Former El Dorado Hills resident Skimmed Millions from Indian Tribe's Insurance Company

by Placerville Newswire / Feb 11, 2016 / comments

A former El Dorado Hills resident now living in Wisconsin, he remains free on bond pending sentencing. 

BY DALE KASLER, Sacramento Bee: Roseville businessman Gregory J. Chmielewski had what seemed like a brilliant idea: Create an alternative low-cost version of workers’ compensation insurance, at a time when the price for traditional coverage was soaring out of sight in California.

It was a failure, and a fraud. Chmielewski, 46, pleaded guilty to two counts of fraud in Sacramento last month, admitting he skimmed millions of dollars from the tiny Indian tribe that financed the operation while leaving scores of injured workers in the lurch.

Chmielewski’s guilty plea came nearly a decade after his scheme unraveled – and served as a sad epilogue to an era in which the rising cost of treating injured workers raged as a hot political issue across California.

More than a decade ago, workers’ comp insurance premiums were driving employers crazy, and newly elected Gov. Arnold Schwarzenegger was scrambling for an answer. Chmielewski was one of a handful of entrepreneurs who thought they could profit from the crisis by partnering with Indian tribes.

Chmielewski convinced the Fort Independence Community of Paiute Indians, in Inyo County, to bankroll a company that would offer discount coverage by using tribal laws to cut through the red tape plaguing the state-run system.

The company they created, Independent Staffing Solutions of Roseville, signed up dozens of clients but fell apart after four years in business. Independent Staffing was unable to pay its bills despite hauling in $225 million in revenue from employers during its brief life.

What went wrong? In a written plea agreement filed in U.S. District Court in Sacramento, Chmielewski said he siphoned $7.3 million from Independent Staffing in order to fund his personal real estate investments.

Chmielewski likely will get a prison term of 41 to 51 months when he’s sentenced in April, according to the terms of the written plea agreement he signed. A former El Dorado Hills resident now living in Wisconsin, he remains free on bond pending sentencing...

Chmielewski’s case took some odd turns. He was indicted by a grand jury in Sacramento in February 2011, but police couldn’t find him to make an arrest for 20 months. When he was finally caught, standing outside his girlfriend’s apartment in Glendale, Ariz., he tried to pass himself off as someone else, according to court records. Over the objections of prosecutors, Chmielewski was eventually released after his father posted a $215,000 bond, and he’s remained free ever since...

Controversy erupted almost immediately. The state Department of Insurance and Department of Industrial Relations took the position that the tribes weren’t licensed to sell workers’ comp insurance and that the service they were selling was illegal.

Injured workers said the tribal programs often ran roughshod over their legal rights. In the traditional system, they could appeal to a state-run board if they felt they weren’t getting proper medical care or the disability payments they deserved. With Mainstay and Independent Staffing, they were stuck arguing their case before councils run by the tribes.

“There was no way to enforce those benefits,” said Melissa Brown, a Sacramento lawyer who represents injured workers. “You could never get a hearing.”...

For a while, the case loomed as a test of sovereign immunity, the legal doctrine that gives tribes broad protection to manage their own affairs. Blue Lake sued the state, saying it was illegally meddling in tribal business. The state said sovereign immunity didn’t extend to businesses that were operating outside reservation borders...

After Independent Staffing fell apart, the Fort Independence tribe pursued a more traditional method of making money. In 2008, the tribe opened a small casino.

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