For Immediate Release - July 25, 2012

Woburn Business Owner Arraigned in Connection With Workers' Compensation Fraud

Alleged Premium Avoidance Scheme Results in More Than $42,000 in Fraud

BOSTON – A Woburn business owner has been arraigned on charges he failed to accurately report his total payroll or number of employees to his insurance provider to avoid paying the proper insurance premium, Attorney General Martha Coakley announced today.

Edward App, 50, was arraigned on charges of Workers’ Compensation Fraud (4 counts) and Larceny Over $250 (3 counts). 

App is the owner and sole proprietor of App Tree Inc. (App Tree), a tree service company based in Woburn.  The Insurance Fraud Bureau of Massachusetts (IFB) referred this case to the Attorney General’s Office after an investigation into an insurance claim filed by an employee who was injured in a life threatening accident when he was crushed by a falling tree.   

According to authorities, App Tree was assigned to AIM Mutual Insurance Company (AIM) through the Assigned Risk Pool for workers’ compensation insurance in 1999.  Authorities allege that in an effort to evade high insurance premiums, App reported to AIM that he was the sole employee of the company and failed to disclose any information about additional employees.  Based on his reporting, App was granted the minimum premium rate on his policy. As a result of this alleged fraud, App put AIM unknowingly at risk to cover any employees who were not disclosed for injuries that occurred or might have occurred during the policy periods.    

Authorities allege that contrary to reports made to his insurance provider, App employed at least two full-time employees and a number of sporadic part-time workers at various times between 2005 and 2009.  As a result of this alleged premium avoidance scheme, App underpaid his workers’ compensation insurer a total of $42,115 in premium payments.  Additionally, AIM paid more than $700,000 in medical and disability payments to the injured employee.    

A Special Statewide Grand Jury returned indictments against App on June 15.  App was arraigned Tuesday afternoon in Middlesex Superior Court where he pleaded not guilty and was released on personal recognizance.  App is scheduled to appear in Middlesex Superior Court on August 14, for a pretrial conference.  Clerk Magistrate Matthew Day presided over the arraignment.

AG Coakley’s Insurance and Unemployment Fraud Division works to protect consumers and the integrity of the insurance system by investigating and prosecuting those who commit fraud against all types of insurers, including the Commonwealth’s unemployment insurance and workers’ compensation system.  The prosecution of insurance fraud helps prevent the increase in premiums and taxes that are the result of fraudulent insurance claims.  In 2011, the Insurance and Unemployment Fraud Division obtained $5,578,934 in restitution orders in 33 matters.         

Assistant Attorney General Jennifer Adreani of Attorney General Martha Coakley’s Insurance and Unemployment Fraud Division is prosecuting this case with assistance from the IFB.

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