The federal government may be shut down, but the wheels of justice continue to turn. Federal prosecutors filed indictments against American Labor Alliance and its two principle operatives – founder Marcus Asay and chief operating officer Antonio Gastelum – for a host of fraudulent activities.
Workers’ Comp Executive broke multiple stories about the MEWA before it came to official’s attention. See the link at the end of this story to all our coverage of this MEWA.
The indictment stems from an FBI investigation of ALA’s operations and a subsequent raid on its offices. The charges are also the work of a federal grand jury as Workers’ Comp Executive reported nearly two years ago (see Grand Jury…). The charges include conspiracy, mail fraud, and money laundering.
Changing Names
American Labor Alliance is also known as Agricultural Contracting Services Association and initially marketed its workers’ comp product as CompOneUSA. But, following a state enforcement action, it shifted business to using the name Omega Community Labor Association and sold the program under the name Compass Pilot.
ALA claims to provide ERISA benefits and says that it is an entity claiming exception that is exempt from state regulation. But the United State Department of Labor does not certify them and in fact, wrote a letter so stating.
The charges date back to the fraudulent workers’ comp certificates that ALA produced for clients that falsely listed National Union Fire Insurance Company as the insurer. National Union is a unit of AIG – American International Group (NYSE AIG).
“From approximately March 2016 through March 2017, defendants defrauded ALA’s clients and others, and obtained money and property from ALA’s clients and others, falsely and fraudulently claiming that the National Insurance Companies provided workers’ compensation coverage to clients, included by creating and issuing to ALA’s clients Certificates of Liability [Certificates of Insurance] that Asay and Gastelum knew contained material falsehoods,” prosecutors allege. Prosecutors note that in some cases National Insurance had issued liability policies or bonds covering ALA itself but did not cover nor would they have paid workers’ comp benefits to ALA’s client employers.
“In many of these cases,” prosecutors say, “ALA-issued Certificates of Liability that contained a false policy number, not the real policy or bond number that pertained to ALA’s corporate coverage.”
Prosecutors contend the false policies were intended to fool both ALA’s clients and state regulators. They also note that both Asay and Gastelum furthered the fraudulent scheme by attempting to pass off the bogus certificates as “good faith mistakes” when state officials questioned the veracity of the certs. Investigators note that when the U.S. Department of Labor began investigating the scheme, Asay wrote to ALA’s clients and told them not to provide any information to DOL officials.
The indictment also covers an allegedly fraudulent pension plan – the ALA Trust – that sought contributions from ALA’s clients. Prosecutors say it was marketed as a 401(k) retirement plan, a pension plan and a Multiemployer Plan, but in reality was essentially a slush fund for the organization.
Illegal & Ill-gotten Gains
The indictment maintains that the scheme netted the organization at least $2.8 million in premiums for the purported workers’ comp coverage with National Insurance during one 12-month period and another $770,000 in payments to the allegedly fraudulent pension plan. Federal officials say the proceeds were used for personal use by Asay and Gastelum and to pay business expenses. In one case, prosecutors say Marcus Asay withdrew funds and then deposited $20,321 in his personal individual retirement account.
Previously, ALA officials testified under oath that the organization did not maintain reserves for its workers’ comp claims and that it paid these expenses out of its cash flow. The organization also collected the surcharges assessed by the Department of Industrial Relations and California Insurance Guarantee Association but never forwarded these funds to the appropriate organization. CIGA has been clear that there is no coverage.
Asay and Gastelum were released from federal custody on the condition that they stop selling purported workers’ comp coverage under any trade name and may not renew any policies that expire. They are also barred from collecting any pension or retirement contributions. Both are due back in court early next month.
Here is a link to see all of our investigative reporting on this story.
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