Before the system went private, the issue of workers' compensation payments for coal contractors was highly controversial, with major producers allegedly creating a web of contract firms to avoid insurance premiums. A decade ago, a series of state lawsuits, backed by organized labor, forced the industry to pay back millions in workers' comp debts.
In the new case, Assistant U.S. Attorney Thomas C. Ryan alleged that Sargent allowed the four contract firms, all BrickStreet policyholders, to underreport their payroll during annual field audits conducted to confirm those policyholders were paying accurate insurance premiums.
"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 in a statement. "This type of corruption has long plagued the coal industry in southern West Virginia and must be stopped."
Sargent was charged with "honest services" mail fraud, which alleges he deprived BrickStreet of its intangible right to his honest services, and with tax evasion.
In court filings, prosecutors said Sargent in 2009 reported annual income of just less than $50,000, when in fact he knew that his income was "substantially in excess" of that amount because of "unreported cash bribes."
Prosecutors are seeking to seize $415,000 they say is traceable to Sargent's crimes, including $226,000 in cash from a safe deposit box. The government also is seeking to seize from Sargent a Dodge Ram truck, a Harley-Davidson motorcycle and a Yamaha ATV, court records show.
Goodwin's office said that Russell and Frelin Workman admitted paying "a significant number of their employees" in cash as part of a tax evasion scheme to avoid the associated payroll taxes. Randy Workman similarly used a significant cash payroll to evade payroll taxes, Goodwin's office said. White paid a portion of the payroll for T&W Services through a shell company, thereby evading taxes.
Sargent, Russell, Frelin Workman and Randy Workman each face up to 25 years in prison and a $500,000 fine. White faces up to 10 years in prison and a $500,000 fine.
Through Susan Lavenski, a media spokeswoman at Charles Ryan Associates, BrickStreet officials refused to answer questions about the case. But the company issued a prepared statement saying it "has been informed that it is one of the victims of a crime committed by a former employee working with a very small number of our policyholders, nearly all of which were owned or controlled by one family in Southern West Virginia."BrickStreet has been fully cooperating with and assisting the authorities in this investigation since we were first informed of it in August 2012," the statement said.
Reach Ken Ward Jr. at kw...@wvgazette.com or 304-348-1702.