December 5, 2017

CA Employers Indicted for Unemployment & Workers’ Comp Fraud

San Diego, CA – San Diego County District Attorney Bonnie M. Dumanis recently announced charges against four businesses, their owners and several employees who were indicted on various types of insurance fraud including workers compensation fraud, unemployment fraud and tax evasion.

Owners of A1 Patio and Remodeling Experts in Encinitas, Christina Engineering in Escondido, Quality Way Building Maintenance in National City and Rufino’s Landscaping of Escondido were all indicted by the grand jury in December for their roles in bilking insurance companies and the state tax board out of $1.5 million. Fourteen defendants were indicted in December. Of those, four were arraigned on January 6, and the remainder is scheduled to be arraigned at 1:30 p.m. today in Department 11 of the downtown San Diego Superior Court. They include Joshua Swarthout, James Hooper, Andrew Curtis, Billy Ray Alsbrook, George Norton, Jacob Kuhn, Pat Gee, Tim Mountney, and Tom Jarvis. If the defendants fail to appear for arraignment, warrants will be issued for their arrest.

“Insurance fraud costs Americans across the country $80 billion a year,” DA Dumanis said. “In California, it costs consumers $15 billion annually. The conduct of these defendants is a slap in the face to law abiding businesses and to employees who are out of work and whose legitimate unemployment benefits have expired.”

Those indicted include:

  • Russ E. Kubart of A1 Patio and Remodeling Experts. When an employee of Kubart’s injured himself after falling from a deck at a jobsite, Kubart told the employee to tell medical staff he injured himself at home because Kubart did not have workers’ compensation insurance. Loss to known victims is $160,000.
  • Ten employees of Christina Engineering were indicted for their roles in receiving unemployment benefits at the same time they were being paid cash to work, which they were encouraged to do by their employer. Loss to known victims is $350,000.
  • Marcos Castaneda, of Quality Way Building Maintenance was indicted on four counts of felony insurance fraud for his role in intentionally lying about his payroll in order to receive reduced workers compensation premiums. Loss to know victims is $133,921.
  • Rufino Aguiluz and his wife, Maria Foulk of Rufino’s Landscaping, were indicted on several counts of insurance fraud, payroll tax evasion and income tax evasion for their roles in failing to report payroll to various workers’ compensation insurance carriers and tax collectors. Loss to known victims is $952,202.
  • Several law enforcement and insurance partners worked with the District Attorney’s Office to bring this case to fruition, each of whom weighed in below.

    “Last fiscal year 2012-13, my department received more than 5,000 referrals for suspected workers’ compensation fraud, with losses totaling more than $340 million,” said California Insurance Commissioner Dave Jones. “The impact of fraud is felt across California businesses and is a drain on our economy. I look forward to another successful year of investigations with the San Diego District Attorney’s Office to uncovering workers’ compensation fraud schemes and prosecuting those who mislead insurers and employers.”

    “The real victims are the honest business owners, who can’t compete against fraudsters like these, and the millions of honest California taxpayers, who pay more because tax evaders aren’t paying their fair share,” said John Chiang, California Controller and Franchise Tax Board Chairman. “I am pleased that FTB’s investigators assisted the San Diego District Attorney’s Office and our sister agencies in the arrests and indictments of these suspects.”

    “Businesses that commit workers compensation premium fraud not only raise costs for their honest competitors, but also put the health and financial well-being of their workers at risk, said Dennis Jay, Executive Director of Washington, D.C.-based Coalition Against Insurance Fraud. “We applaud San Diego County for going after these cheaters. This anti-fraud initiative will help other businesses stay honest, protect employees and will lead to fairer insurance rates for all.”

    “The integrity of the California workers’ compensation system depends on employers, workers, insurers and providers working together in good faith,” said Carol Newman, Acting President and CEO of the State Compensation Insurance Fund. “The State Fund appreciates the ongoing efforts of the San Diego District Attorney in combating this serious fraud, which threatens the health of California’s economy.”

    “Whether it’s payroll tax evasion or against the employer-funded unemployment insurance program, fraud is costly to all of us.” said Employment Development Department Chief Deputy Director Sharon Hilliard. “Our department and its dedicated investigators and auditors are committed to detecting and deterring fraud, and ensuring justice is served in these cases and any other where individuals are cheating a system meant to benefit hard-working Californians and businesses.”

    “These are excellent examples of the variations found within the underground economy that continues to negatively impact the California Workers’ Compensation system,” said Donald Marshal, Chair of the California Workers’ Compensation Fraud Assessment Commission. “We can see that the victims of these alleged crimes include injured workers and the citizens of the State who must absorb the costs paid for this criminal activity. Congratulations to the San Diego District Attorney’s Office and the California Department of Insurance for their hard work in disrupting the activities of these suspected criminal enterprises.”

    Source: San Diego DA’s Office

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