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Prosecutors Uncover Multimillion-Dollar Fraud Scheme

A New York construction company owner was indicted for workers’ compensation fraud in a Manhattan courtroom.
52-year-old Michael Cholowsky concealed payroll information from investigators and filed false reports about the number of Sky Materials Corporation employees, according to District Attorney Cyrus R. Vance, Jr. Mr. Cholowsky allegedly hid more than $3 million in payroll, which resulted in a $1 million premium underpayment. Court documents also state that the company claimed it had 20 employees when, in reality, there were more than 150. Mr. Vance said the issue went far beyond a simple paperwork error or miscommunication. “A lax approach to following proper procedures may be characteristic of a much more dangerous disregard for workers’ safety,” he declared. New York City Business Integrity Commissioner Daniel Brownell added that companies which commit fraud are underinsured and therefore unable to meet their legal obligations to injured workers.
The indictment is the latest product of the Construction Fraud Task Force, which Mr. Vance launched in August 2015.
Workers’ Compensation Employer Fraud
Fraud schemes like this one are especially painful in a time of diminishing compensation for injured workers, because they drain money from the system. Next month, the Florida Supreme Court will hear a challenge to that state’s workers’ compensation law. Advocates claim that compensation has been reduced so much that the system is no longer a viable alternative to negligence litigation.
In addition to under-reporting the number of employees, some other money-draining employer fraud schemes include:

  • Misclassification: Some companies classify high-risk workers in a lower-risk category. As a result, they are also underinsured.
  • Refusal to Participate: Other companies simply do not purchase workers’ compensation insurance, because the penalty for nonparticipation is usually only a fine.
  • Informal Payments: Still other companies promise injured workers that they will pay their bills under the table if they do not file claims. If the boss reneges on this promise, which is often the case, the deadline to file a claim has passed and the injured worker gets nothing.

Injured workers are entitled to cash benefits to pay lost wages, medical bills, and other economic losses.
Employers and insurance companies want to pay injured workers as little compensation as possible. For a free consultation with attorneys who are committed to maximum recovery, contact our office. Home and hospital consultations are available.

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