Thomas McGrath started the concept that became NICA in 1993 as an informal association of independent contractor (IC) couriers (of which he was one) in the metropolitan area around Boston, Massachusetts. The principal purpose of this association was to provide a level of benefits to the association members, primarily workers' compensation insurance and annual tax return preparation, and to alleviate the costs associated with the courier companies' levying of exorbitant workers' compensation deductions against the ICs' commissions.

The concept caught on locally as more and more ICs within Mr McGrath's sphere of influence opted to take advantage of the cost savings, financial protection and tax compliance. On March 14, 1995, Mr. McGrath decided that he had the critical mass to operate on a more formal basis and incorporated as the National Independent Contractors Association, Inc. He shifted his focus from approaching the ICs individually to approaching courier companies, which had access to concentrated numbers of ICs, in order to inform potential new members about the program. As the young company grew and continued to expand its menu of services offered, new ways of providing occupational accident insurance (instead of workers' compensation) were tried. Most of these endeavors were novel concepts that had never been tried before or, at least, had never been tried successfully.

Because each of these attempts to invent a new way of doing things flew in the face of conventional wisdom about workers' compensation, Mr. McGrath started to attract the attention of powerful interest groups, such as the insurance industry and state workers' compensation regulatory agencies. The concepts that he was espousing were a direct challenge to the autonomy and cash flow of these institutions.

As a result of a complaint by his workers' compensation insurer at the time, the U.S. Department of Justice, through the Federal Bureau of Investigation, launched an investigation into Mr. McGrath's business practices in the fall of 1995. This investigation included a visit to NICA's offices on March 1, 1996, during which records and computer equipment were removed for examination. Despite this shock to his operation, Mr. McGrath continued to service his clients in as routine a fashion as could be achieved under the circumstances. He was even able to grow the business to a remarkable extent, as clients with faith in his concepts and expertise signed up for NICA's programs in spite of their awareness of his situation with the government.

The investigation culminated in a multiple count indictment alleging wire fraud, mail fraud, and workers' compensation premium fraud on August 20, 1996. These Federal statutes were invoked solely because Mr. McGrath, like any other contemporary businessman, did a majority of his business by telephone, fax and mail. Most of these counts were for conduct that occurred during the early stages of the NICA concept and/or with predecessor entities created to structure the concept as it grew geographically. These business practices and entities had long since been discarded by NICA as unviable, but the Government was holding NICA responsible for them nonetheless. (Se Exhibit 1)

Mr. McGrath retained counsel to fight the charges, despite his fledgling company's absolute inability to afford taking on the resources of the Federal Government. Tens of thousands of dollars of legal fees later, Mr McGrath's attorney advised him that the Justice Department had time and money on its side and, no mater how strong a case NICA had in fighting for the principles involved, the point of diminishing returns was quickly approaching.

After several pre-trial conferences with the United States District Court Judge and the Assistant US Attorney, the Federal Government extended an opportunity for a plea agreement to significantly reduced charges. All parties conceded that it was going to be very difficult to seat a jury and time consuming to try the case where all parties would be sophisticated enough to understand the complexities and nuances of workers' compensation law and independent contractor versus employee issues.

His attorney advised Mr. McGrath that the terms of a plea agreement, while abhorrent from a personal point of view, were something that NICA could live with from a practical perspective. Several of the counts would be dismissed outright. More importantly, the subject around which the government's case was initially based, the allegation of workers' compensation insurance premium fraud, would be expressly excluded from the judgment. On the advice of counsel, pressure from his family, and in order to stem the huge loss of time away from his family and the business, and the overwhelming outflow of money being spent defending the suit, Mr. McGrath reluctantly agreed to the plea agreement on January 13, 1997, on the remaining charges.

The penalty phase of the agreement, handed down on March 31, 1997, included fines of $20,000 and restitution of $43,977.34, the total of which was substantially less than the amount that Mr. McGrath had already spent on legal fees; it was a fraction of the amount that he could anticipate spending if the case were to go to trial. The restitution and fines derived solely from NICA's and Mr. McGrath's assets and were paid in full in court ordered installments by September 6, 2000.

It is important to note that, before, during, and after the indictment, trial and probationary period, Mr. McGrath was allowed by theCourt and the US Attorney's Office to run his business as usual, without interruption, including out of state travel as necessary. There was never an attempt by the Federal Government to close down the business through injunction or claims as to improper business practices. There was never any attempt by the Government to force premature collection of the restitution or fines, which could have easily jeopardized the ability of the company to stay in business. The fact that NICA was providing a valuable service in a lawful manner was recognized and implicitly, if not expressly, encouraged by the Federal Government. (See Exhibit 2)

It is interesting to note that there was a civil case, by the same workers' compensation insurance carrier that instigated the Federal case, brought against Mr. McGrath on February 7, 1997, less than a month after his Federal plea agreement. This case asked for compensation of $41,000 in premiums plus interest and costs for allegedly incorrectly classified ICs during the policy periods from June 30, 1994 to June 30, 1996. The Boston Municipal Court found in favor of M.r McGrath on March 9, 2000. (See Exhibit 3)

Considering the complexity and amount of gray area surrounding IC issues in many quarters, even to this day, NICA's survival within the context of a challenge of this magnitude is substantiation of its position on those issues. In the decade during which it has been in existence, NICA has ben able to successfully defend its position on IC issues and protect its clients from unemployment and workers' compensation challenges time and time again. (See Exhibit 4)

If further clarification of any of these issues is necessary, please contact Thomas McGrath at your convenience.