SAUGUS — Two Saugus residents who own a cleaning company in Malden have been indicted and arraigned in connection with an insurance fraud scheme.
Marcello Pompa, 40, was indicted by a Statewide Grand Jury on five charges of workers compensation insurance fraud and five counts of larceny over $250, according to Attorney General Maura Healey.
Marcelia Freitas, 43, was indicted on two counts of workers’ compensation insurance fraud. Both defendants were arraigned in Middlesex Superior Court, where they pleaded not guilty and were released on personal recognizance. They are due back in court Dec. 13 for a scheduling conference.
Healey alleges that between 2010 and 2016, Pompa and Freitas falsely claimed that they used three subcontractors through their company, M&M Cleaning, Inc., to lower their workers’ compensation insurance premiums.
Investigators allege that Pompa falsely claimed the work was performed by subcontractors, concealing more than $2.8 million in M&M’s payroll. Through this scheme, Healey alleges that M&M evaded paying more than $74,000 in workers’ compensation insurance premiums.
As a result of this alleged intentional misclassification, Pompa and Freitas won multiple contracts, including municipal contracts throughout Massachusetts, by offering a substantially lower price for their cleaning services than their competitors during the bidding process, according to a statement from Healey’s office.
Misclassification is an increasingly common way for employers to avoid their legal obligations to employees and to unfairly compete in the marketplace, according to Healey. Employers that misclassify their workers avoid paying their fair share of unemployment insurance and worker’s compensation contribution.
Misclassification not only puts at risk a much-needed safety net for workers injured on the job, but also raises costs on other employers, she said.
This case is being prosecuted by Assistant Attorney General Geoff Wood with assistance from Michelle Silva, both of Healey’s Insurance and Unemployment Fraud Unit and from investigators at the Insurance Fraud Bureau.
