California security firm created shell company to avoid workers' compensation

In what may be one of the most egregious cases of workers' compensation fraud, a California employer created a shell company to avoid workers' compensation premiums for his 1,500 workers.

Last week, Ousama Karawia, the owner of International Protective Services Inc., and two company vice presidents pleaded not guilty to charges that they defrauded the California State Compensation Insurance Fund of $9 million.

The men are accused of going to extreme measures to deceive the state about the number of people employed by the private security firm.

According to an LA Times article:

 

 

The men allegedly created a shell company, International Armored Solutions Inc., to hide the true number of employees at the security firm to avoid paying higher workers’ compensation insurance premiums to the State Compensation Insurance Fund.

Authorities said Karawia told state officials that he employed about 20 workers at the new company and that it was not part of the main security firm. The company failed to pay $9.5 million in workers’ comp premiums for its 1,500 employees, prosecut

 

 

Employer workers' compensation fraud, the most common type of fraud, costs not only injured workers but taxpayers, as well. In the event of an accident, workers' on-the-job injuries may not be covered if their employer doesn't have adequate insurance, as required by law. In those instances, the burden for caring for these hurt and disabled workers falls on taxpayers and social service agencies.