Sacramento, CA – Insurance Commissioner Dave Jones recently announced that Jerry Buffington, 69, and Cynthia Russell, 47, have pled guilty in Kern County Superior Court to one count each of workers’ compensation insurance premium fraud and eight counts each of tax evasion. Buffington and Russell were ordered to pay restitution to State Compensation Insurance Fund in the amount of $475,100 and $127,899 to the Employment Development Department (EDD). Both have been ordered to serve 10 years probation.
According to detectives from the California Department of Insurance (CDI) Fraud Division, Buffington was the owner and President of Safehome, Inc. Buffington’s daughter, Cynthia Russell, was the Chief Financial Officer for the business. Their guilty pleas are a result of an investigation led by CDI’s Fraud Division while working with the San Joaquin Valley Premium Fraud Task Force, which is a coalition of multiple agencies working together to investigate workers’ compensation insurance premium fraud and tax evasion cases. The coalition consists of District Attorney Offices from the counties of, Kern, Fresno, Tulare, Kings, and Merced. CDI’s Fraud Division, EDD Investigation’s Division, and the National Insurance Crime Bureau are also in the coalition.
On November 7, 2007, State Compensation Insurance Fund (SCIF) discovered Safehome, Inc. was under-reporting their employee payroll in order to avoid paying the proper premium. An audit was completed and indicated that Safehome, Inc. had failed to pay the proper premiums for their workers’ compensation policy in the amount of $477,285. Additionally, SCIF determined the business was operating out of its classification which was registered as an alarm company yet several employees were operating as roofers. The payroll related to the roofing portion of the business was never reported to either SCIF or EDD. During the investigation a separate set of payroll records was located and corroborated the evidence that the business had not reported payroll to SCIF and EDD as required. The Task Force investigated the case and filed a complaint with the Kern County District Attorney’s Office who charged the two with insurance fraud and tax evasion.
Buffington was convicted of one felony count for violating Insurance Code Section 11880(a), False or Fraudulent Statement, four felony counts for violating Unemployment Insurance Code Section 2117.5, Failure to File Return or Report, and four felony counts for violating Unemployment Insurance Code Section 2118.5, Failure to Collect or Pay Taxes.
Cynthia Russell was convicted of one felony count for violating Insurance Code Section 11880(a), False or Fraudulent Statement, four felony counts for violating Unemployment Insurance Code Section 2117.5, Failure to File Return or Report, and four felony counts for violating Unemployment Insurance Code Section 2118.5, Failure to Collect or Pay Taxes. In addition, she was ordered to perform 400 hours of community service.
The Kern County District Attorney’s Office prosecuted the case.
Source: CDI