The federal judge overseeing the prosecution of two officials linked to an illegal workers’ comp program took under submission each side’s pretrial motions in limine to determine what will and won’t be argued at trial next month.
Included in the filings was a copy of a startling email between the defendants and a former attorney.
The email [see image] emerged in the five-year-old federal criminal fraud case against Marcus Asay, Antonio Gastelum, American Labor Alliance (ALA), and the Agricultural Contracting Services Association. The parties sold California employers an alleged alternative to traditional workers’ comp insurance under the name CompOneUSA and allegedly provided fraudulent certificates of insurance to their clients.
Asay was the head of the operation, and Gastelum handled the finances. The operations later morphed into Omega Community Labor Association, and the renamed product was marketed under the name CompassPilot.
The US Attorney for the Eastern District of California is asking the court to block any arguments asserting 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 the illegal certificates of coverage.
The government also seeks to undercut any offered “good faith” defense that the defendants believed they could offer workers’ comp coverage through their unapproved product. To this end, the government filed a copy of an email by their one-time attorney, George Vasquez, sent after the Department had issued the defendants their first cease-and-desist order. In the email, Vasquez tells his clients why he would not seek an injunction to block the order and that he could no longer represent them.
“This decision is in a large part based on the fact that I have previously advised in a legal memorandum that making any sort of representation that Compone (sic) benefits provide an employer with the coverage required by California workers’ compensation law would constitute fraud,” Vasquez wrote. “It appears based on the facts alleged in the cease-and-desist letter issued by the DOI that ALA has issued certificates of insurance implying that the benefits do provide such coverage. I, therefore, must discontinue my representation of ALA in any capacity.”
It is understood that allegedly fake certificates were issued in the name of The Travelers and National Union Fire Insurance.
Assistant US Attorney Tierney maintains in the filing that there is abundant evidence in the record of the defendant’s bad-faith actions. “In addition to the evidence that they ignored attorney advice about their program and obtained no advice to support the false statements on the Certificates, ALA’s theory that it could legally sell Worker’s Compensation was (as the Chief ALJ found) ‘unsupported by the facts presented and the applicable law,’” he wrote. “ALA also disobeyed a state regulatory body’s official Cease and Desist Orders. When an administrative law judge examined ALA’s claims and found ALA had violated the law, ALA and the defendants merely changed the operating business name and kept on selling the product.”
Testimony presented under oath by the defendants in the state administrative action revealed that they did not establish claims reserves and were paying claims out of revenues. They also revealed that they were operating without any reinsurance.
The government is going to trial next month, alleging the defendants engaged in fraud by providing clients with certificates of insurance that list coverage with a national insurance carrier. However, the listed carriers and policy numbers were for coverage provided to ALA, not its clients.
The trial is scheduled to start on April 25th.