Premium insurance fraud is committed when an employer intentionally misrepresents to the State or his/her insurance company the number of employees, the nature of work performed by certain employees, the amount of payroll, and the loss history. These misrepresentations allow employers to purchase Workers’ Compensation Insurance at a significantly lower rate, or to avoid purchasing the insurance at all. This practice also places their competitors at a disadvantage because it forces them to compete against a company with lower operating costs.
On July 23, 2010, Michael Nuciforo and James Nuciforo, owners of D and J Drywall Painting, Inc. in Newbury Park, California, pleaded no contest to three felony counts of workers' compensation premium fraud and admitted a special allegation that their conduct caused losses of over $100,000.
Michael and James Nuciforo were accused of lying to their workers' compensation insurers over a period of nine years in order to lower their workers' compensation premiums. The Ventura County District Attorney's Office Workers' Compensation Unit froze $1.5 million of defendants' assets pursuant to California's “freeze and seize” law (Penal Code § 186.11) in order to preserve money for the purpose of paying restitution and fines. Restitution is expected to exceed $500,000.
The sentencing hearing for Michael and James Nuciforo is set for September 22 at 1:30 a.m. in courtroom 12. They are facing up to nine years in state prison.
Attorney Comments: We note several things about this case. I have written several other posts regarding premium workers' compensation fraud. I will not repeat those comments here but these articles are: "Workers Compensation Premium Fraud in Los Angeles" and "Workers' Compensation Fraud: Attorney Comments on Premium Fraud Case in Orange County."
First, restitution will be the most important factor at sentencing. If full restitution has been made it is much easier to obtain a non-state prison or jail sentence. Given that assets of $1.5 million were seized, these assets can be used to fund the restitution if they can be made liquid. This is critical and strategy and creativity has been used in many of our cases to fulfill this requirement.
Second, Ventura County is different that Los Angeles County or San Francisco County. Ventura (and Orange County) are tougher on white collar crime sentencing. First-time offenders are frequently given jail time. Thus, every extra effort to obtain probation or house arrest must be made in counties such as Ventura. Where judges are used to sentencing people to 60 days county jail for minor offenses involving less than $1,000 when the loss amounts exceed $100,000 - judges and prosecutors are insisting on jail time. However, payment of restitution is a clear indicator of acceptance of responsibility.
Third, this case went back 9 years. The statute of limitation does not begin to run until the date of discovery of the fraud and under People v. Zamora there should be an allegation in the complaint about the failure to discover the alleged fraud. Thus, if your company has engaged in this activity, now is the time to hire a lawyer, change practices immediately, and seek advice on how to proceed. Do not use an accountant or non-lawyer given that your statements to them are NOT protected by the attorney-client privilege.
Fourth, there will be a civil lawsuit by State Fund or the workers' compensation carrier and this should be handled at the same time as the criminal case in order to resolve the case in its totality.
Fifth, each case is different but it requires an assessment early on at the first notice that there is an audit or investigation. I have seen attorneys not take these audits or preliminary investigations seriously and seen individuals arrested without any notice and been saddled with a high bail equaling the cost of restitution. Although I have been successful in getting bails reduced from $10 million or $1 million in a workers' compensation fraud case - it is much easier if I have contacted the District Attorney's Office early, offer a self-surrender in the event charges are filed, and make all efforts to evaluate the case pre-filing in order for there to be damage control.
Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.
Any questions or comments should be directed to Tracy Green, a very experienced workers compensation fraud attorney, workers compensation premium fraud attorney, and white collar criminal defense attorney at tgreen@greenassoc.com.
The firm focuses its practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing professionals in fraud related matters in California and throughout the country. Their website is: http://www.greenassoc.com/
