“On reaching the place, he said to them, “Pray that you will not fall into temptation.”

-Luke 22:40

While I firmly believe that people are largely good and honest, I recognize weakness and temptation as elements of the human condition. Former Oklahoma Congressman J.C. Watts used to quote his grandfather as saying, “Character is doing the right thing; even when no one is looking”. Most people will endeavor to do just that, but, as a California court case showed this week, not everyone will be truthful and just when left to their unverified devices.

46 Year old Gregory J. Chmielewski operated Management Resources Group California LLC, which also went by the name Independent Management Resources. That company was supposed to sell workers’ compensation insurance, but not the normal “subject to State oversight” kind we are accustomed to. Chmielewski negotiated agreements with a California Indian tribe to collaborate on business ventures and sell “alternative insurance plans” not subject to the state’s insurance regulations. They were able to do this because the operations were under the sovereign domestic nation status of the tribe. 

According to the Sacramento Business Journal, “Prosecutors say Chmielewski in 2003 set up Management Resources Group California LLC to sell workers’ compensation insurance. Chmielewski then worked with Fort Independence Community of Paiute Indians near Death Valley to create a professional employer organization called Independent Staffing Solutions, managed by his Management Resources Group.” (Our CompNewsNetwork also carried the story here)

They say that from 2004 through 2007, more than $225 million passed through Independent Staffing Solutions accounts. The company promised it would maintain a financial reserve but prosecutors claimed Chmielewski used $7.3 million of the money in those accounts for his own personal real estate investments. Independent Management Resources went out of business in 2010 through a Chapter 7 bankruptcy liquidation. An estimated 117 injured workers were left with approximately $1.8 million in unpaid claims.

All because a system was established that was not subject to any oversight. 

On Friday Chmielewski pleaded guilty in Sacramento Federal Court to two counts of mail fraud for transferring business funds for his own personal use. He will be sentenced April 1st.

There has been a tremendous amount of discussion in recent months about the “need” for alternative workers' compensation plans. Promoters of the concept, commonly known as “Opt Out”, have added the word “Responsible” as part of the slick marketing effort to convince state legislators that their plans are superior to traditional workers' compensation systems. Yet, in Oklahoma where Opt Out already exists, and in states where legislation is pending to enact it, they doggedly insist that no oversight is needed. In fact, they have made Herculean efforts to keep the systems closed and away from prying eyes; even the application/approval process in Oklahoma is now largely confidential. 

Proponents claim that state oversight and activity reporting are “burdensome”, and that they are only acting in the best interests of the employees who work for them. I honestly believe the intent of most employers who embrace these plans is good; they simply wish to escape a chaotic and confusing comp industry in need of overhaul and simplification. Yet the details of the plans that we have seen sometimes belie that sentiment. And the steadfast refusal to allow any oversight whatsoever, instead saying, essentially, “Trust us, we are doing great”, leaves the potential for tremendous abuse. 

For many opponents to Opt Out, including myself, the primary objection to the concept is not the light of alternative ideas, but rather the darkness of a closed and unverifiable system. The potential for tremendous abuse exists when no one is looking or is occasionally allowed to peek beyond the veil of secrecy. The California fraud case proves that point without argument. 

We can only hope that when employers reach “the place”, that they will do the right thing. After all, the way these plans are structured, “hope” is the only tool in our arsenal.

“Never take your word of truth from my mouth, for I have put my hope in your laws.”

– Psalm 119:43



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