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FBI Seizes Personnel Documents, Computer Records

By: Brad Cain

The Federal Bureau of Investigations seized personnel records and copied hard drives when they raided the offices of American Labor Alliance earlier this year, Workers’ Comp Executive has learned. The raid is connected to a grand jury investigation that is digging deep into the organization’s efforts to sell what it claims is an alternative to buying traditional workers’ comp insurance. The federal grand jury is digging into ALA’s finances and into who is running the company.

American Labor Alliance (ALA) continues to operate in defiance of multiple California Department of Insurance cease and desist orders. ALA is challenging the actions before a CDI administrative law judge. There is a link to many other stories about American Labor Alliance at the bottom of this story.

American Labor Alliance is also known as Agricultural Contracting Services Association and also does business as Avanta Health Care. It markets its workers’ comp product as CompOneUSA. ALA claims to provide ERISA benefits and that it is an entity claiming exception that is exempt from state regulation.

However, experts say that what it is selling does not meet the requirements for California workers comp coverage which are, either insurance from an admitted carrier, single self-insurance plan approved by the Office of Insurance Plans or through a Self-Insured Group. Captives are insured.

During testimony before the Department’s ALJ, American Labor Alliance officials testified that the company started up with no capitalization, does not maintain case reserves, has no reinsurance and no stop loss coverage. Officials testified that they are paying claims out of its current cash flow.

It is unknown why the Department of Industrial Relations, which is charged with such things, has not shut down those employers who are using the system despite having a list of of such employers. Employees covered by the program as well as employers and the state’s uninsured employers fund are at risk.

ALA has been selling CompOne to high-risk, high X-Mod accounts including farm labor contractors, trucking and construction risks.


Grand Jury Investigates

Workers’ Comp Executive has learned that the federal grand jury is now looking into the financial service providers, such as banks and accountants, that are doing business with the company and any financial accounts it holds. The grand jury is also digging into how ALA markets and sells its products to California employers.

The grand jury also wants to see how ALA is paying claims and providing benefits under the programs it has sold.


Judicial Notice

In the case of its on-going appeal of the CDI cease and desist orders, the administrative law judge took official notice of a letter the federal Department of Labor sent to ALA and its chief executive officer Marcus Asay. That letter revoked ALA’s designation as a labor organization which had been the key component in the organization’s argument that it qualifies as an entity claiming exception.

American Labor attempted to cast doubt on the authenticity of the letter from DOL’s Office of Labor-Management Standards (OLMS), but Workers’ Comp Executive obtained exclusive assurances directly from the Department Of Labor that the letter was real and that ALA’s union designation was terminated.

ALA’s attorney also attempted to diminish the significance of the letter’s content. ALA claimed that the letter was “irrelevant” to the matter before the Department. ALJ Kristin Rosi, however, was having none of it noting that the letter is important for its “rebuttal value.”

“During the evidentiary hearing, ALA’s founder and Executive Director Marcus Asay argued OLMS’ issuance of a file number and its acceptance of ALA’s financial documents supported ALA’s labor organization status. Specifically, Mr. Asay testified ‘we have a union designation by the Department of Labor,’” Rosi noted in an order taking official notice of the letter. “The February 23, 2017, letter directly rebuts Mr. Asay’s testimony and is therefore highly relevant.”

Rosi’s order also notes that ALA’s actions undercut its attempt to question the authenticity of the letter. She notes that while ALA was casting doubt on the veracity of the letter, Marcus Asay actually traveled to Washington, D.C. to discuss the issue in person with the DOL official who wrote the letter. “Mr. Asay’s actions in response to the letter serve to authenticate the letter,” she maintains.

Where the cases head next is still unclear. Federal officials declined to offer any public comment on their investigation, while ALA’s appeal is still in the hands of ALJ Rosi who reopened the evidentiary record in the case to take a deeper look at Mr. Asay’s business relationships. To see our full list of MEWA investigation stories click here.