Zurik: State official’s companies sanctioned in two separate investigations

Lee Mallett’s companies were investigated twice for coverage provided to his companies through a state worker’s compensation program

Zurik: State official’s companies sanctioned in two separate investigations

NEW ORLEANS (WVUE) - A business owner who sits on two different state board has been sanctioned in two separate investigations surrounding insurance claims.

Lee Mallett listens to a speaker during the Louisiana Board of Supervisors meeting on March 20, 2019 in Baton Rouge.
Lee Mallett listens to a speaker during the Louisiana Board of Supervisors meeting on March 20, 2019 in Baton Rouge. (Source: Jon Turnipseed WVUE-TV)

The Louisiana State University Board of Supervisors website describes member Lee Mallett as a ‘respected businessman’ who has created businesses ‘that support good-paying jobs and give back to the community’ -- but Mallett’s companies have been investigated twice by state agencies in relation to coverage under a state worker’s compensation program.

Mallett, who also serves as chairman of the State License Board of Contractors, owns several manufacturing and construction companies in the Lake Charles area. In 2018, his companies purchased workers compensation insurance through a state created entity, the Louisiana Worker’s Compensation Corporation. The coverage protects workers hurt on the job, as long as their company signs up for coverage and pays a premium.

The premium is based on the salary of each employee.

When applying for the worker’s compensation coverage, one of Mallett’s companies, Progressive Buildings, claimed one employee drove the equivalent of New Orleans to Atlanta every day of the week.

State records obtained by FOX 8 show the company claims it paid the woman about $18,000 in wages and then paid her another $95,000 in mileage reimbursements. That figure is key because the premium paid to the worker’s compensation corporation is based on the employee’s salary, not their other earnings and reimbursements. So in this example, 84 percent of the employee’s total earnings were not included in calculating the premium paid to the state corporation.

The $95,000 in mileage reimbursements to the employee equals about 3,400 miles a week -- equal to the drive from the Mercedes-Benz Superdome in New Orleans to the Mercedes-Benz Stadium in Atlanta.

Tulane Law Professor Joel Friedman reviewed the investigations and said “this could not be by accident.”

In another filing, Progressive Buildings claimed another employee earned $17,000 in wages and $54,000 in mileage reimbursements. The Worker’s Compensation Board found the company paid many clerical workers more in mileage reimbursements than wages.

In total, investigators found one of Mallett’s companies paid 46 employees a total of $452,000 in wages and during the same time period the company paid $553,000 in mileage reimbursements.

The same company claims it made nearly $200,000 in donations to employees. Those donations are also excluded from the calculation of worker’s compensation premiums. The Worker’s Compensation Corporation canceled the coverage a month after Mallett’s companies signed up for the policy. The corporation started investigating right after the companies signed up for the insurance.

In 2005, investigators found another Mallett company had “the same sort of inaccuracies." Initially the company had a lower worker’s compensation premium -- $8,100 -- but after an extensive audit, investigators found the correct premium should have been nearly $1.3 Million.

“He’s been caught before,” Friedman said. “So this is a continuing course of conduct -- clearly a knowing course of conduct to defraud the worker’s comp board."

According to the Worker’s Compensation Corporation, after the audit, it asked Mallett to pay the correct premium -- $1.3 Million -- but it says rather than pay the premium owed, Mallett transferred the ownership of the company to his father who then put the company in bankruptcy.

In a filing sent to the Louisiana Department of Insurance about the latest allegations, Larry Bankston, Mallett’s attorney, wrote “the real motive was to punish Mallett for not paying the $1.3 Million debt.”

Bankston appealed the Worker’s Compensation Corporation’s ruling to cancel the coverage. Insurance Commissioner Jim Donelon heard that appeal and ruled against Mallett, writing Mallett’s companies “failed to provide complete and accurate information.”

In an e-mail to FOX 8, Bankston said, “I am not in a position to comment on this pending matter. We completely disagree with the decision.”

Mallett remains in position on the two state boards -- the Board of Supervisors and the State License Board of Contractors.

At April’s LSU Board of Supervisors meeting, Mallett declined to comment on the most recent allegations. His attorney, Larry Bankston, told Lee Zurik, Mallett’s companies were able to secure worker’s compensation coverage through the private marketplace. He also said any issues with the reimbursements and wages were done by an employee and those would be corrected.

Copyright 2019 WVUE. All rights reserved.