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O.C. owner gets fine, jail time for workers comp fraud
October 30th, 2009, 6:00 am · 42 Comments · posted by Jan Norman, small-business columnist
An Orange County business owner and his bookkeeper have pleaded guilty to workers compensation insurance fraud dating back to 2005, according to California Insurance Commissioner Steve Poizner.
Sanjiv Mahendra Shah of Placentia and his bookkeeper Abu M. Hossain of Chino Hills will pay $380,126 in restitution to two insurance companies, the State Compensation Insurance Fund and Fireman’s Fund, serve 120 days in jail plus three years’ probation. They will also pay fines that will be determined at their sentencing Jan. 26, 2010.
Shah owns Sonic Foods and United Pizza in Placentia, an umbrella company for a Papa John’s Pizza franchise. Shah has not returned a Register phone call.
The two men have pleaded guilty to 13 counts of fraud and one count of conspiracy in the case filed Oct. 15 in Orange County Superior Court, according to the Department of Insurance.
Shah and Hossain under-reported the company’s payroll more than 60%, totaling $6.71 million from 2005 to 2008, the state said. That under-reporting reduced workers’ compensation insurance premiums by $375,553 over three years.
The State Fund discovered the underpayment in May 2006 and forwarded the case to the Department of Insurance and Orange County District Attorney’s Office for investigation.
“Whether it’s the State Fund or a private insurer, fraud costs all of us dearly,” Poizner said in a prepared statement. “I want to make it clear: If you commit these types of crimes, we will find you and prosecute you.”
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Come here for a better life and then take advantage of the system? Sorry, you lose. Deport now with no ability to ever come back.
Very common. We should be ashamed that the system is so easy to milk.
underpayment is bad, but our state workers comp system is clearly broken which encourages this stuff.
at least they didn’t tell employees to fall down and file false claims then reap the rewards. I guess that’s the good part.
Deport these low-lifes IMMEDIATELY!!!!!!!
Deport to where? The article does not state that they are here illegally or that they were not born here.
Not that this wasn’t an act of wrongdoing and deserved punishment, but I look at it with a sense of amazement when the gobblement can go after a pizza parlor owner for financial fraud yet not prosecute even ONE investment banker or insurance man (of the hundreds or thousands involved) who took down our economy with BLATANT acts of deceit and criminal fraud. It simply amazes me. Another one of those head scratching moments. This guy must have been somebody’s political enemy. That’s all that I can figure.
ocobserver, you so right..but understand that Kalifornia needs the money because they are in deep sh&*t financially…They are looking out for their own benefit..If the book was turned and those companies wanted help from the State because the State committed blatant acts of deceit and fraud…Good freaking luck….
It’s all a scam, sham, call it what you will…..It’s easier ot pick on the small guy than the fat loaded one(government incase you didn’t catch it)..Great job State of California….you used my tax wisely and took the pizza man out…..may I ask, at what expense did it cost us to get these guys to pay (please don’t forget to add on not only the money they didn’t pay, but the legal costs, the incarceration costs, the probation costs, etc) to recoup a miserly $300K…
You are so right oc, my guess is, it’s easier for them to go after places who commit wc fraud, than to work many long hours and days building up a case on investment bankers. We need to find a way to keep everyone honest, I have to, and they should be to. Again, I love your comment.
I find this article more than disturbing considering that having a Pizza restaurant very close to the defendants have taken losses over the same time frame. As far as I can tell premiums were higher due to the fact that they had workers at risk and made claims that others had to pay for. These people should never be allowed to run a business ever again in the state of California. Thanks for costing competitors and my family to the point where I have considered leaving for good. Great reward for following the rules, next time I will try the same formula so that I can have all the extras you have been privy to.
This is nothing new, however, I am SO HAPPY these people got caught.
I used to work for a company, a tile/granite installation located in HB, (can’t say the Co. name, for it will get deleted by the OCR) that paid many employees cash, under reported their hours by not reporting overtime. Plus, he didn’t have to pay any payroll taxes either.
When State Fund came to conduct their audits in Jan for the previous year, my boss made me change the checks to read “material reimbursement” from “outside labor”. He had a slew of tricks, but what was so frustrating, is that he got away with it for many, many years, and he is still doing it today. A very deceitful, dishonest creep, who by the way has a luxury home and cars.
