State Fund Awarded $800,000 in Workers’ Comp Fraud Case

March 1, 2004

State Compensation Insurance Fund will collect $800,000 in restitution from two former owners of a San Diego County-based construction company. This award followed their guilty plea on felony workers’ compensation insurance fraud and tax evasion charges in San Diego County Superior Court on Thursday.

State Fund — whose audits played a critical role in the San Diego County District Attorney’s investigation — will collect approximately $800,000.00 in workers’ compensation insurance premiums owed the Fund under the plea bargain by Fallbrook resident Robert Covington, 44, and Del Mar resident Donald Huffman, 62.

Covington and Huffman — who also pleaded guilty to tax evasion charges — owned C & H framing which State Fund insured from 1998 through 2003. State Fund audits reportedly revealed that Covington and Huffman falsified information to avoid paying proper workers’ compensation premiums beginning in 2000 through 2002.

“This case underscores State Fund’s ongoing commitment to investigate and fight all types of fraud which robs California’s employers of millions of dollars each year,” said Donna Gallagher, who manages State Fund’s Fraud Investigation Program (FIP). “Through our Fraud Investigation Program and positive relationships with law enforcement officials, State Fund will continue its effort to protect California’s employers and employees and the integrity of the workers’ compensation insurance system.”

Covington and Huffman — who pleaded guilty to felony counts involving workers’ compensation insurance fraud (Insurance Code 11880), state income and payroll tax evasion and conspiracy to file false tax returns — are scheduled to be sentenced March 25 in San Diego County Superior Court. Both defendants could face up to five years and eight months in prison.

The two men — who have already paid approximately $182,000 in restitution to the State Franchise Tax Board — will also have to pay restitution to the State Employment Development Department under the plea bargain which capped a multi-year investigation aided by State Fund.

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