Shelby Township-based Lutz Roofing Company pleaded guilty Monday to mail fraud and health care fraud in a case that involved false reporting of hours worked to the Unemployment Insurance Agency.MLive file image
SHELBY TOWNSHIP, MI -- A Macomb County roofing company pleaded guilty this week in a fraud case involving unemployment insurance.
The Shelby Township-based Lutz Roofing Company was accused of allowing employees who worked part time during winter months to file for full unemployment benefits as if they hadn't worked at all.
The company would later pay workers for a full week once they had banked enough part-time hours, according to federal prosecutors.
"Lutz engaged in a practice known as 'banking hours,' that is, Lutz did not pay certain part-time employees when they worked, but rather, allowed them to continue to collect unemployment compensation that they were ineligible for because of the hours worked, falsely verified to the UIA that those employees were entirely unemployed and permitted them to accumulate, or "bank," the hours and be paid only when they had reached 40 hours, at which time Lutz would pay the employees and declare to the UIA that the employees had worked the one week," announced the U.S. attorney's office Tuesday.
"Instead of losing multiple weeks in unemployment insurance benefits, the employees would lose only one week of unemployment compensation."
The scheme cost the Unemployment Insurance Agency more than $104,000 between 2007 and 2012, according to prosecutors.
The company pleaded guilty Monday to mail fraud and health care fraud.
The company was also accused of directing workers to falsely report that on-the-job injuries were suffered outside of work, costing various health care plans more than $70,000 between 2008 and 2010.
"By reducing the number of reported on-the-job injuries, Lutz benefited by reducing its workers' compensation insurance premiums as well as reducing its 'incidents rating' so that it could bid on certain high-value contracts for which it would otherwise be ineligible," the U.S. attorney's office announced.
"Unemployment compensation funds exist to benefit unemployed workers," said U.S. Attorney Barbara McQuade said. "Companies that cheat to gain an unfair advantage over competitors will be brought to justice."
Defense attorney Steve Fishman, who represented Lutz Roofing in the case, said the company didn't benefit financially from the illegal practices.
"Lutz Roofing has always been known for its generosity toward its employees," Fishman said. "Although the company acknowledges that its conduct was clearly wrong, Lutz received no financial benefit from these transactions."
The plea agreement calls for the company to pay $174,267 in restitution to the Michigan Employment Security Commission and several health care providers.
The company could also face up to $1 million in fines and five years of organizational probation.
A sentencing hearing before U.S. District Judge Gershwin Drain has been set for March 17, 2016.