The long arm of the law reached across 43 states and state and federal investigative offices to convict three defendants in a workers' compensation insurance scheme. The defendants now face a combined 480 years in prison, more than $17 million in fines, and more than $78 million in forfeitures.

The six-week trial, which concluded in February, was the result of joint investigations by the FBI and the Florida Department of Financial Services, Fraud Division. Assistant United States Attorney Mark B. Devereaux prosecuted the case.

Trial evidence established that the three defendants, along with others, conspired between January 2001 and April 2004 to defraud client companies of PEOs into paying workers' compensation insurance premiums for fraudulent, illegal, and sham workers' compensation insurance coverage. The conspirators used corporate names of purported insurance companies and offshore foreign corporations in order to provide an air of legitimacy to their fraudulent scheme.

Testimony from nine co-conspirators established that the conspirators used co-conspirator insurance brokers and consultants to contract with owners and operators of PEOs to provide their client companies with illegal, fraudulent, and sham workers' compensation insurance. The owners and operators of these PEOs then falsely and fraudulently represented to their client companies that the client companies' employees were legitimately covered under the PEO's workers' compensation insurance policy.

Convicted on charges of conspiracy and numerous counts of wire fraud, mail fraud, and money laundering were: Donald E. Touchet, 54, of El Cajon, CA; Dr. Richard E. Standridge, 59, of Tempe, AZ; and Robert J. Jennings, 60, a former resident of Danville, IL.

Touchet was convicted of all 22 counts in which he was named in the indictment and faces the maximum penalty of 215 years' imprisonment and a fine of $7.9 million. Touchet had been a licensed insurance broker in California since 1977. He operated a TPA named Stat-Care in El Cajon.

Standridge was convicted of all 11 counts in which he was named in the indictment and the maximum penalties he faces is 100 years' imprisonment and a fine of $3.25 million. Jennings owned and operated a TPA business in Danville named TPA 1.

Jennings was convicted of all 15 counts in which he was named in the indictment and the maximum penalties he faces is 165 years' imprisonment and a fine of $5.9 million. Standridge, a licensed medical doctor in California and Arizona, owned and operated a TPA business in Tempe called Global Health Care, which later became EOS Health.

Additionally, a forfeiture hearing was held following the jury's verdict and the United States provided the Court with evidence to support $38,858,098 in forfeitures from Touchet, $18,070,806 in forfeitures from Standridge, and $21,272,624 in forfeitures from Jennings, as proceeds of the fraudulent scheme.

According to Assistant United States Attorney Devereaux, "It is not unusual for state and federal offices to work together. In this case, the impact of the fraudulent scheme was nationwide and involved more than 15 PEOs. Although workers' compensation is mandated and regulated by the individual states, the scope of this fraud made it appropriate that the feds handle the case. We had testimony that with one group of PEOs that knowingly used the sham Regency Insurance, 43 states were affected. This was the type of case that required the 'long arm' of federal jurisdiction."

While the cost to investigate and prosecute the case is still being tallied, the cost to injured workers may provide to be incalculable. Testimony established that hundreds of thousands of employees throughout the United States were left without any workers' compensation insurance coverage.

Prosecution witnesses included several individuals who suffered catastrophic lifelong injuries at their work places, and because of the scheme, did not receive either the wage benefits or the medical benefits that should have been provided through legitimate coverage. One witness, who lost both of his legs in a work place accident, has never been able to secure his prosthetic legs because of the conspirators' fraud.

Whether or not these affected workers can seek redress largely depends on state law. In the State of Florida, the injured workers have very limited recourse. The legal employer was the PEO, and most of them are now out of business. In some states, such as California, even if the employer fails to have workers' compensation insurance, the state will pay the injured worker's benefits (lost wages and medical) anyway.

The defendants are now in the custody of the U.S. Marshal awaiting a May 23 sentencing.

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Scammers Face Up to 480 Years in Prison

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