When Laguna Hills roofing contractor Michael Vincent Petronella was convicted for one of the largest known frauds of its kind in California history, Orange County District Attorney Tony Rackauckas famously said, "Cheaters who defraud the system will be trading in their Pradas for prison garb." Sure enough, Petronella was sentenced in November 2010 to 10 years in state prison for the $30 million Workers' Compensation Insurance scam. Fast forward a year: the other cheater, Petronella's wife Devon Lynn Kile, received the same sentence, but it will be stayed pending completion of conditions that will keep the Real Housewives of Orange County wannabe out of Pradas and prison garb.
Kile, who spent two years in county jail garb while her case was pending, must successfully complete 10 years of probation and pay around $3 million in restitution to avoid the 10-year prison sentence her husband received.
cut a deal with prosecutors accepted a court deal that had her pleading guilty last April to 36 felony counts of misrepresenting facts to the State Compensation Insurance Fund (SCIF), 15 felony counts of willful failure to pay tax to the Employment Development Department (EDD), 10 felony counts of failing to file a return with the intent to evade tax, six felony counts of willful failure to file tax returns, six felony counts of filing false tax return, one felony count of making fraudulent statements, and sentencing enhancements for excessive taking over $2.5 million and white collar crime over $500,000.
As part of Kile's sentence, restitution payments will total $1.3 million to EDD, $1.5 million to the Franchise Tax Board (FTB) and a yet-to-be determined amount to SCIF.
Kile and Petronella, who also went by Michael Constantine, owned the roofing and general building contractor businesses Petronella Corporation, Western Cleanoff, Inc., and The Reroofing Specialists, Inc. (also known as Petronella Roofing). With offices in Costa Mesa and Cathedral City, their clients included the Ocean Institute in Dana Point, Pacific Amphitheater in Costa Mesa and other commercial properties.
In March 2006, one of their employees was injured after falling from a roof. A payroll stub was submitted to the SCIF listing his employer as Western Cleanoff, Inc., which the state Legislature-created, quasi-governmental non-profit insurance company did not insure. The SCIF reported the suspected fraudulent claim to the Orange County District Attorney's office (OCDA) and the state Department of Insurance (DOI).
The Orange County Premium Fraud Task Force, a collaboration of investigators from OCDA, DOI, EDD, FTB and the Contractors State License Board investigated the couple for two years and discovered that between 2000 and 2008, they fraudulently submitted 42 claims for uninsured injured workers and underreported $29 million in payroll to SCIF in order to avoid paying Workers' Compensation Insurance premiums. The scheme resulted in SCIF incurring more than $253,000 in uncovered injured worker claims and insurance premium losses in the millions. Petronella and Kile reported $3 million in payroll to SCIF, while having an actual payroll of $32 million, ten times more than reported.
When the couple was arrested at their Laguna Hills home on April 29, 2009, they owned five properties in California and Texas and multiple luxury vehicles including a Bentley, two Ferraris, and a Range Rover. Between 2005 and 2007, they spent more than $2.1 million on their American Express credit card for personal items. They spent thousands of dollars on jewelry, shoes, clothes, and other personal items at stores including Balenciaga, Bloomingdale's, Chanel, Christian Louboutin, Gucci, Kitson, Neiman-Marcus, Nordstrom, Yves Saint Laurent and others.
A search of two residences, two businesses, a storage unit and a Certified Public Accountant's office turned up more than $500,000 in jewelry, $51,000 cash, and an application from Kile to be featured on Bravo's Real Housewives of Orange County.
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A court-appointed Receiver later determined which properties of the couple should be sold or put up for collateral to cover their fines.
- Michael Vincent Petronella, Laguna Hills Roofer Who Lived Like a King, to Do a Dime for Massive Workers' Comp Insurance Fraud