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June 2005
Area of Interest: U.S. District Court Orders Competitive Technologies Inc. to Reinstate Sarbanes-Oxley Whistleblowers In the first federal court decision enforcing a preliminary reinstatement order under the Sarbanes-Oxley Act of 2002, the U.S. District Court for Connecticut has ordered Competitive Technologies, Inc. (CTI) of Fairfield, Conn. to reinstate, pending the outcome of litigation, two men who claimed they were fired for whistleblower activities protected by the Act. In September 2003, Scott Bechtel and Wil Jacques complained to the U.S. Labor Department's Occupational Safety and Health Administration (OSHA) that CTI had fired them in June 2003 because they raised concerns about financial disclosures in the preceding six months. OSHA investigated the complaints and issued its findings on Feb. 2, 2005. The agency ordered CTI to reinstate the men to their jobs and pay them back wages and benefits. CTI filed an objection to OSHA's findings with the Labor Department's Office of Administrative Law Judges and requested a stay of the reinstatement order. An administrative law judge denied both that request and a subsequent request for reconsideration. Source Occupational Safety and Health Administration State: New York Area of Interest: Insurance Department Holds Line On Workers’ Compensation Rates Acting Superintendent of Insurance Howard Mills announced today that the New York Compensation Insurance Rating Board (NYCIRB) has withdrawn its proposed rate increase of 9.5 percent and that workers’ compensation rates will remain at their current levels through Oct. 1, 2005. NYCIRB originally sought last year a 29.3 percent increase in workers’ compensation insurance rates, which was rejected by the Department in July 2004. The Insurance Department determined at the time that the data NYCIRB submitted to support its request -- combined with testimony and information gathered during three public hearings -- did not substantiate the increase. The Rating Board subsequently reduced its request to 9.5 percent. That rate request was the topic of a public hearing earlier this year. Governor Pataki signed into law in 1996 the New York State Employment, Safety and Security Act, a sweeping reform to the workers’ compensation system that has saved employers millions of dollars because the average manual rates have dropped almost 30 percent since the law’s adoption. The measure also repealed Dole v. Dow, a court-imposed standard that permitted New York employers to be sued by manufacturers of injury-causing equipment. Employers can now be sued by manufacturers for only the gravest of injuries. In addition, the 1996 law made the crime of workers’ compensation fraud a felony and created the office of the Workers’ Compensation Inspector General. Source: State of New York State: New York Area of Interest: State Suit Cites Pattern of Fraud at AIG Former CEO Hank Greenberg Directed and Approved Illegal Transactions Attorney General Eliot Spitzer and State Insurance Superintendent Howard Mills today announced a lawsuit against the nation’s largest business insurance company, alleging that the firm manipulated its books to deceive regulators and the investing public. The lawsuit alleges that American International Group’s (AIG) former top management, including former Chairman Maurice R. Greenberg and former Chief Financial Officer Howard I. Smith, engaged in numerous fraudulent business transactions that exaggerated the strength of the company’s core underwriting business to prop up its stock price. The lawsuit, filed today in State Supreme Court in Manhattan, attributes the misconduct at AIG directly to Greenberg. The suit cites e-mails and other evidence showing that Greenberg was personally involved in negotiating some of the fraudulent transactions, and that he directed other AIG staffers to develop and implement the schemes underlying other misleading transactions. Specifically, the company and top management:
The suit also cites a separate scheme in which AIG improperly booked worker’s compensation premiums as general liability and other coverage. This misconduct reduced the company’s taxes and other assessments. AIG has already admitted that many of the transactions were improper, has terminated certain implicated personnel, and has announced plans to restate its earnings. The company is cooperating with authorities. The suit alleges violations of New York’s Martin Act, Executive Law and Insurance Law, plus common law fraud. In addition to injunctive relief, the suit seeks damages and disgorgement of profits from the illegal transactions. The investigation is continuing. Source: State of New York State: Florida Area of Interest: Gallagher Announces Launch of Database Showing Employers Who Have Been Issued Stop Work Orders Florida’s Chief Financial Officer Tom Gallagher today announced the launch of a database that will continually update employers who have been issued stop work orders. The orders are issued by investigators with the Division of Workers’ Compensation when they determine that the employer has not secured workers’ compensation coverage for its employees. Stop work orders are also issued to employers that materially understate or conceal payroll or materially misrepresent or conceal employee duties so as to avoid proper classification for premium calculations. The new database is updated daily and displays employers who have been issued stop work orders. It can be queried by county, month, or by specific employer. During the last fiscal year the Division of Workers’ Compensation, Bureau of Compliance served 1,791 stop work orders, assessed over $19 million in penalties, caused over $25 million in additional premium to be written and ensured over 13,000 more employees had workers’ compensation coverage. The Compliance Stop Work Order Database can be accessed by going to the Division of Workers’ Compensation website at www.fldfs.com/wc/ Click on the “Databases” link and then click on “Compliance Stop Work Order Database Source: State of Florida State: New Hampshire Area of Interest: OSHA Proposes Nearly $320,000 in Fines for Widespread Safety and Health Hazards at New