7 Suspects Arrested in Calif. Workers’ Comp Fraud

Seven suspects in California’s San Joaquin Valley region have been arrested for workers’ compensation fraud that cost insurers $900,000, and duped the state out of some $676,000 in payroll taxes, according to Insurance Commissioner John Garamendi.

The arrests were made by the San Joaquin Valley Premium Fraud Task Force after an investigation into suspected illegal activities of four agricultural labor contractors in Fresno, Kings, Tulare, and Kern Counties. The Premium Fraud Task force is comprised of prosecutors, investigators and support personnel from the Fraud Division of the California Department of Insurance (CDI) and district attorney’s offices in Merced, Fresno, Tulare, Kings and Kern counties. The California Employment Development Department’s Investigations Division also assisted.

The investigations centered on suspected misrepresentation of payroll by contractors. The arrests included Xochilt Gonzales, 29, of Tulare; Dora Guerrero, 30, of Delano; Elizabeth Montero, 40, of Kerman; Marco Nunez, 36, of McFarland; Rogelio Ramirez, 53, of Lemoore; Sergio Ramirez, 39, of Avenal; and David Rocha, 64, of Hanford.

Xochilt Gonzales and Dora Guerrero were charged with seven felony counts of workers’ compensation insurance premium fraud and five felony counts of making material misrepresentations on payroll tax reports. Gonzalez is listed as the owner and president of Hacienda Ag Farm Labor Service, located in McFarland, which contracts out farm laborers to farmers in Kern and Tulare counties. Guerrero is listed as an employee of the company.

The charges allege that Gonzalez and Guerrero failed to report and misclassified employee payroll in the amount of a about of $2.1 million to the State Compensation Insurance Fund (SCIF) and the California Employment Development Department (CEDD). That resulted in losses of about $401,000 to SCIF and approximately $281,000 to the CEDD. Guerrero was booked into the Kern County Jail and Gonzales surrendered to task force investigators at the Sanger Police Department.

The case is being prosecuted by the Fresno County District Attorney’s Office. If convicted on all charges, Gonzales and Guerrero could each face up to approximately twelve years in prison and a $150,000 fine.

Elizabeth Montero was also charged with four felony counts of workers’ compensation insurance premium fraud and nine felony counts of making material misrepresentations on payroll tax reports. Montero is the president of Ramirez Ag Labor, located in Kerman, which is a farm labor contracting service operating mostly in Fresno and Madera counties.

The Commissioner’s office said the task force investigation revealed that through her company, Montero allegedly underreported and misclassified employee payroll in the amount of approximately $2.75 million. Her alleged misrepresentations resulted in a loss of approximately $310,000 to the State Compensation Insurance Fund and about $395,000 to the CEDD. Montero was booked into the Fresno County Jail. The Fresno County District Attorney’s Office is prosecuting the case. If convicted on all charges, she could face up to ten years in prison and a $150,000 fine.

Marco Nunez was charged with one felony count of workers’ compensation insurance premium fraud. Nunez owns and operates Nunez Farm Labor Contracting, located in McFarland, which is a farm labor contracting company operating mostly in Kern and Tulare counties. The task force investigation revealed that through his company, Nunez allegedly underreported and misclassified employee payroll in the amount of approximately $120,000. His alleged misrepresentations resulted in a loss of approximately $30,000 to SCIF. Nunez was booked into the Tulare County Jail. The Tulare County District Attorney’s Office is prosecuting the case, and Nunez could face up to five years in prison and a $150,000 fine.

Rogelio Ramirez, Sergio Ramirez, and David Rocha were each charged with one felony count of workers’ compensation insurance premium fraud and one count of grand theft. Rocha was additionally charged with one felony count of being a convicted felon in possession of a firearm.

Rogelio and Sergio Ramirez are listed as the owners of Sierra Pacific Labor Service, located in Lemoore, which is a farm labor contracting service operating mostly in Kings, Tulare and San Luis Obispo counties. Rocha is listed as an employee of the company.

The charges allege that the Ramirez and Rocha failed to report and misclassified employee payroll in the amount of about $500,000 to SCIF, resulting in losses of about $122,500. Both Ramirezes and Rocha were booked into the Kings County Jail. The Kings County District Attorney’s Office is prosecuting the case, and
if convicted on all charges, all three could face up to five years in state prison and a $150,000 fine. Rocha could face up to an additional five years in state prison for being a convicted felon in possession of a firearm.

During the past three years, CDI observed an increase of over a hundred workers’ compensation insurance premium fraud cases reported in the Central and Southern San Joaquin Valley area. The increase was also noted by the Insurance Fraud Units in the District Attorney Offices in Merced, Fresno, Tulare, and Kings Counties.

In response to the problem, in May of 2005 CDI’s Fresno Fraud Division Office began meeting with the district attorney’s offices from the affected counties to develop a strategy to address the crime trend. As a result, the San Joaquin Valley Premium Fraud Task Force was created to investigate and prosecute suspects who commit workers’ compensation insurance premium fraud. Since premium fraud is often accompanied by the fraudulent under reporting of payroll taxes and, in some cases, lapses in workers’ compensation insurance coverage, the California Employment Development Department’s Investigations Division, and the California Department of Industrial Relations, Division of Labor Standards Enforcement, have also lent their support to the task force.