DOJ: News Release

Colorado Resident Guilty of Workers’ Compensation Fraud

Colorado Resident Guilty of Workers’ Compensation Fraud

Colorado resident Sandra Armstrong admitted in court on Thursday that a jury would likely find her guilty of felony Accountability to Employer Misconduct for her role in assisting an employer in avoiding paying Montana Workers’ Compensation premiums.

“Workers’ Compensation fraud is a serious crime that drives up costs for every employee, business, and taxpayer in Montana,” Montana Attorney General Tim Fox said. “Assistant Attorney General Mary Cochenour, our Division of Criminal Investigation, and the staff at Montana State Fund are to be commended for their hard work building a case so irrefutable that the suspect conceded when presented with the evidence.”

Armstrong, 50, admitted to District Judge Jeffrey Sherlock of Montana First Judicial District Court that she reviewed the state’s evidence and concluded a jury would likely find her guilty of such an offense. Accountability to Employer Misconduct carries a maximum penalty of 10 years imprisonment in the Montana State Prison and a $50,000 fine.

Assistant Attorney General Mary Cochenour stated that the evidence would show that Armstrong, while operating a tax and insurance business in Colorado, assisted her client—Efrain Cruz, a contractor from Mexico—in avoiding his responsibility to provide Workers’ Compensation coverage under Montana law by requiring his workers to falsify information and apply for and obtain Independent Contractor Exemption Certificates when they were, in reality, employees of the business.

Montana law requires employers to provide Workers’ Compensation insurance to employees, with a few exceptions. One such exception is an independent contractor. A person who is deemed an independent contractor can agree to waive the mandatory requirement for Workers’ Compensation insurance coverage.

The crime came to light when one of Cruz’s employees fell from a second-story truss while working on a single-family home construction site in Big Sky in June 2008. The injured employee, a Mexican citizen who was working and living illegally in the United States, sustained serious head injuries.

Cruz, who has since returned to Mexico, maintained a Workers’ Compensation insurance policy through the Montana State Fund but did not claim the injured worker as an employee on the policy. That is because Armstrong, who represented herself to Montana State Fund as Cruz’s office manager, assisted the injured employee in obtaining an independent contractor exemption status and helped him file a waiver of Workers’ Compensation benefits.

After the injury, Armstrong then submitted forms to Montana State Fund claiming that the injured worker was now Cruz’s employee and entitled to benefits under his Workers’ Compensation policy. Montana State Fund accepted the claim and paid Worker’s Compensation medical and wage loss benefits for the injured worker.

Cochenour explained to the court that if the case were to go to trial, the injured employee would testify that he was never an independent contractor but rather an employee of Cruz, and that he was made to fill out the paper work to falsely obtain independent contractor status.

Cochenour alleged that by requiring the injured worker to obtain a false independent contractor status, Cruz was able to avoid his responsibilities to provide Workers’ Compensation insurance to the injured worker. The prosecutor alleged that Armstrong assisted Cruz in the crime of Employer Misconduct by helping the worker achieve false independent contractor status and a waiver of Workers’ Compensation insurance when he should have been claimed as an employee on the Workers’ Compensation policy.

The judge accepted Armstrong’s plea and followed a plea agreement reached by the parties, which called for a deferred imposition of Armstrong’s sentence for 18 months and a $3,000 fine and court surcharges.

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