Whitesburg KY

Federal jury indicts 3 at insurance firm

County insurance agency are among five persons indicted on mail fraud charges by a federal grand jury.

John Pennington, 49, and his wife, Tena Lynn Pennington, 43, both of Stanton; Thomas J. Childers, 59, of Hazard; and Karen Lynetta Fox-Burns, 55, and her daughter, Shannon Ranee Hogg, 32, both of Whitesburg, were indicted last week.

The indictment alleges that John Pennington aided by Tena Pennington, Childers, Fox-Burns, and Hogg, devised a mail fraud scheme from 2003 to 2005 to defraud Kentucky Employers’ Mutual Insurance (KEMI) in Lexington, of workers’ compensation insurance premiums by misrepresenting to KEMI the number of employees and the amount of payroll of John Pennington’s company, ZAG Re sources Inc. Childers is the owner of CS&W Insurance Services Inc. in Whitesburg. Fox- Burns is a licensed insurance agent for CS&W, and Hogg works for CS&W as a customer service representative.

The indictment also alleges that John Pennington failed to pay federal taxes to the Internal Revenue Service that he withheld from his employees’ wages from 2003 to 2007.

James A. Zerhusen, Acting U.S. Attorney for the Eastern District of Kentucky; Robin Dangleish, postal inspector in charge, U.S. Postal Inspection Service; and Christopher R. Pikelis, special agent in charge, Internal Revenue Service, Criminal Investigation Division, jointly made the announcement after federal grand jury in Lexington returned the indictment May 1.

The investigation preceding the indictment was conducted by the U.S. Postal Inspection Service; the Internal Revenue Service, Criminal Investigation Division; and the Kentucky Office of Insurance, Fraud Division. The indictment was presented to the grand jury by Assistant U.S. Attorneys John Patrick Grant and Patrick H. Molloy.

The defendants’ appearance before the U.S. District Court has not yet been set by the court in Lexington. If convicted, they face maximum prison sentences of 20 years. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of sentences.

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