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Justice News

Department of Justice
U.S. Attorney’s Office
Eastern District of California

Friday, August 19, 2016

Former El Dorado Hills Man Sentenced for Scheme that Misappropriated Millions of Dollars of Workers’ Compensation Funds

SACRAMENTO, Calif. — Gregory J. Chmielewski, 46, of West Bend, Wisconsin, was sentenced today by U.S. District Judge Garland E. Burrell Jr. to three years and five months in prison for mail fraud in connection with his misappropriation of funds from his insurance business into his own personal accounts for his personal use, Acting U.S. Attorney Phillip A. Talbert announced.

According to court documents, between September 2003 and September 2007, Chmielewski defrauded his clients and their employees in a workers’ compensation coverage scheme. During this time period, Chmielewski set up a professional employer organization called Independent Management Resources (IMR), later operating under the name Management Resources Group (MRG), which he operated from Healdsburg until relocating to Roseville in 2006.

He solicited an Indian tribe to partner with him to provide employee insurance coverage and other employee services at a reduced cost. Chmielewski marketed the insurance coverage to California employers as a low-cost alternative to workers’ compensation coverage, and he claimed that it was modeled after the California workers’ compensation statutes except that claims were made and adjudicated under the Tribe’s sovereign system. Because of the low rates, Chmielewski was successful in obtaining employers as clients.

Chmielewski diverted and misappropriated millions of dollars from MRG accounts for his personal use. He caused over $7.3 million to be paid out of MRG’s accounts to other unrelated companies that he controlled. Eventually, the company experienced serious cash flow problems and was forced to cease operations, leaving approximately 117 injured workers with approximately $1.8 million in unpaid claims.

Acting U.S. Attorney Talbert stated: “Many of the victims harmed in this scheme were companies in California’s construction industry, whose employees worked as roofers, general laborers, and other jobs where injuries can occur. The defendant’s actions left many injured workers without the benefits they expected and deserved. Our office is committed to prosecuting large-scale schemes such as this that hurt employers and workers alike.”

“While Chmielewski lined his pockets with the money he stole from California employers, he left injured workers without the workers’ compensation benefits and medical treatment they needed and deserved,” said Insurance Commissioner Dave Jones. “Thanks to the hard work of our investigators at the Department of Insurance and our law enforcement partners in the U.S. Attorney’s Office, Chmielewski’s crimes were exposed, and he has been brought to justice.”

“The license to operate a business is not a license to steal from those whom you are hired to protect,” said Cindy S. Chen, Acting Special Agent in Charge, IRS Criminal Investigation. “The misconduct of Chmielewski harmed those that needed his help during a time they were very vulnerable. Today’s sentence demonstrates IRS Criminal Investigation’s determination to combat financial fraud in all types of schemes.”

San Francisco Inspector in Charge Rafael Nunez of the U.S. Postal Inspection Service stated, “Postal Inspectors worked closely with the U.S. Attorney’s Office and our partners in law enforcement on this investigation and will continue to vigorously protect the public against complex fraud schemes and the criminal misuse of the U.S. Mail.”

This case was the product of an investigation by the United States Postal Inspection Service; the Internal Revenue Service, Criminal Investigation; and the California Department of Insurance. Assistant U.S. Attorneys Heiko P. Coppola and André Espinosa prosecuted the case.

Financial Fraud
Press Release Number: 
2:11-cr-084 GEB
Updated August 19, 2016