California Family Business-Owners Arrested on Fraud

Californians Clyde and Jackie Sewell, both 52, owners of North Pointe Enterprises Inc., and their daughter, Toni Studer, 30, were arrested at their place of business.

The Sewells, who are residents of Elverta, Calif., were arrested June 1 and each charged with one felony count of making a false or fraudulent statement for the purpose of reducing premium, rate, or cost of workers’ compensation insurance; one felony count of grand theft; one felony count of willful failure to supply true information with the intent to evade payroll tax; and one felony count of willful failure to collect, truthfully account for and pay payroll tax.

Studer, a resident of Antelope,Calif., was arrested on one felony count of making a false or fraudulent statement for the purpose of reducing premium, rate or cost of workers’ compensation insurance; one felony count of grand theft; and one felony count of assisting in supplying a false or fraudulent report to the Employment Development Department (EDD).

All three suspects were booked into the Sacramento County Jail with bail set at $500,000 for all three suspects. If convicted, each could be fined up to $50,000 and/or receive five years in prison or double the value of the fraud, whichever is greater.

North Pointe is a large residential framing contractor business operating primarily in and around the Bay Area. It was alleged that North Pointe was not reporting the accurate amount of employee payroll to the State Compensation Insurance Fund (SCIF) and the EDD, in addition to misclassifying carpentry employees to SCIF.

During investigator interviews with former and current employees, it was indicated that employees received two paychecks per pay period; one check from a payroll account with deductions, and one check from a general account without deductions. The check from the general account was allegedly for reimbursement for travel and meals. The total amount of the two checks equaled one week’s salary. It was also revealed during employee interviews that the hourly rate reflected on their paychecks was not the rate reported to SCIF. The rate reported to SCIF was higher, and therefore generated a lower monthly premium. It was found that most employees were being paid anywhere from $8 to $17 per hour. Investigators contend that North Pointe reported to SCIF that all employees earned more than $21 per hour.

On April 13 and 14, 2005, the California Department of Insurance’s (CDI) Fraud Division served search warrants on the Sewell’s residence, business and bank account. EDD also conducted an audit on North Pointe’s employer account and found that North Pointe underreported its employees’ wages by $1.9 million dollars, owing EDD approximately $332,352.

SCIF conducted an audit on North Pointe’s workers’ comp policy and found it was allegedly owed approximately $2.7 million dollars in additional premiums. SCIF’s Special Investigative Unit provided information which assisted in the investigation. The case is being prosecuted by the Sacramento County District Attorney’s office. This was a joint investigation conducted by CDI’s Fraud Division and the EDD.

Source: CDI