HARRISBURG – Attorney General Tom Corbett announced that criminal charges have been filed against a New Jersey man and several of his corporations for allegedly committing more than $497,000 in workers’ compensation fraud, filing false workers’ compensation reports and failing to maintain the required workers’ compensation coverage while conducting business in Pennsylvania
Corbett identified the defendants as Michael James Mortorano, Fairfield, New Jersey and Merchandise Movers, Inc., Fairfield, New Jersey. Mortorano is the president and principle operator of Merchandise Movers, Inc.
Corbett said that Mortorano allegedly engaged in an elaborate scheme to defraud the Pennsylvania State Workers’ Insurance Fund out more than $497,000 over the last five years.
The charges state that Merchandise Movers conducted business in Pennsylvania since 2001, while operating under the aliases of different affiliated corporations. Over the past five years, Mortorano allegedly failed to obtain proper workers’ compensation insurance for his Pennsylvania employees and had at least two periods of time where there was no coverage.
Corbett said that during that time, Merchandise Movers and one of its corporate affiliates, Clinton Services, obtained contracts to provide labor at several warehouses within Pennsylvania, including Philadelphia and Berks counties.
According to the criminal complaint, Merchandise Movers did not obtain workers’ compensation coverage for its Pennsylvania employees until Oct. 1, 2004 and that Clinton Services allegedly had a New Jersey only workers’ compensation policy until April 10, 2002 despite conducting business in Pennsylvania since 2001.
Corbett said that on April 2, 2002, a Merchandise Movers truck driver was seriously injured while working at a Philadelphia warehouse job site. Later that day, Clinton Services allegedly submitted an application for Pennsylvania workers’ compensation insurance.
The charges state that the policy did not take effect until April 10, 2002, therefore the company did not have Pennsylvania workers’ compensation insurance at the time of the accident, which left the injured worker unable to collect more than $155,000 in benefits, which he was entitled to receive.
Corbett said that after the incident, a workers’ compensation claim was filed under Clinton Services existing Travelers Insurance policy for New Jersey employees. In the claim, Mortorano allegedly lied, stating that the injured worker was a New Jersey employee, who was temporarily assigned to the Philadelphia job site at the time of the accident.
The investigation also revealed that Mortorano allegedly used acquaintances to establish numerous “shell” corporations, which concealed that Merchandise Movers was the primary company providing a labor force in Pennsylvania.
Corbett said that Mortorano allegedly used the shell corporations to lie to the State Workers’ Insurance Fund about the number of employees, their job classifications and payroll information in order to hide his true operation liability and obtain Pennsylvania workers’ compensation policies at minimal cost.
According to the criminal complaint, Mortorano stated on a SWIF application that one company provided food handling operations, employed one worker and had an estimated annual payroll of $25,000. Agents allege that the company actually employed 20 warehouse laborers and had an annual payroll of $785,000.
Corbett said that as a result of this fraudulent application, Mortorano allegedly paid only $1,384 for the company’s workers’ compensation coverage instead of the correct premium amount of $122,723, which should have been paid into the state managed fund.
The charges state that over the past five years, Mortorano allegedly defrauded SWIF out of more than $497,000 in workers’ compensation premium payments.
Corbett said that Mortorano and Merchandise Movers are both charged with 308 counts of failure to insure workers’ compensation, six counts of workers’ compensation insurance fraud, five counts of theft by deception and one count of criminal attempt theft by deception.
Mortorano was preliminarily arraigned before West Reading Magisterial District Judge Timothy Dougherty, who released Mortorano on $15,000 bail. A preliminary hearing has tentatively been scheduled for ten days from the date of arrest.
Corbett said the case will be prosecuted in Berks County by Deputy Attorney General John Dickinson of the Attorney General’s Insurance Fraud Section.