Roseville man skimmed millions from Indian tribe’s insurance company
It was a failure, and a fraud. Chmielewski, 46, pleaded guilty to two counts of fraud in
Chmielewski's guilty plea came nearly a decade after his scheme unraveled -- and served as a sad epilogue to an era in which the rising cost of treating injured workers raged as a hot political issue across
More than a decade ago, workers' comp insurance premiums were driving employers crazy, and newly elected Gov.
Chmielewski convinced the
The company they created, Independent Staffing Solutions of
What went wrong? In a written plea agreement filed in
Chmielewski likely will get a prison term of 41 to 51 months when he's sentenced in April, according to the terms of the written plea agreement he signed. A former
The impact of the crime appears to have been widespread. When he was arrested in 2012, Fort Independence officials issued a statement saying his crimes had "a devastating effect on the tribe and ... its impoverished membership." Tribal officials didn't return calls seeking comment for this story.
Injured workers were victimized as well, although it's not clear exactly how many lost their benefits because of Independent Staffing's demise. Chmielewski's plea agreement says "the losses resulting from defendant's fraud scheme" amount to
The pain might not be limited to those 117 workers. At least 31 injured workers who were supposed to have been covered by Independent Staffing still have claims for unpaid benefits pending with the state
In any event, some workers who didn't get covered could be eligible for payment from a state-run, employer-financed fund designed to cover uninsured claims.
Chmielewski's case took some odd turns. He was indicted by a grand jury in
Chmielewski and Independent Staffing Solutions weren't the only entrants in the discount workers' comp business in the early 2000s. The Blue
The two companies were "professional employer organizations." Technically, they employed the workers they were covering. The firms handled payroll and other personnel functions, although the main draw was cheap workers' comp.
In both cases, the plan was simple: By using the tribes' sovereign-nation status, they could streamline the cumbersome process of workers' compensation. They passed on the savings to employers by offering deep discounts -- 20 percent or more -- on premiums.
For the tribes, it was way to generate new revenue.
"Tribes were trying to expand their business opportunities," said
It worked at first. Mainstay and Independent Staffing signed up hundreds of
Controversy erupted almost immediately. The state
Injured workers said the tribal programs often ran roughshod over their legal rights. In the traditional system, they could appeal to a state-run board if they felt they weren't getting proper medical care or the disability payments they deserved. With Mainstay and Independent Staffing, they were stuck arguing their case before councils run by the tribes.
"There was no way to enforce those benefits," said
In late 2003, the state temporarily shut down a small chain of IHOP pancake franchises in
For a while, the case loomed as a test of sovereign immunity, the legal doctrine that gives tribes broad protection to manage their own affairs.
The conflict got resolved. The restaurants were allowed to reopen and the tribe's lawsuit was settled.
By that point, the Legislature was acting to make the tribes' workers' comp programs largely irrelevant. In 2004, Schwarzenegger signed into law a compromise overhaul of the state workers' comp system aimed at reducing costs. Premiums began stabilizing within a couple of years, and employers that had chosen Mainstay or Independent Staffing started drifting back toward traditional workers' comp.
Independent Staffing didn't last nearly that long. Chmielewski's financial misdeeds had left the Fort Independence tribe's company on much shakier footing when clients started leaving, according to court records.
"Revenues began a steep decline," reads the plea agreement signed by Chmielewski. "Without sufficient reserves to pay ongoing claims, and lacking additional revenue from new insurance premiums, (Independent Staffing) began to default on its various financial obligations."
Independent Staffing went under in
"They were valid and they did business as usual," said one of Independent Staffing's former clients, Redding roofing contractor
After Independent Staffing fell apart, the Fort Independence tribe pursued a more traditional method of making money. In 2008, the tribe opened a small casino.
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