When Gabriel Gonzalez was killed in 2007 by his body accidently going through a wood chipper, the owner of the tree trimming business he worked at filed a workers compensation insurance claim with the state to collect benefits for Gonzalez's family. Police, coroner's investigators and safety regulators would deem Gonzalez's death in a Tustin cul-de-sac an unfortunate industrial accident, but his boss Jose Luis Guerrero is not out of the, uh, woods. That insurance claim led to an investigation that has the 42-year-old Fullerton man being arraigned on fraud charges this morning.
For four years beginning in March 2005, Guerrero under-reported his payroll to the state insurance fund by more than $2 million so he would have to pay less in workers' compensation insurance premiums, alleges the Orange County District Attorney's office (OCDA), which also accuses him of illegally paying that sum to the employees in cash.
By failing to pay into the system as required by law, Guerrero denied his employees the benefit of state unemployment and disability insurance, the OCDA says in a statement that also accuses the landscaping business owner of avoiding state taxes. Meanwhile, he collected on insurance claims for employees he never paid premiums to cover, including one hurt seriously in a work-related car crash in May 2007, prosecutors allege.
The state discovered the fraud after reviewing Guerrero's business, Jose Martinez Tree Service, Inc., when he filed the claim for Gonzalez's November 2007 death. A search warrant was then served at Guererro's home, where an assault weapon was seized, the OCDA says.
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Guerrero is charged with 20 felony counts of failing to file a return with the intent to evade taxes, 20 felony counts of willfully failing to pay taxes, six felony misrepresenting facts to the State Compensation Insurance Fund (SCIF), two felony counts of making fraudulent statements, and one felony count of possession of an assault weapon. He faces sentencing enhancements and allegations for aggravated white collar crime over $500,000, property loss over $200,000, and causing over $100,000 in loss.
If convicted, he could get a sentence ranging from probation to up to 31 years in state prison. He's been out of custody on $500,000 bail before today's scheduled continued arraignment in Santa Ana.
Here is the OCDA explanation of workers comp law:
California law requires that all employers maintain workers' compensation insurance for their employees. Payroll records showing the number of employees and their income must be submitted to both the workers' compensation insurance company and Employment Development Department (EDD), who oversee the collection of payroll taxes. Workers' Compensation Insurance rates are determined by a formula, which takes into consideration the number and type of employees and the company's history of injury claims.
Premium insurance fraud is committed when an employer intentionally misrepresents to the State or insurance company the number of employees, the type of work performed, the amount of payroll, and the loss history. These illegal misrepresentations allow deceitful employers to calculate and purchase workers' compensation insurance at a significantly lower premium rate, or to avoid purchasing the insurance at all. This practice places their competitors at a disadvantage because it forces them to compete against a company with fraudulently lower operating costs.
Premium fraud drives up the cost of insurance premiums for legitimate businesses that pay higher rates for their employees' workers' compensation insurance coverage. These legitimate businesses are less competitive against crooked companies who are able to under-bid their competitors due to lower business costs resulting from insurance fraud. This also endangers injured employees who may be denied workers' compensation benefits intended to meet their physical, psychological, and financial needs for a work-related injury.