Arville Sargent, 52, has been charged with two counts of mail fraud and tax evasion for allegedly permitting four employee leasing companies, also known as mine labor contractors, to “drastically” under-report payroll during field audits he performed for Brickstreet Insurance.
It is alleged the audits were specifically to determine that proper workers’ compensation premiums were being paid.
US attorney for the southern district of West Virginia Booth Goodwin laid the charges. He identified the Brickstreet policyholders as contract companies Aracoma Contracting, Christian Contracting, Newhall Contracting and T&W Services, LLC.
He alleged they all provided labor on a contract basis to coal companies in southern West Virginia.
It is also alleged that Aracoma principals Jerome Eddie Russell, 50, and Frelin Workman, 58, admitted they paid a significant number of employees in cash as part of a tax evasion scheme to avoid associated payroll taxes.
Randy Workman, 36, allegedly similarly utilized a significant cash payroll to evade payroll taxes, while it is claimed Arthur White Jr, 60, paid a portion of his payroll for T&W Services through a shell company, thereby evading taxes.
“In exchange for saving those policyholders millions of dollars in insurance premiums rightfully owed to BrickStreet, Sargent accepted hundreds of thousands of dollars in cash bribes and other things of value, including a Yamaha Rhino all-terrain vehicle,” he said.
BrickStreet Mutual Insurance is West Virginia’s leading workers’ compensation provider.
According to the office’s documentation filed Tuesday, Sargent was engaged in the scheme from January 2006 until at least February 2011.
“Mine safety is unquestionably a priority of my office,” Goodwin said.
“Today’s filings underscore my commitment to approach this important issue from every angle.
“Employers in the coal mining industry who cheat the workers’ compensation insurance system are really only cheating the hard-working miners who risk injury to perform dangerous jobs to provide for their families.”
He also noted that failing to report employment information honestly and accurately to entities such as BrickStreet could possibly put miners in a position of “devastating financial misfortune” should they get hurt on the job.
“These charges are even more disturbing because these crooked operators were able to compromise the one person entrusted to make sure the employees are properly accounted for: the insurance company’s auditor,” Goodwin said.
“This type of corruption has long plagued the coal industry in southern West Virginia and must be stopped.”
Sargent, Russell, Frelin Workman and Randy Workman each face up to 25 years in prison and a fine of $US500,000, while White faces up to 10 years imprisonment and a $500,000 fine.
The FBI and the IRS are handling the investigations, Goodwin said, and his agency’s facet of the probe was handled in coordination with the United States Attorney’s Office for the Western District of Virginia and the IRS’s local Abingdon, Virginia Resident Agency.
Assistant US attorney Thomas Ryan is in charge of the prosecutions.
