Sunday, October 3, 2010

Workers Comp Premium Insurance Fraud: Two Painting Contractors Sentenced To 6 Months' Jail And 3 Years' Probation After Paying Over $500,000 In Restitution In Ventura County

On September 8, I posted an article about Two Painting Contractors Plead Guilty To Workers' Compensation Insurance Premium Fraud in Ventura County.  Now for the follow-up post on their sentence.

At the time they plead they were not sentenced and had no firm agreement on sentencing from what I understand.  There probably was a "lid" or cap on what the sentence would be with the judge to have discretion on the amount of jail time imposed.

Last week, the two painting contractors, Michael Nuciforo and James Nuciforo were sentenced to 36 months formal probation and ordered to serve 180 days in the Ventura County jail as a result of their convictions for felony workers' compensation premium fraud. Ventura County is known as a tough county in sentencing defendants. In order to obtain the 6 months' sentence (for which they will have to serve 3 months), the Nuciforos paid $517,433 in restitution before sentencing. In Los Angeles County, they may have received a different result showing that venue is important in your case. It also shows that payment of restitution is key to getting an excellent result. 
In this case, the allegations were that Michael and James Nuciforo, owners of D and J Drywall Painting, Inc., in Newbury Park, lied to their workers' compensation insurance carriers over a period of nine years in order to lower their workers' compensation insurance premiums. The Nuciforos allegedly earned an extra $50,000 a year by underreporting their workers' compensation premiums.  
Attorney Commentary: The government views this case and other premium workers' compensation fraud cases as indicative of an epidemic of workers' compensation premium fraud in California . A comprehensive study out of U.C. Berkeley by researchers Frank Neuhauser and Colleen Donovan indicated the losses caused by premium fraud in California during 2005 (the most recent year reflected in the study's statistics) were as much as $2.8 billion. 

According to the study, this $2.8 billion loss translates to approximately $75 for every person in California per year. According to the study, insurance companies do not suffer a net loss; they simply pass on the losses to businesses in the form of higher workers' compensation premiums. The businesses, in turn, increase their costs of goods and services to the consumer. In the end, the belief is that the average citizen bears the brunt of this crime.
The other reason the government targets workers' compensation premium fraud is the belief that it creates an unlevel playing field for businesses, particularly contractors (where premiums are high). This occurs in the construction industry, garment industry, farm worker industry and any other industry where certain jobs are deemed "high risk."  Contractors who improperly classify workers at lower premium rates or underreport their payroll are able to keep the money they would be using to pay premiums and then can underbid the competition. Honest employers are disadvantaged by having to pay even higher premiums than they otherwise would, and then lose jobs to the other company who pays lower workers' compensation premiums.   

The workers' compensation carriers are conducting more audits and are now obtaining the records that the employers have filed with EDD (which previously were ruled confidential). Thus, there is now a greater likelihood of an audit and a criminal investigation.  If your company has engaged in premium workers' compensation misrepresentations, it is better to address these issues early and amend prior submissions or ensure that future submissions comply with the law.  

Posted by Tracy Green, Esq. Please email Ms. Green at or call her at 213-233-2260 to schedule a complimentary 30-minute consultation. 

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:


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