Hampshire Paper Mill Atlantic Paper & Foil Corp., doing business as Atlantic Paper Mills of New Hampshire LLC, has been cited for a total of 59 alleged willful, serious and other-than-serious job safety and health violations at its Winchester, N.H., paper mill. The U.S. Labor Department's Occupational Safety and Health Administration (OSHA) has proposed $319,200 in fines following inspections begun Nov. 30, 2005 following an accident in which a worker was caught in a paper winder. The willful citations address the company's failure to maintain roof support walls and others parts of the mill's structure in safe condition; paper machines not guarded to prevent employees from being caught in their moving parts; untrained personnel operating forklifts, and a front end loader operated without working brakes. A total of $198,000 in fines is proposed for these items. The alleged serious violations, which carry an additional $121,200 in proposed penalties, include citations for not having an emergency response program or training; inoperable emergency response and sprinkler systems; no fire extinguisher training; no trained first aid responders; inadequate exit access; damaged floors; uninspected cranes and hoists; unsafe operation of forklifts; improper chemical storage; lack of personal protective equipment and training; excess noise levels and lack of adequate hearing protection; unsanitary bathrooms; confined space hazards; electrical hazards; inadequate hazard communication and numerous additional instances of unguarded machinery. The other-than-serious citations address an inadequate injury and illness log, improperly modified forklifts and failure to inform employees of their right to access their medical records. Source: Occupational Safety and Health Administration State: Florida Area of Interest: Two Charged with Staging Accident, Filing False Claim Two Broward County men are facing felony fraud charges after a state investigation determined they staged an accident in January and then filed fraudulent insurance claims for injuries that did not occur. Jesse Demetro, 20, of Hallandale, and Anthony Nicholas, 20, of Ft. Lauderdale, are each facing charges of organized scheme to defraud, insurance fraud and second-degree grand theft. Demetro was arrested Tuesday and Nicholas on May 18. The charges follow an investigation by the Department of Financial Services, Division of Insurance Fraud. If convicted on the charges, each will face up to 50 years in prison. Detectives said they found that Demetro and Nicholas conspired and participated in a staged accident on January 27, 2004, in Broward County, and then both got tests and treatment at Plantation General Hospital. As a result, they also filed an insurance claim for medical expenses with Republic Western Insurance Company and received benefits totaling more than $12,800. They also filed a claim for more than $17,000 in damage to a 2003 Mercedes Benz Source: State of Florida State: New York Area of Interest: Mexico, N.Y., Food Plant Cited by OSHA for Lockout/Tagout,
Machine Guarding and Other Safety Hazards A Mexico, N.Y., food plant's alleged failure to safeguard workers against the accidental startup of machinery and other industrial hazards has resulted in a total of $43,350 in proposed penalties from the U.S. Labor Department's Occupational Safety and Health Administration (OSHA). The citations result from an inspection conducted under the Syracuse OSHA office's "Local Emphasis Program on Food Processing Industries." The inspection found that the company failed to develop a lockout/tagout program for machinery in the plant and also failed to guard two labeling machines to prevent employee contact with their moving parts. These citations, which carry $33,000 in proposed penalties, were classified as willful. OSHA defines a willful violation as one committed with an intentional disregard of, or plain indifference to, the requirements of the Occupational Safety and Health Act and regulations. An additional $10,350 in fines was proposed for 16 serious citations. The citations address such hazards as failure to maintain lifting devices; lack of stair railings; failure to label confined spaces; lack of eye wash stations; lack of fire extinguisher training; failure to cover live electrical parts; ungrounded electrical equipment; lack of electrical safety training, and several other machine guarding hazards. A serious citation is issued when death or serious physical harm are likely to result from a hazard about which the employer knew or should have known. Source Occupational Safety and Health Administration State: Georgia Area of Interest: Oxendine Directs Insurers Not To Penalize Soldiers for Unoccupied Residence Insurance Commissioner John W. Oxendine issued a directive today ordering property and casualty insurance companies who operate in Georgia to waive certain occupancy requirements on homeowners policies held by armed forces personnel on active duty. In March 2005, Oxendine sponsored a resolution to the National Association of Insurance Commissioners which asked insurance regulators in all 50 states to review industry practices in their jurisdictions and determine whether regulatory action should be taken in order to protect our armed forces in connection with policy cancellations tied to property occupancy requirements. Oxendine’s directive, issued today, said that insurers should review underwriting claims procedures and to waive occupancy equirements for deployed Armed Forces personnel. Source: State of Georgia State: New York Area of Interest: State Senate Confirm Mills’ Nomination as Insurance Superintendent The New York State Senate confirmed today Governor George E. Pataki's nomination of Howard Mills as Superintendent of the New York State Insurance Department. Mills has been serving as Acting Superintendent since January 2005. Superintendent Mills was a New York State Assemblyman, representing Orange and Rockland counties, for three terms (1998-2004) and served as that chamber’s Deputy Minority Leader while also sitting on the Assembly’s Banking, Housing, Insurance and Ways and Means Committees. Source: State of New York
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