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The owner of a Manhattan-based temporary staffing company is facing up to 25 years in prison for an alleged workers’ compensation fraud scheme of more than $25 million in unpaid premium to the New York State Insurance Fund.

Manhattan District Attorney Cyrus R. Vance, Jr., charged Eric Goldstein, 61, of Manhattan, in a five-count indictment with insurance fraud, forgery, offering a false instrument for filing, and fraudulent practices under the New York Workers’ Compensation Law last week The charges follow a joint investigation by the DA’s Office and NYSIF’s Division of Confidential Investigations into Mr. Goldstein’s ownership of GT Systems, the back office operation of 50 temporary placement agencies under the umbrella of his company. Investigators said GT Systems allegedly operated with deliberate and utter disregard for the Workers’ Compensation Law in New York State and for the safety of hundreds of employees. Over a period of several years, the company allegedly established one insurance policy after another under different pseudonyms, allowed policies to cancel for non-payment, misclassified workers and avoided paying premium on more than $400 million in payroll.

District Attorney Vance said the indictment against Mr. Goldstein represents “the largest premium fraud case our office has seen to date.”

“I want to thank Manhattan District Attorney Cyrus R. Vance, Jr., and his office for their persistence in pursuing this case,” NYSIF Chief Deputy Executive Director Francine James said. “This indictment is the result of a lengthy investigation by the DA’s Office and NYSIF’s Division of Confidential Investigations to unravel the dealings of a large company charged with fraudulent practices over several years. The case includes dozens of temporary employment agencies in a multi-million dollar scam involving unpaid premium, which NYSIF intends to recover for the State of New York.”

According to documents filed in court, NYSIF cancelled Mr. Goldstein’s policy under GT Systems in 2000 for nonpayment of premiums. From 2003 to 2007, according to court documents, seven companies owned by Mr. Goldstein applied to NYSIF and received workers’ compensation policies after he allegedly had his employees fill out applications in their names and falsely deny any connection to him or GT Systems.

Mr. Goldstein also failed to cooperate to allow NYSIF to audit the companies’ payrolls, wherein NYSIF would simply raise premium rates on the policies in effect. To avoid paying higher rates, Mr. Goldstein allowed NYSIF to cancel policies for non-payment, and repeated this pattern by allegedly obtaining other policies from NYSIF under false pretenses. The indictment also alleges Mr. Goldstein misrepresented the amount of payroll for each of his companies and the type of work done by employees. When they were able to gain access to company records, NYSIF auditors allegedly were misled. Investigators alleged Mr. Goldstein’s companies incorrectly classified much of the workforce as “clerical” in order to obtain insurance at lower rates. Instead, investigators said, many of Mr. Goldstein’s employees were nurses, truck drivers and warehouse workers.

Mr. Goldstein also allegedly underreported payroll by more than $400 million to avoid paying higher premiums and allegedly used hundreds of fraudulent certificates of insurance to represent to his clients that his companies carried coverage that the companies did not have.

“No one should forget that workers’ compensation fraud is a felony which saps our economy of billions of dollars annually, leading to higher prices, lower wages, and less money for hiring, training, investment and expansion,” Ms. James stated.

“In the case of premium fraud, it also leads to abuses of unprotected workers for whom employers have no coverage. NYSIF is the largest workers’ compensation insurance company in New York. With the help of law enforcement authorities, NYSIF is committed to fighting workers’ compensation fraud because it is our job to protect legitimate businesses and working men and women while controlling costs that are ultimately passed on to the public.”

District Attorney Vance thanked NYSIF for its assistance in the investigation, including Chief Deputy Executive Director Francine James, NYSIF Director of Confidential Investigations Laurence LaPointe, Supervising Investigator Benedict Emengo and Senior Investigator Curtis Brantley II, and said his office will continue to work with NYSIF in ongoing investigations involving premium fraud. “Fraud like this drives up premiums for honest New Yorkers, and hurts both taxpayers and our workforce,” he said.  “Workers’ compensation premium fraud is a $5 billion a year problem in the United States. Our efforts working with the New York State Insurance Fund have recovered much-needed money for the state, and today's case is the largest premium fraud case our office has seen to date. We will continue this valuable partnership to investigate and prosecute those who scam the system.”

The DA thanked assistant district attorneys Beth Fisch Cohen and Jean Marie Donohue of the Labor Racketeering Unit-Construction Industry Strike Force, who are handling the prosecution under the supervision of Assistant District Attorney Michael Scotto, chief of the Labor Racketeering Unit-Construction Industry Strike Force. DA Vance also thanked the District Attorney’s Office Squad, specifically Captain Ronald Haas, Lieutenant Patrick Johnston, Sergeant Anthony Gonzales and Detective Patricia O'Connor for assisting in the investigation. Criminal complaints and indictments are accusations only. Defendants are presumed innocent until proven guilty.