San Diego Trio Pleads Guilty to WC Scam

September 5, 2003

Three San Diego residents must pay more than $125,000 in restitution after pleading guilty to insurance fraud in a case that highlights the danger to employers of bogus workers’ compensation insurance.

The convictions followed an investigation by the California Department of Insurance (CDI) Investigation Division, which found that the trio’s American Employees Benefits Association (AEBA), allegedly marketed an illegal employee benefit package billed as an “alternative to workers’ compensation insurance.” Duped employers did not learn the truth until claims were filed for injured employees.

“This is a serious threat to employers in California who are so desperate for relief from soaring workers’ compensation insurance premiums,” said Insurance Commissioner John Garamendi. “If you, as an employer, hear an offer for workers’ comp coverage that sounds too good to be true, beware. It’s probably bogus.”

Garamendi warned that employers without valid coverage, no matter the circumstances, are subject to fines and the immediate closure of their business. He called bogus workers’ compensation insurance a growing problem and a high priority for CDI.

In the AEBA case, the three suspects marketed a package offered by the United Employees Trade Association falsely claiming it “meets and exceeds all state requirements for workers’ compensation insurance.” Businesses that bought the insurance were left without coverage when employees filed claims and were also subject to fines for not having valid insurance.

The suspects include Richard White, 70, who pled guilty to three felony counts of transacting insurance without a certificate of authority. Gary Miller, 58, pled guilty to one misdemeanor count of transacting insurance without a certificate of authority. On Aug. 21, both White and Miller were sentenced to five years probation. White was fined a total of $92,609 and Miller fined $1,286 and sentenced to perform 15 days of public service. The two men were also ordered to pay $27,602 in restitution to two of the victims.

The third suspect, Monique Martinez, 57, pled guilty to one misdemeanor count of misrepresentation of the terms of an insurance policy. At the time of the plea agreement on April 11, she was fined $200.

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