A Rockville Centre business owner and his Queens-based iron and erection construction company pleaded guilty to insurance fraud for a workers’ compensation scheme in which more than $600,000 of the company’s policy premiums were underpaid.
According to the charges, annual audits by NYSIF Premium Fraud Investigators revealed the defendants — Mahendranauth Khargie and his business, GC Stud Inc. — substantially underreported the total amount of their payroll during three policy periods between April 2019 and March 2022, resulting in premium fraud.
As a NYSIF Workers’ Compensation policy holder, Khargie and his company are required to provide financial records concerning income and employee payroll to NYSIF every year the policy holder renews its coverage.
Records revealed that large payments to the defendants were made by three different steel and iron fabrication companies during the time of the investigation. The defendants hid the money, deposited the funds in a JPMorganChase account, and did not provide that account to the NYSIF premium auditors.
Over the course of the scheme, Khargie underreported his payroll to NYSIF by more than $3.5 million, resulting in under payments of the company’s Worker’s Compensation policy premiums.
Khargie was arrested on September 4 in Mineola by members of the Nassau County District Attorney’s Detective Squad.
On October 21, Khargie, 36, and his company 11 pleaded guilty on October 21 before Judge Robert Schwartz, to Insurance Fraud in the Third Degree (a Class D felony). GC Stud, Inc. also pleaded guilty to Effect of Failure to Secure Compensation under the New York Workers’ Compensation Law (a Class E felony).
Khargie and GC Stud are expected to be sentenced on December 2. The defendant must pay restitution of $625,000 to the New York State Insurance Fund (NYSIF) prior to the sentencing date.
Should Khargie fail to pay the restitution amount for the lost premiums in full, he faces a prison sentence of two to six years. GC Stud, Inc. faces fines totaling $6,000 on December 2.
“This calculated scheme of underreporting millions of dollars of payroll to defraud the state’s insurance system was a deliberate effort to gain an unfair advantage over businesses doing things the right way,” said Nassau County District Attorney Anne Donnelly. “When employers cheat the system, they put workers at risk. We will continue to work with our state partners in holding businesses owners accountable when they try to undermine the integrity of systems put in place to help employees.”
“This guilty plea and significant restitution serve as a powerful deterrent to any business attempting to cheat the workers’ compensation system,” said NYSIF Executive Director and CEO Gaurav Vasisht. “NYSIF is committed to ensuring a level playing field for the thousands of honest employers in New York State.”