Authorities in California announced yesterday they had made four arrests for what is believed to be a record workers' compensation premium fraud of more than $39 million.
"Our fraud investigators believe it's the largest amount of premium fraud that they have seen in their records," said Norman D. Williams, a spokesperson for Insurance Commissioner John Garamendi.
In addition to the four taken into custody, the department said it was seeking other suspects.
Mr. Williams said the four arrested, who allegedly were part of an operation that committed more than $39,280,000 worth of workers' compensation premium fraud against three insurance companies, had misclassified warehouse workers as clerical employees.
The Department of Insurance's Fraud Division investigators served arrest warrants Tuesday after a nearly four-year investigation.
Taken into custody were: Luis Perez, 37, of Dove Canyon; Paul Rodas, 40, of Costa Mesa; Elizabeth Waldo (aka: Elizabeth Middleton), 58, and Oscar Hidalgo, 31, both of Yorba Linda.
An arrest warrant is still outstanding for Javier Chavolla, 36, also of Yorba Linda, the department said.
All of the suspects were described as either owners or principal employees of temporary employment agencies known as Checkmate Staffing Inc., Checkmate Staffing West Inc., Checkmate Transport Inc., Tower Temps Inc., Staffaide Inc., RPM Staff Leasing and Tower Staffing Inc.
"This amount of alleged fraud, and fraud committed in other cases, is not only harmful to businesses and employees, but to our economy," said Commissioner Garamendi. "We will continue our work to ensure that fraud does not add debilitating costs to our fragile workers' compensation system."
Mr. Perez and Mr. Rodas were arrested at their current place of employment in Foothill Ranch. Ms. Waldo was arrested at her residence by the Chino Hills Police Department, and Mr. Hidalgo was arrested at his place of employment in Orange.
Each of the four suspects was charged with one count of conspiracy to commit workers' compensation insurance fraud and one count of conspiracy to commit denial of workers' compensation insurance benefits.
If convicted, they could face up to 10 years in prison.
Mr. Perez was booked into Orange County jail with bail set at $10 million. Ms. Waldo was booked into West Valley Detention Center Jail on $500,000 bail. Mr. Hidalgo was booked into Orange County jail on $500,000 bail, and Mr. Rodas was booked into Orange County jail on $250,000 bail.
The suspects were all owners or employees who are alleged to have fraudulently underreported and/or misclassified employees to insurance companies, including State Compensation Insurance Fund, Zurich American Insurance Company and Redland Insurance Company.
The suspects' companies were neither licensed insurers nor were they bonded and able to act as a third-party administrator, the department said.
Prosecution of the case is being managed by the San Bernardino County District Attorney's Office and additional arrests are expected, according to the department.
If anyone has information regarding Mr. Chavolla or other aspects of this case, please contact the CDI Fraud Division's regional office in Rancho Cucamonga at (909) 919-2200, or your local law enforcement agency.
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