California authorities arrested four suspects early Friday morning after an extensive investigation into a workers’ compensation and payroll tax fraud scheme, one in which the suspects allegedly underreported the payroll of their Saratoga firm by nearly $5 million.
The suspects have been charged with multiple felony counts resulting from the investigation, which was conducted by the Department of Insurance (CDI) Fraud Division, Santa Clara County District Attorney’s office, the Contractors State License Board, the Employment Development Department, and the Special Investigations Unit of the State Compensation Insurance Fund (SCIF).
According to investigators, the scheme evolved around a construction framing firm called Castle Rock Industries, also known as Sequoia Construction Company. Between July 2000 and November 2004 the firm was found to have intentionally underreported its payroll to its workers’ comp insurance carriers by as much as $4.6 million. That cost the insurers, State Compensation Insurance Fund (SCIF), Clarendon National Insurance Company and Virginia Surety Company approximately $2.3 million in premiums.
In addition, since the firm did not report its entire payroll it was able to outbid competitors for several public works projects, including work for the Gilroy Unified and Antioch Unified school districts.
Evidence seized during the investigation revealed that Castle Rock appears to have been paying its employees by cash and circumventing the workers’ comp claims process by paying medical providers directly for the treatment of injured employees.
The four owners of the firm are Wade Ellis Peebles, 55, his wife, Gigi Peebles aka Rosemary Morin, 40, both of Saratoga; Peter Morin, 42, (Gigi Peebles’ brother) of San Jose; and Kevin Stimson Killeen, 44, of South Lake Tahoe. They will be charged with multiple felony counts of workers’ comp premium insurance fraud and payroll tax fraud. Bail will be set at $2.3 million for each of them.
Robert Hartford Wyckoff Jr., 54, of Mariposa, and Gabor Maghera, 31, of Turlock will be charged with workers’ comp insurance fraud related to this case. They were the alleged contact and authorization employees for payroll processing. Bail will be set at $100,000 for each of them.
Wade Peebles and Wyckoff Jr. have not been taken into custody yet. Gigi Peebles was arrested at her home in Saratoga, Morin was taken into custody at his home in San Jose, Killeen was arrested at his home in South Lake Tahoe, and Maghera was arrested at his home in Turlock.
If convicted, Wade and Gigi Peebles, Killeen and Morin could face up to 12 years and eight months in prison, and/or a $50,000 fine. Wyckoff and Maghera could face up to five years in prison and/or a $50,000 fine.
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