$3.6 million insurance fraud alleged City man is accused of cheating state fund

April 17, 1996|By Thomas W. Waldron | Thomas W. Waldron,SUN STAFF

In one of the largest claims of insurance fraud in state history, the Maryland attorney general's office charged a Baltimore man yesterday with cheating a state insurance agency out of $3.6 million by underpaying workers' compensation premiums over a five-year period ending last fall.

Frederick A. Maher is accused of substantially underreporting the payrolls handled by his Baltimore employee-services company to avoid paying the appropriate premiums to the Injured Workers Insurance Fund, a quasi-state agency in Towson.

The criminal information filed in Baltimore County Circuit Court charges Mr. Maher with one count of theft and one count of failure to file state income tax returns for the years 1993, 1994 and 1995.

Mr. Maher's company, Donnybrook Associates Inc., provided employment services to numerous roofing, transportation and other businesses, according to Assistant Attorney General David P. Lunden, who is prosecuting the case.

For a fee, Donnybrook processed the firms' payrolls and handled all state and federal withholding payments, including workers' compensation premiums.

Working from an office in Cross Keys in North Baltimore, Donnybrook allegedly reported only a fraction of the payrolls it handled, allowing Donnybrook to pay substantially reduced workers' compensation premiums to the insurance fund.

Donnybrook was paying far too little for the insurance coverage it received for its employees, the attorney general's office alleged.

Established by state law, the nonprofit Injured Workers Insurance Fund insures those employers who are unable -- or choose not to -- obtain coverage from private companies.

State law requires employers to carry workers' compensation insurance to cover on-the-job accidents and injuries.

The Injured Workers Insurance Fund, like most other workers compensation insurance carriers, does not require its customers to provide a list of employees covered, only a total company payroll, a spokeswoman said.

Mr. Maher, 49, of the 4500 block of Schenley Road in North Baltimore had no comment on the charges, according to his attorney, John Francomano.

None of the employees covered by workers' compensation insurance secured by Donnybrook was harmed by the alleged fraud, Mr. Lunden said.

However, the firms that did business with Donnybrook could be held liable for some of the unpaid premiums.

Although his company allegedly underpaid its premiums by $3.6 million, Mr. Maher's profits from the alleged insurance swindle were substantially less, prosecutors said.

Mr. Maher allegedly charged his clients less than he should have to secure the insurance coverage and paid the insurance fund even less than that.

"It's a good amount of money but it's nowhere near $3.6 million," Mr. Lunden said.

He declined to give more information until Mr. Maher goes to trial.

Attorney General J. Joseph Curran Jr. said the alleged fraud was one of the largest insurance schemes in state history.

Workers at the Injured Workers Insurance Fund detected the alleged fraud last fall and alerted state officials.

The charges against Mr. Maher carry maximum penalties of 20 years in prison and $6,000 in fines, Mr. Lunden said.

A hearing in the case was set for April 30.

Pub Date: 4/17/96

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