leonard. "If you do cheat the system, it doesn't matter who you are - employer or employee -- we're going to find out and we're going to do everything within the limits of the law to prosecute you."

As a result of his plea, Gould could receive up to five years in prison on each count. No sentencing date has yet been set.

In January 1996, Gould began receiving indemnity payments for a back injury that was reported earlier that same month. He was paid $441 per week, the maximum at the time. Gould had back surgery in November of 1996.

MEMIC followed up on an anonymous tip in February 2000 that Gould was being paid for remodeling work he was doing on condominiums in Portland's West End. The insurer also mailed Gould an "employment status report" form which Gould signed and returned to MEMIC, claiming that he had not made any income from working since his 1996 injury. The company's investigation showed that, in fact, Gould had begun working again shortly after his surgery - in early 1997, under the name "Royce Gould Associates".

The company's investigators interviewed several of Gould's West End customers and photographed him as he carried tools into an apparent worksite. The company then took the case to the Internal Revenue Service.

While workers' compensation benefits are tax-free, the benefits become taxable if they are fraudulently obtained. MEMIC's investigators believed that if Gould wasn't reporting his income from his "Royce Gould Associates" work to MEMIC, then he might not be reporting it to the IRS either. The company's investigators brought their information on the case to the attention of the IRS and the US Attorney's office.

While the percentage of cases that involve fraud is small, MEMIC estimates that workers' compensation fraud and abuse costs insurers and employers in Maine between $12 and $20 million each year. MEMIC employs a team of special investigators, working across the state, who delve into those cases that appear questionable. If fraud appears to be taking place, MEMIC works with the Maine Workers' Compensation Board and other law enforcement authorities to bring the case to justice.

"The issue is fairness," said MEMIC's Leonard. "If these people are illegally collecting benefits, they aren't just taking money from insurance companies. They are taking money out of the pockets of the good people of Maine."

Maine Employers' Mutual Insurance Company (MEMIC), based in Portland, Maine, is the state's largest and leading workers' compensation insurance company, insuring more than 19,000 of Maine's 27,000 insured businesses and their 250,000 employees. Now entering its 10th year of business, MEMIC is rated A (Excellent) by A.M. Best and is the parent company of MEMIC Indemnity Company, based in Manchester, NH. MEMIC was created as a mutual insurance company in 1993 to solve what was termed a crisis in workers' compensation in Maine.