Federal MEWA Case Edges Closer to Trial

Attorneys defending Marcus Asay, Antonio Gastelum and Agricultural Contracting Services Association/American Labor Alliance (ALA) are due back in court next week as the federal government’s mail fraud and conspiracy charges against the backers of the CompOneUSA workers’ comp program move closer to trial. The charges stem from an FBI investigation and raid on ALA’s operations as well as a grand jury investigation of the organization and its leadership.

ALA ran the CompOneUSA program that purported to offer employers in California and other states an alternative to valid workers’ comp insurance or self-insurance. It claimed to provide ERISA benefits and that it is an entity claiming exception that is exempt from state regulations. State and federal officials both said this is not the case.

The latest hearing will be the fourth status conference in the case since the federal indictment came early this year. Asay is the program’s founder. Gastelum served as the chief operating officer. No trial date has been set.

Workers’ Comp Executive broke multiple stories about the MEWA before it came to officials’ attention. See the link at the end of this story to all our coverage of this MEWA.

When faced with the closure of the CompOneUSA program, the operations morphed into the Omega Community Labor Association, and the program changed its name to Compass Pilot, according to official reports. The organizations in its various forms were hit with numerous cease and desist orders by the California Department of Insurance. Most recently in March, the California Department of Insurance issued a cease and desist order against Omega and Compass Pilot.

But CDI apparently has no power to order non licensees to do anything. Omega and Compass just ignored the CDI orders.

The federal indictment maintains that the scheme netted the organization at least $2.8 million in premiums for the purported workers’ comp coverage during one 12-month period, and another $770,000 in payments to an allegedly fraudulent pension plan that was offered as part of the package. Federal officials say the proceeds were used for personal use by Asay and Gastelum and to pay business expenses. In one case, prosecutors say Marcus Asay withdrew funds and then deposited $20,321 in his own individual retirement account.

In various proceedings before the Department, ALA officials testified under oath that the organization did not maintain reserves for its workers’ comp claims and that it paid these expenses out of its cash flow. The organization also collected the surcharges assessed by the Department of Industrial Relations and California Insurance Guarantee Association, but we never authorized to charge such fees. Nor were the collected fees forwarded to the appropriate organization. CIGA has been clear that there is no coverage.

Click here to access all of our investigative reports on this story.