Unlicensed to Defraud

Closeup rear low angle view of an early 60's senior gentleman having some back pain. He's at doctor's office having medical examination by a male doctor. The patient is pointing to his lumbar region.

Unlicensed insurance agents are not allowed to engage in the sale, solicitation, or negotiation of insurance, but that didn’t stop Costa Mesa, Calif. resident Karyl Lynn Reed from allegedly collecting insurance premiums on nonexistent workers’ compensation policies. The 57-year-old supposedly defrauded multiple businesses out of more than $1.4 million. She pleaded “not guilty” to felony charges including embezzlement, grand theft, and forgery.

Reed acted as an unlicensed insurance agent who collected premiums for workers’ compensation insurance through a Huntington Beach office suite for two businesses including Envoy Business Partners and Allenn Specialty Group. Another business, Cultivate HR, Inc. was listed as operating from a residence in Costa Mesa.

Reed’s purported ruse provided fraudulent certificates of insurance to her victims, who thought they had valid workers compensation coverage. (It’s sad to say that they did not.)

Reed, who also operated a staffing company, did not provide workers’ compensation for her employees either. (This is against California law which says all employers in the state must provide workers compensation benefits to their employees.) She personally administered her employees’ injury claims. (Go figure. That was a good tactic for hiding her alleged crime.) Reed allegedly collected premiums and payroll, employer, and employee taxes, and provided forged certificates of insurance. (She was a one-stop shop.)

Reed, who was arrested in Seabreeze, Tex. and extradited to Orange County, Calif., faces 20 felony charges and enhancements for alleged criminal acts involving workers’ compensation fraud that took place over 7 years. Her alleged illegal actions put the livelihood of at least five business owners at risk. The victims include a property management company and autism therapy business in Los Angeles, a Santa Ana wholesale bakery, and an assisted living facility in Long Beach. (These business owners paid good money for workers’ compensation coverage they did not have or could not use.)

Department of Insurance officials learned that something was up when one victim reported that they had tried to verify certificates of insurance. Another victim discovered something was amiss when they tried to access benefits when an employee was injured. The third victim found out that the premiums paid to Reed’s staffing business were never remitted to the insurance company. (Sounds like the evidence is leaning heavily against the defendant.)

Of the $1.4 million that was lost by the three victims, Reed is believed to have taken more than $500,000. Prosecutors have charged her with a felony enhancement of aggravated white-collar crime. (If convicted, this could prolong any prison sentence that she would receive.) Reed, who is currently being held in an Orange County jail is scheduled for a pretrial mandatory settlement conference.

Today’s Fraud of the Day comes from an article, “Former Costa Mesa resident extradited to O.C. on suspicion of $1.4M workers’ comp fraud,” published by Daily Pilot on November 2, 2021.

A former Costa Mesa resident who allegedly defrauded businesses of more than $1.4 million by collecting insurance premiums on nonexistent policies pleaded not guilty last week to a slate of felony charges, including embezzlement, grand theft and forgery, officials reported.

Karyl Lynn Reed, 57, was arrested Oct. 7 in Seabreeze, Texas, and extradited to Orange County, where she faces 20 felony charges and enhancements for alleged criminal acts that took place between 2012 and 2019, according to an Oct. 27 release issued by the California Department of Insurance.


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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.