California Receives $6.3 Million in Workers' Comp Fraud Case

June 10, 2008

California Insurance Commissioner Steve Poizner announced Cover All, Inc., a 15-year old flooring and carpet installation company headquartered Chatsworth, pled no contest to one count of insurance fraud in Los Angeles County Superior Court. On June 2, 2006, the corporation was placed on five years probation and ordered to pay $6.3 million restitution to the victim, State Compensation Insurance Fund (SCIF).

The case was referred to the California Department of Insurance's Fraud Division (CDI) by SCIF and prosecuted by the Los Angeles County District Attorney's Office.

"Fraud is a major cost-driver in California's workers' comp system," stated Commissioner Poizner. "Businesses are hurt, injured workers suffer, and consumers pay more because workers' comp rates are artificially raised by people cheating the system."

On September 1, 2001, Cover All obtained a workers' comp insurance policy from SCIF, which routinely conducts audits of its policyholders. In this case, the audit revealed that the payroll reported to SCIF was significantly lower than that reported to the state's Employment Development Department. The investigation alleges that Zeev and Irit Golan were responsible for preparing the fraudulent monthly payroll reports provided to SCIF, and that those reports were reviewed and approved by Leshem. It was also alleged that Leshem and Zeev Golan provided to SCIF fraudulent payroll documents during the routine audit.

CDI's investigation determined that from September 1, 2001 to April 16, 2005, Cover-All underreported $26.9 million in payroll to SCIF, which resulted in a premium loss of $7.6 million.

Source: California Department of Insurance.