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Construction Owner Admits $450K Theft

Monday, December 10, 2012

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The former owner of two defunct New Jersey construction companies is facing eight years in prison after admitting to insurance and tax fraud that netted him more than $450,000.

Prosecutors said Herlindo Garcia-Merlos, 49, whose last known address was in Trenton, lied to his workers’ compensation carrier, failed to file five years' worth of tax returns, and underreported his own wages on tax returns.

Garcia-Merlos pleaded guilty Nov. 28 to a criminal accusation charging him with two counts of second-degree theft by deception before Superior Court Judge Gerald Council in Mercer County. 

Herlindo Garcia-Merlos

Herlindo Garcia-Merlos, 49, faces an eight-year prison sentence.

Sentencing is set for Jan. 23. Under the plea agreement, the state will recommend that Garcia-Merlos be sentenced to eight years in state prison. In addition, the state is seeking $315,680 in restitution on behalf of New Jersey Manufacturers Insurance Group and $135,462 on behalf of the New Jersey Department of Treasury.

Insurance Fraud

“This defendant was responsible for making sure that he had adequate and lawful workers’ compensation coverage for his companies,” said Acting Insurance Fraud Prosecutor Ronald Chillemi.

“By providing misinformation to his workers’ compensation carrier, he not only failed in this responsibility but also defrauded an insurance company out of hundreds of thousands of dollars. The cost of such fraud is passed on to consumers through increased premiums."

Garcia-Merlos was president of the now-defunct Orients Construction Company Inc., located in Trenton. In March 2009, Garcia-Merlos ceased doing business as Orients and began doing business as Melrose Construction Inc. in Trenton.

In pleading guilty, Garcia-Merlos admitted that, between February 2007 and April 2010, he provided "false and misleading information" to NJM Insurance Group, according to a release from the New Jersey Attorney General's Office.

Ronald Chillemi

Prosecutor Ronald Chillemi said Garcia-Merlos defrauded his insurer out of hundreds of thousands of dollars.

"The investigation determined that the type of services rendered by Orients, as well as the amount of payroll during the specified policy periods, were not true," the AG's office said. The fraud allowed Garcia-Merlos to avoid paying $315,680 in insurance premiums.

Tax Dodger

Garcia-Merlos also pleaded guilty to stealing more than $135,462 by failing to file tax returns for his companies.  Authorities said he did not file returns "for Orients and/or Melrose" Construction in 2006, 2007, 2008, 2009 and 2010. During the same years, he underreported his own wages on his individual tax returns, authorities said.

Deputy Attorney General Cheryl Maccaroni and Detective Natalie L. Brotherston coordinated the investigation. 

Chillemi noted that some important insurance fraud cases have started with anonymous tips. Tips may be reported to the state's toll-free hotline at 1-877-55-FRAUD, or visiting www.NJInsurancefraud.org. State regulations allow for payment of a reward to tipsters whose information leads to an arrest, prosecution and conviction for insurance fraud.

   

Tagged categories: Enforcement; Government; Insurance; Laws and litigation; Taxes; Workers

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