I wish I could turn him in and make him pay.
He was the worse person I had ever worked for, and I thank the Lord today that I finally was able to quit that job, and now I work for a company who conduct their business very honestly, and it makes me happy to be a part of this team, working with honest people.
turn him in! what’s stopping you…
You may qualify as a whistleblower if you contact the authorities about this dishonesty. Several whistleblowers receive a substantial reward. I for one firmly believe that we are grossly overtaxed, but insurance premiums are another matter altogether.
It might be better to blow the whistle yourself for your own protection. If you don’t and he eventually gets caught, they may come after you for aiding his fraud.
also employing primarily illegals to do any labor, no doubt.
what!? but rush says all rich people got that way through their hard work and they earned every penny. we have to cater our policy to them and let them walk all over us, otherwise they will just leave. we’re just supposed to relax and take it. if we just let them rape our economic system, maybe they will throw us some table scraps. the right wing model of an economy is basically right out of the third world.
a) who said they’re rich? and b) it’s pretty safe to assume they’re the exception and not the rule, though there are also other lawbreakers out there.
Actually, tenyrslater, your post shows you to be completely spineless! Not standing up to that low-life is exactly why we have employers and the government we do! People are afraid to stand-up to and do the right thing! The other reason we have these types of employers and the government we do, is because people will continue to put up w/low-life employers and vote for corrupt politicians because there’s something in it for them…………..as small as that something may be at times!
People like you make me sick!!!!
CALvr:
Do you consider yourself to be an honest, kind ethical person with good morals? I think you are spinless, sitting in front of your computer calling me vicious names in an agressive manner. Unfortunately, just speaking for myself, I have to work, and when I accepted that position I was not aware that the owner conducted his business the way he did. Instead of making the decision to “turn him in” while employeed, I decided to seek another position, for I felt by being employeed while going through the legal formailities would only have added tremendous stress on me. Yes, I know I can still report him, and maybe I just might look into it, but to call me spinless and to say I make you sick makes you a person no better than the man I worked for. If there is one thing I have learned from posting here, people like you love to bash people, and I would rather have you tell me to my face, which I feel you are too spinless to do just that.
You should have reported his activities to the ins company yourself, either through the auditor or anonymously thru their tip line…you still can.
Isn’t liberal Democratic open-boards and open-immigration policy wonderful! According to Barrack Obama … “immigrants contribute so much to the American society and culture.” They sure do … crime and scams!
Tom,
Are you saying that the prior administration had the borders sealed or actually did something about illegal immigration? I think both parties are equally to blame here.
stop using facts and logic! that currency is no good here!
Yea, and there weren’t any Mafia and Irish gangs that formed after they landed at Ellis Island. Somehow that’s just honky dory. You suffer from an intolerable case of ignorance for which there is no cure. You fail big time, Tom Racist
I am very happy to read this. As a couple of people pointed out, all other policyholders indeed pay for those without insurance.
deport these towel head losers. we need to get rid of all the god for saken losers. what do we need to do the clean up ourselves. this is getting ridiculous.
What is the surprise?
Their culture teaches them to do acts such as that. In their homeland, everyone is out for themselves. They found a way to take advantage of the system and they will, even if it’s for a small amount.
Despite the PC crowd, I will not do business with, or even befriend a West Asian. From experience, any relationship with them, will turn into a one sided relationship. They don’t understand that the other party has to benefit from it as well.
Ah, come on. This stuff is widespread. I bet at least 20% of the workforce is paid under the table, especially with the saturation of illegals we have living in California. Picking them off would be like shooting ducks in a pond. And California wonders why we have a $26 billion deficit! hah. And as tax revenues continue to go south watch the gobblement stick their hand deeper in YOUR pocket in way of new taxes. It’s coming. Trust me. The option arm mortgages are coming due and you will see scores of new foreclosures in the months and years ahead. Legitimate business that actually pay their taxes are fleeing the state and the only ones left behind are the pizza parlors, etc… that find every which way to skirt paying their due. Soon all we will have are gobblement workers and illegals living here. Good luck with that!
notice that, even while businesses and residents have been fleeing the state and therefore the bottom line (tax revenues) and populations are more modest, government has in not really shrank: either from a personnel or a dollar figure perspective. just shameful.
