Kentucky Residents Indicted in Fraud Against Carrier

John Pennington, 49, and his wife, Tena Lynn Pennington, 43, both of Stanton, Ky.; Thomas J. Childers, 59, of Hazard, Ky.; and Karen Lynetta Fox-Burns, 55, and her daughter, Shannon Ranee Hogg, 32, both of Whitesburg, Ky., have been indicted for mail fraud.

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, Ky., of workers’ compensation insurance premiums by misrepresenting to KEMI the number of employees and the amount of payroll of John Pennington’s company, ZAG Resources Inc. Childers is the owner of CS&W Insurance Services Inc., in Whitesburg, Ky. Fox-Burns is a licensed insurance agent for CS&W, and Hogg works for CS&W as a customer services 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.

The defendants’ appearance before the United States District Court has not yet been set by the Court in Lexington, Ky. 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 United States Sentencing Guidelines and the federal statute governing the imposition of sentences.