Hamberger & Weiss LLP

Illegal Drug Sale Conviction Forms Basis for Successful Section 114-a Fraud Claim

In Adams v. Black Horse Carriers, Inc., decided 9/29/16, the Appellate Division reaffirmed its previous holdings that illegal work is still work for purposes of the workers’ compensation law fraud statute under §114-a. Claimant, convicted of criminal sale of a controlled substance in the third-degree, denied receiving any income while receiving workers’ compensation benefits. When he denied receiving income, he had already been convicted of the drug sale charge. The court affirmed the Board’s fraud finding and discretionary disqualification from indemnity awards, citing claimant’s drug sale conviction as evidence of income, combined with claimant’s admission that he had received drugs as compensation for his illegal work activities.

The principle that an illegal activity, such as drug dealing, could form the basis for a fraud claim under §114-a was litigated by our firm and affirmed by the Appellate Division in Johnson v. New York State Dep't of Transportation, 305 A.D.2d 927 (3d Dep't 2003),which was cited by the court in Adams.

Demonstrating a creative side, the claimant asserted that his due process rights were violated by allegedly not receiving adequate notice of the false statement forming the basis for the fraud claim before his fraud trial. The court rejected this argument because claimant and his counsel knew the drug sale conviction formed the basis for the fraud claim, even if specific false statements were not identified by the carrier before the fraud trial commenced. The court also noted that claimant’s attorney had access to transcripts from the criminal proceeding and other information, implying that some good old fashioned investigation by claimant’s counsel would have readily identified the basis for the fraud claim.

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