58 Arrest Warrants Issued in Calif. for Workers’ Comp Fraud

May 31, 2007

Law enforcement officers from five Calif. counties have served 58 arrest warrants for insurance fraud and related charges, such as grand theft, receiving stolen property and perjury, following investigations of alleged auto insurance and workers’ compensation insurance fraud.

Four suspects have already been arrested and were charged late last year. Another suspect is in federal custody; a hold has been placed on him to answer for the local charges. A total of 66 suspects will be charged (three persons were already in custody on unrelated charges and were re-arrested) with insurance fraud.

Each count of insurance fraud is a felony and carries a maximum sentence of up to five years in state prison and/or a fine of $50,000, as well as the possibility of being ordered to pay an undetermined amount of fines and restitution.

California Commissioner Steve Poizner said the arrest warrant announcement covers four sets of enforcement actions: Operation Scratch n’ Play, Operation Back Draft, Operation Round-Up, and two other workers’ compensation insurance premium fraud cases.

Operation Scratch n’ Play, which took place in Fresno, Kings, Madera, San Luis Obispo and Tulare Counties, involved suspects using false receipts to obtain insurance monies through fraudulent insurance claims for aftermarket stereo equipment, custom wheels and tires and performance parts.

During the investigation, an undercover investigator discussed an item he or she wished to purchase with the store’s personnel or owner, telling the store’s representative that he or she did not have enough money to purchase the item at this time, but that an insurance claim was going to be filed that the vehicle had been stolen or burglarized. The store’s representative then produced a backdated receipt showing that cash was used to purchase the selected item, which would indicate to the insurance carrier that the item was purchased and subsequently stolen during the supposed theft. The fraudulent receipts provided to the undercover investigators ranged from $800 to $5,000.

Scams of this type cost insurance carriers, and ultimately consumers, in the southern San Joaquin Valley an estimated $200,000 per year, CDI said.

In Operation Back Draft in Fresno County, the Fresno County Urban Organized Auto Insurance Fraud Task Force (AIFTF), comprised of investigators from the CDI and the Fresno County District Attorney’s Office, began with a tip from the CHP about potential insurance fraud within the city of Parlier. The original case developed into five associated cases and extended from Parlier to the cities of Sanger, Del Rey and Kerman. Twelve suspects allegedly conspired in the disposal of five vehicles to collect insurance benefits to which they were not entitled.

The common ploy was to report a vehicle stolen then report the loss to the insurance carrier for compensation when, in fact, the vehicles had been taken out and set ablaze by either the registered owner(s) or associate(s) in an attempt to destroy the vehicle beyond repair and dispose of any evidence.

In Operation Round-Up in Fresno County, 13 suspects spanned six cases and involved family members or close friends who conspired to dispose of their vehicles to collect insurance benefits to which they were not entitled, or conceal the identity of an excluded driver to obtain insurance benefits.

Workers’ compensation insurance premium fraud occurred in Fresno and Kern Counties, CDI said, with the arrest of two suspects. The following two cases resulted in net losses totaling approximately $2.2 million, including $1.7 million to the State Compensation Insurance Fund and $500,000 to EDD.

Armando Rios, 26, of Reedley was arrested on four counts of workers’ compensation insurance premium fraud and nine felony counts of failure to remit withheld payroll taxes. Rios, the owner and president of a farm labor service company, allegedly failed to report and/or misclassified approximately $4 million in employee payroll to SCIF and EDD. That resulted in losses of $900,000 to SCIF and approximately $500,000 to EDD.

Larry Gonzalez, 56, of Bakersfield was arrested on one felony count of workers’ compensation insurance premium fraud and one felony count of insurance fraud. Gonzalez, a farm labor services contractor, underreported and/or misclassified employee payroll in an amount in excess of $2 million, which resulted in a loss of approximately $810,000 to SCIF.

Source: CDI

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