More than Your Own Slice of the Pie

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13488926 - a shot of market cart and supermarket view

A California pizza shop owner is in big trouble for withholding the government’s piece of the pie. Bay City News reports that this pizza punk was caught not only evading payroll taxes, but also fudging employee numbers to drive down the cost of his required workers’ compensation insurance premium.

For a little over two years, the shop owner falsely misrepresented the number of employees he had on staff, to make it appear as though he didn’t employ as many as he actually did. This fraudulently decreased the amount of payroll taxes he owed the government and also lowered his State Farm workers’ compensation insurance premium. (Because you don’t have to insure or pay taxes for ”nonexistent” employees.) This also required him to defraud California’s Employee Development Department, which monitors this information, and he did so by inaccurately reporting to the agency his employee wages and payroll taxes.

The district attorney’s workers’ compensation fraud unit and the California Department of Insurance conduct regular uninsured employer compliance sweeps. When it was this guy’s turn, their noses led them to pieces missing from the overall pie. They ended up filing formal charges against him, including tax evasion. (You could say his pizza went cold, as the case became hot.)

This cheesy cheat ended up pleading guilty to two counts of making a material misrepresentation in order to obtain a lower worker’s compensation insurance premium and one count of willfully failing to file payroll tax returns with the intent to evade taxes. He was sentenced to four months in prison and ordered to pay more than $10,000 in fines and another $4,819.06 in restitution to State Farm Insurance. Once he is released from prison, he’ll serve another five years on felony probation. (So he’ll need to quit cutting corners and just stick to cutting slices.)

 

Source: Today’s ”Fraud of the Day” is based on, ”Pizza business manager sentenced for insurance fraud, tax evasion in Monterey County,” a report published by Bay City News on April 28, 2016.

Zawideh, the manager of Gabilan Pizza at 383 Gabilan Drive, pleaded guilty on March 14 to two counts of making a material misrepresentation in order to obtain a lower worker’s compensation insurance premium and to one count of willfully failing to file payroll tax returns with the intent to evade taxes, prosecutors said. Investigators determined Zawideh had committed premium fraud from March 2013 through April 2015 by underreporting the business’ number of employees and by falsely reporting payroll taxes to the state’s Employment Development Department. He was also charged with tax evasion for not accurately reporting employee wages and payroll taxes to the Employment Development Department from July 2012 through December 2014.

In addition to the jail time and felony probation, Zawideh was ordered to pay $4,819.06 in restitution to State Farm Insurance. He was also ordered to pay more than $10,000 in fines, prosecutors said.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.