Jacksonville, FL (WorkersCompensation.com) – The owner of a Florida construction company has been arrested in a multimillion dollar scam for underreporting payroll in order to lower her workers’ compensation premium.
Andrea Karau, 50, was arrested on May 12 and charged with workers’ compensation fraud, money laundering, structuring transactions to evade reporting or registration requirements and organized fraud.
Karau, the owner of Andies Construction, secured a workers’ compensation policy from Builders Mutual Insurance Company in 2016. At the time, she told the company her payroll was $20,000, bringing her policy payment to $2,200.
Investigators with the Bureau of Insurance Fraud within the Florida Department of Financial Services said that between December 2016 and December 2017, Karau operated a systematic, ongoing effort to conceal payroll payments from her insurer, as well as to avoid transaction reporting as required by state law.
Investigators found that Karau wrote nearly 500 payroll checks totally $2.3 million, as well as checks to uninsured subcontractors for $246,000 and nearly 100 checks made out to cash for $310,000 to cover other payroll costs.
Additionally, investigators said in the arrest warrant, Karau reported all of her employees were in the class cleaner/debris removal. In fact, all of the employees working for Karau were found to be working in carpentry, a different class of employees, with a higher workers’ compensation premium.
“Based off the discovered payroll of $2,910,848.73, the premium loss on the workers’ compensation policy to Builders Insurance Group was $346,792.00,” investigators said in the arrest warrant. “On the general Liability policy of Andies Construction, Karau estimated the payroll at $44,400 in class code 91629 – cleaner/debris removal that resulted in a premium of $986.00. The premium loss to Builders Insurance Group on the General Liability policy was $108,062.00.
“After a review of the application that was filed by Karau/Andies Construction, Inc., there were several major discrepancies noted. Karau reported that the class code for work performed would be in the 5610-Cleaner/Debris removal, while a check of the companies paying Andies Construction were all Framing contractors operating in class code 5651-Carpentry.”
Florida law requires reporting of transactions in excess of $10,000. But investigators found Karau would write multiple checks to individuals on the same day to get around the currency transaction reporting requirements.
Bond for Karau was set at $200,012. An arraignment hearing is scheduled for June 4.