California contractors pegged in alleged $6M fraud
- The Los Angeles County District Attorney’s Office on Tuesday announced fraud and other charges against two siblings who run a Los Angeles construction company, claiming the two are responsible for at least $6 million in losses to the State Compensation Insurance Fund. One charge alone allegedly resulted in a $500,000 loss to the state fund.
- Authorities allege that from Jan. 1, 2012, through March 31, 2017, Enrique Vera, owner of Ultimate, Inc., and his sister, office manager Gloria Vera, falsified the payroll records they submitted to the state fund in order to avoid paying the proper amount of workers’ compensation insurance premium; discouraged injured workers from making workers’ compensation claims and pursuing the associated benefits; and paid less than the prevailing wage on a student housing project at the University of California, Los Angeles. Gloria Vera was also charged with trying to hide employees’ workplace injuries.
- The two Veras face a total of nine counts of felony workers’ compensation fraud, three counts of felony insurance fraud and six counts of felony grand theft of labor. Enrique Vera is subject to a maximum state prison sentence of 15 years if convicted, while Gloria Vera could receive a sentence of up to 19 years.
Workers’ compensation premiums, depending on how risky the trade, can be very expensive. Typically premiums are a certain dollar amount per $100 of payroll. For example, according to the latest California workers’ compensation rate comparison, the base premium for a roofer, one of the most dangerous construction jobs, making less than $23 per hour, range from $24.34 to $80.81. That’s in addition to state and federal payroll obligations. The highest rates usually take effect after a contractor has had a few workers’ compensation claims or if the company has not been in business very long and not yet established an experience record.
The high cost of workers’ compensation is one of the reasons construction companies opt to get workers through employee leasing companies, also known as professional employer organizations. By transferring their employees to the leasing companies’ payroll, the contractor can take advantage of the company’s experience rating and buying power, which often translates to more affordable workers’ compensation costs.
Wage theft — i.e. not paying overtime or benefits, paying less than prevailing or minimum wage rates — can also get contractors in hot water. This summer, the California Department of Industrial Relations announced it had charged a Fullerton, California, interior construction company with $1.9 million of wage theft violations. The department alleged that Fullerton Pacific Interiors did not provide workers with rest periods, did not pay some overtime and paid others less than minimum wage. Failure to pay for rest periods constituted the majority of the penalty, at $800,000.
- Los Angeles County District Attorney's Office October 30, 2018: Construction Company Operators Charged with Fraud, Labor Theft
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