Sorry to be so picky, but the tax revenues are a part of what makes up the “top line”. The “bottom line” is also known as the net income, which is what is left after paying all expenses. In our case, the bottom line has been negative for quite some time. The top line has been shrinking, the expenses have been going up, and the bottom line has been going more and more negative.
Any of you commenting to “deport” the convicted felons don’t have a clue about Worker’s Comp and how devastatingly expensive it is for any Business! I am not advocating or justifying committing fraud against Workers Comp, but California has THE highest Workers Comp in the Union!
I work in the Insurance business and I LOVE when they get caught! Great job State Fund for discovering this! Typical losers taking advantage of the Insurance companies.
This all goes with why allowing illegal immigrants to live and work here, was such a BAD idea!
When you allow some laws to be broken, you set up a standard of more laws to be broken. This ‘mindset’ of “anything goes”, in American business has reached a head, and has nearly has put us in a new depression.
It’s time for Americans to start obeying and our laws, and put a STOP to illegal immigration.
Remember if you allow “SOME” laws to be broken, you allow ALL laws to be broken, and they you have anarchy!
Having done business with some arab-types over the years, I have found it seems to be part of their culture to lie — and if you catch them in the lie, they simply smile and shrug. In this case, the smile and shrug won’t cover the debt these two will have to pay. And no, I am not a racist, just a businessman with considerable experience. Still, I can
hear the flack starting from here.
I am not a racist (more of a realist actually), and I don’t think you are a racist for saying this, as it is somewhat true for some cultures to ‘bend the rules’ in this country, due to our VERY lax legal system..
Of course, white-Caucasians (like Bernie Madolf) are some of the greatest offenders of not only bending the rules, but rather ‘destroying them altogether!
Nobody picks up on the fact that it did cost $125K/yr for work comp insurance for pizza joint!!! In Sacr they are debating th bill to increase it by 20-25%. Go and try to run business honestly.
If its not under the table payments its designating many of your employees as “contract” and paying them with with 1099’s. very similar. The State is broke and has eliminated many workers comp inspectors who find these cheaters, and some immigrants come from cultures that do not ingrain honest and rule observing, many of the cheaters are home-grown and have no such (poor) excuse. Catch ‘em all. Remember, worker comp was created at the behest of the business community to curtail large costs in fighting individual worker injury cases. They are now adjudicated through worker comp. People get injured through the fault of business practices and need to be fairly compensated. Workers comp does it, and if you know a cheater, pass the info on, it cheats us all.
why is workmans comp. premiums based on payroll?
Nancy, if you were to get hurt on the job, then you could collect Workers Comp Ins and your monthly payments would be based on your annual pay. The ins payments would be less than what you would normally make, but it would be more than Unemployment benefits.
So its not ok for us to cheat on are taxes or other fee’s the states and government charge us but is ok for them to charge us for anything they makeup, then when they still they just get fired… and keep all the money they took over the years… when the proof comes out about all the money the school districts of California are losing and taking from the children they to should go to jail, and not sprit from the criminals but along side them, then we will be teaching them a lesion… They are not Americans, they are thieves that run are government…
I work for this man, and I’m not at all surprised that the cheap SOB was cheating somewhere. Raise prices here, cut cost here to line his pocket. He even lowered the amount per delivery that his drivers get while gas prices were high
It is good he got caught and yes people from the middle east don’t have any morals but it doesn’t change what really caused this.
It is California government is out of control. They rape businesses and the hard working achievers. They spend money like there is no tomorrow. They are killing the job market here and their answer is always more taxes and more tax collection.
They will be going after all the remaining small businesses to squeeze out more tax dollars till the well is dry. People with money have choices. They don’t have to risk their future to pay high salaries and taxes. If there are no profits then what is the point.
And to those of you that think owning a business is so great and that business owners should just hire more even is they lose their life savings. I say now is the time for you to start your own business and not just some work out of your home deal but a real one with lots of employees. Shut and give it a try. Come back when you know what you are talking about.
If you think there is no corruption in the government ranks, you must be mistaken. Take my word, all this doesn’t go around without the so called guardians of the law, who are now supposedly going to catch each one of these fraudsters. They really are the ones responsible. They let it slide till their their bellies don’t run dry.