7 CALIF. FIRMS NAMED IN WORKERS COMP CASE

7 CALIF. FIRMS NAMED IN WORKERS COMP CASE

A civil action filed in Los Angeles Federal District Court against seven labor contractors charges misrepresentations in workers compensation reporting.

The State Compensation Insurance Fund charged the seven firms - U.M.I. Inc., Western Labor Exchange, American Labor Exchange, Harbor Operator Group, Central Systems Inc., Shannon Group and Admiral Systems - have violated the Racketeer Influenced and Corrupt Organizations Act.The complaint filed for the state by Sheppard, Mullin, Richter & Hampton charges the seven firms avoided paying $19.5 million into the fund by improperly describing employee pools.

The suit charged that prior to 1986, the defendants "devised and executed a scheme and artifice to defraud the insurance fund" by providing the fund false or misleading information to obtain workers compensation insurance policies, pay a lower premium for those polices and have the fund pay claims pursuant to those polices.

It also charged that through a series of business organizations, the individual defendants offered labor contracting services to employers and provided workers compensation insurance for the benefit of the employers.

George Vignola, a spokesman for the insurance fund, said the state had discovered the potential RICO violation when investigating a high number of workers compensation claims filed by the seven firms.

The companies in question contracted warehouse workers, truck drivers and other laborers on a contract basis. They had filed reports claiming they were small trucking or warehouse operators that employed between five and 50 employees, according to the filing.

The charge said the firms' reports did not reflect true number of employees, classifications or reveal the companies were in fact labor contractors. Mr. Vignola said the state was continuing its investigation in search of the violators.