Fraud Roundup
California State Fund receives $566,000 in restitution
California’s State Compensation Insurance Fund received $566,480 in restitution from a Marin County roofing company owner convicted of workers’ compensation fraud. Kenneth Scott Cooper, 51, of San Rafael, made full restitution to State Fund after pleading guilty on Nov. 1, 2005, to three felony charges: worker’s compensation insurance premium fraud; furnishing a false payroll deduction statement and filing a false tax return.
An 18-month multi-agency state investigation found that Cooper, a licensed general contractor, failed to accurately report employee payroll at Ken Cooper Roofing and Gutter Systems of Marin County from 1999 to 2003. Participating in the investigation were State Fund, the California Department of Insurance (CDI), the Franchise Tax Board (FTB), the Employment Development Department (EDD) and the Marin County District Attorney’s Office.
The fraud was originally uncovered when one of Cooper’s employees fell off a roof. The injured worker filed a workers’ compensation claim and revealed that Cooper’s company had been paying him in cash approximately 50 percent of the time, which led to the lower temporary-disability payment.
A multi-agency audit was conducted of Cooper’s business records, which revealed that Cooper underreported and misreported employee payroll to lower his insurance premiums. Specifically, Cooper’s scheme involved paying more than 50 percent of his payroll in cash to underreport his total employee payroll; reporting inflated hourly wages for some employees; and not identifying some of his employee payroll as “roofer wages” to avoid roofer-related premiums that are greater than premiums for other, lower-risk occupations.
State Fund investigators referred the case to the Marin County District Attorney’s Office, which filed charges against Cooper on May 10, 2005.
Phoenix man sentenced for defrauding workman’s comp fund
A Phoenix man was sentenced to three years of supervised probation after being convicted of defrauding the State Compensation Fund of Arizona (SCF), the state agency that provides workman’s compensation coverage for more than 54,000 Arizona employers.
Benny O. Green, 48, was convicted by a Maricopa County Superior Court jury of false statements to obtain compensation, a Class 6 felony. Green was receiving monthly benefits from the SCF.
To receive benefits, Green was required to complete annual forms indicating any employment and wages. The forms he submitted to the SCF indicated that he was not employed and did not have any wages to report. Green was in fact working for a woman in California, who testified for the prosecution.
In addition to being placed on probation, Green’s benefits were cut off as a result of the guilty verdict. Assistant Attorney General Jacqueline Schesnol prosecuted the case.
Former agent pleads guilty to fraud
and grand theft
A San Diego insurance agent/broker who failed to send clients’ premium funds to insurance companies, causing the victims to lose more than $150,000, has pled guilty to one count of insurance fraud and one count of grand theft, according to the California Department of Insurance.
According to Insurance Commissioner John Garamendi, Oscar Serron, 52, a former insurance agent and broker from San Diego, entered his plea following a a probe by the CDI Investigation Division of consumer complaints received during 2003 alleging that Serron committed insurance fraud involving premium theft. Serron, who entered his plea July 31, was the owner of First Preferred Insurance Services located in Oceanside, Calif.
Documentary evidence seized from Serron’s office in 2004 revealed names of clients and policies that had not been placed after premiums were paid to Serron. Several individuals who purchased auto insurance policies from Serron were involved in car accidents and, without their knowledge, were not insured at the time of the accident. One victim who had purchased homeowner’s insurance suffered a major loss when her home was destroyed due to a fire.
All of the victims thought they were insured when in reality they had no coverage because of Serron’s failure to forward the premium funds to the insurance companies. The documented total loss suffered by the victims is more than $150,000.
Serron was arrested in Wisconsin in November 2005. The San Diego County District Attorney’s office is prosecuting the case.
As part of the plea agreement, Serron agreed to have all his licenses revoked. Victim restitution is to be decided at a later date. Serron is currently at his residence in Wisconsin where he is awaiting his sentencing scheduled in San Diego on Dec. 11, 2006.
Three Californians arrested
for submitting bogus claims
Two of three suspects in California, allegedly involved in a conspiracy and grand theft case from the Automobile Club of Southern California (AAA), are scheduled to be arraigned on 62 felony counts, the California Department of Insurance (CDI) reported. CDI assisted in the arrests of the three suspects along with the Riverside County District Attorney’s Office.
Drake Reed, 32, of Highland, and two of his acquaintances, Jerry Schatz, 45, of Moreno Valley, and Joshua Belville, 30, of Highland, were charged with the felony counts of grand theft and conspiracy to commit a crime after their arrests on July 26. Reed and Schatz were booked into the Robert Presley Detention Center, where they remain in custody. Bail for Reed is set at $208,000; bail for Schatz is $322,000. Both suspects are scheduled to be arraigned in Riverside Superior Court. Belville surrendered to authorities and was released on $32,000 bail. He is scheduled to appear in court on Aug. 22.
The case began on April 19 when the Riverside County District Attorney’s Bureau of Investigations was contacted by the Special Investigations Unit of AAA regarding a case of internal theft allegedly committed by a claims adjuster. The Automobile Club of Southern California alleged that Reed, a former claims adjuster with the company, was suspected of participating in a conspiracy with Belville and Schatz. The trio allegedly filed false claims on their own policies, as well as fake claims on 33 auto and homeowners policies totaling more than $595,000.
The three individuals allegedly submitted inflated claims for items such as home repairs, vehicle burglary and personal property theft. Reed also allegedly issued checks on closed claims using his manager’s computer password to authorize the checks. He then deposited the funds into fictitious business accounts allegedly created by Schatz.
According to investigators, Reed netted $208,085, Schatz received $322,440 and Belville acquired $32,985 in fraudulent proceeds from the inflated claims.
On July 25, investigators from the Riverside County District Attorney’s Office and the California Department of Insurance’s Fraud Division served search warrants at the homes of the men. Items seized included financial information such as tax returns, bank statements and computers. Investigators found boats, recreational vehicles, motorcycles and classics cars at the residences.
If convicted, Reed could face 43 years in state prison. Schatz could face 33 years. And Belville could face 10 years.