Finally the MEWA Fraud Case Goes to Court

The five-year-old criminal fraud case against Marcus Asay, Antonio Gastelum, and their American Labor Alliance (ALA) and Agricultural Contracting Services Association is finally going to trial. The U.S. District Court for the Eastern District of California is hearing pre-trial motions in advance of the scheduled April 25th trial start.

Asay is the cofounder of ALA and ran the operation. Gastelum oversaw the operation’s finances and, at times, was its chief operating officer. ALA claimed to be a labor organization offering an alternative to workers’ comp insurance as an entity claiming an exception to federal multi-employer welfare arrangement (MEWA) rules.

The U.S. Attorney for the Eastern District of California is asking the court to block any arguments that the defendants were legally selling an alternative to workers’ comp coverage. Assistant U.S. Attorney Michael Tierney says in a recent filing that such arguments would only tend to confuse a jury. He maintains that the government’s case is focused on the false statements the defendants allegedly made to further the scheme, including issuing illegal certificates of coverage.

“The Court should prohibit defendants from introducing any evidence or arguing the legal basis or regulatory scheme that applied to their sale of Worker’s (sic) Compensation coverage,” Tierney writes. “The evidence does not further a defense to the charges in the Superseding Indictment. It is therefore not relevant. Discussion of the legal basis underlying the sale of Worker’s Compensation carries a high likelihood of confusing the issues and wasting the jury’s time.”

In the government’s motion in limine, Tierney notes that the defendants waged a multiyear battle with the California Department of Insurance over the legality of the CompOneUSA and CompassPilot programs and their right to sell the products to California employers. That case led to a multi-million-dollar fine against Asay and the company for violating California insurance regulations but didn’t resolve the underlying issues. He maintains that relitigating this in the criminal fraud case wouldn’t be relevant to the charges at hand, which are that the defendants made false statements to their clients about other insurance companies.

“A brief analogy may be helpful: If defendants were a car dealership and its officers, and the fraud charged them with making false statements about odometer readings and creating document with those same false statements, it would not be a defense that they were legally authorized to sell cars,” Tierney notes in the filing. “Such a defense, like the one the defendants may offer here, does not speak to the charged misrepresentations.”

The 19-count superseding indictment alleges conspiracy to commit mail fraud, mail fraud, and wire fraud. Included are allegations that the defendants provided clients with fraudulent workers’ comp certificates claiming to be issued by national insurance companies when they were not.

Additionally, the charges allege that the defendants fraudulently marketed a pension plan to clients and then used the funds for personal expenses and other operations.

Additional Cases

Later this summer, Asay and the Agricultural Contracting Services Association are scheduled to be in a Fresno courtroom to face a fraud lawsuit filed by Fajita Fiesta over the illegal workers’ comp program.

Fajita Fiesta purchased the CompOneUSA product, believing it provided the workers’ comp coverage it needed to fulfill its obligation to obtain workers’ comp coverage for its employees. The lawsuit ensued after the Department of Industrial Relations inspected the restaurant and fined it $187,887 for operating without workers’ comp insurance. Fajita Fiesta is due to get its day in court this July.

Also pending is the second criminal indictment the U.S. Attorney filed against Asay in 2022. The case charged Asay with filing false income tax returns and social security disability benefit fraud. The case alleges that ALA paid more than $300,000 worth of Asay’s personal expenses – including $50,000 for dating services – and that Asay never reported it as income. The complaint also alleges that he was getting $1,700 per month in disability benefits at a time when he was working full-time for ALA. No trial date has been set in this case.