January 14, 2020 / 5:17 PM / in 10 days

Chile's Codelco says uncovered $22 million insurance fraud involving unions

SANTIAGO (Reuters) - Chile’s state-owned Codelco, the world’s largest copper producer, said on Tuesday it had filed a lawsuit over an alleged scam in insurance contracts drawn up by unions for workers at its Chuquicamata and Radomiro Tomic mines.

FILE PHOTO: Codelco's logo is seen at the entrance of its Ventanas copper smelter in Ventanas, Chile October 18, 2019. REUTERS/Rodrigo Garrido

The firm said in a statement that inflated premiums for life and personal accident insurance had cost $22 million between 2005 and 2018, half of which had been borne by the company and half by its workers.

The alleged fraud comes at a time when relations between Codelco and unions at the century-old Chuquicamata mine are already strained by its transformation from open cast into an underground mine, with an associated reduction in headcount.

The unions said in a statement that all insurance agreements had been signed off by Codelco’s human resources managers.

“We are ready to support prosecutors in every way we can to ensure this investigation reaches the appropriate conclusion,” it said in a statement sent to Reuters.

Chile’s El Mercurio newspaper reported on Tuesday that an audit conducted by Chile’s Copper Commission Cochilco put the premiums at as much as 68% higher than the standard market rate.

The newspaper said that at least two unions would have received payments for contracting policies offered by insurance broker Gestion y Servicios (GyS).

“Agreement documents were found that were signed by GyS and union officials in which the payment of benefits to the unions - regardless of the nature of the policies - was offered in exchange for automatic insurance renewals,” Codelco added.

The miner asked prosecutors to interview insurer Chilena Consolidada - a unit of Zurich Insurance Group (ZURN.S), as well as the broker GyS, in addition to 50 union leaders and former bosses of the mines involved.

A spokesman for Chilena Consolidada said the company would not comment while judicial proceedings were ongoing. GyS did not return Reuters’ request for comment.

Reporting by Fabian Cambero; writing by Aislinn Laing

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