One of the US' larger providers of outsourced human resource management services has been accused of passing counterfeit letters of credit (L/Cs) for the second time in a year.

The latest allegations that Certified HR Services and its subsidiaries have been using the fraudulent documents to obtain insurance are made by one of its former partners, North Carolina-based BACE International.

Overstated financials

In a suit brought by BACE in the North Carolina court, Certified and other defendants are accused of conspiring to defraud the plaintiffs in the course of transferring and selling all of its human resource service operations and by providing allegedly fraudulent L/Cs to the plaintiffs' worker's compensation insurers.

The accusation made by BACE against Certified is the latest episode in a dispute between the two companies that dates back to July 2003 when Certified agreed to acquire BACE's professional employer organisation subsidiary, StaffAmerica.

At that time, Certified agreed to pay BACE US$17.3 million for StaffAmerica. Certified later backed out of that deal because it said that BACE had overstated the value of StaffAmerica. BACE denies that charge and is now demanding that the court enforces the terms of the acquisition.

Counterfeit collateral

In October 2003, a group of insurers sued another Certified subsidiary, the Cura Group, for fraud. It is accused of issuing US$37.7 million in counterfeit L/Cs as collateral to cover costs associated with worker injuries.

The Cura Group denies these claims and the case related to the matter remains pending in a Florida court.

Co-employer status

Certified provides several human resource and benefits management and administration services, including payroll and payroll taxes, workplace risk management, and government regulatory compliance.

The way in which the company provides these services means that a subsidiary can effectively become a co-employer for some purposes such as human resource responsibilities, while the client remains in operational control of its employees.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.