No Small Matter

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File with focus on the text Disability Insurance and blur effect. Concept of individual protection.

Sometimes what seems like a small thing can snowball into a very big thing, as is often the case with workers’ compensation fraud. A Modesto, Calif., man may have thought it was a small matter to underreport the number of staff at his employment agency so he could get lower workers’ compensation insurance premiums from the state program.

But this was no small matter. The man, 47, underreported his payroll by nearly $5 million over two years, resulting in a loss to the state program of $944,718. Why is that a big deal? Because state workers’ compensation programs are not flush with cash.

In California, a worker is entitled to two-thirds of pre-tax gross wages within a range of $182- to $1,215 per week. Stealing from the program jeopardizes the ability of injured and disabled people to earn livable wages. (The owner of an employment agency certainly knows this.)

A state judge sentenced the man to reimburse the $944,718, three years of probation, and 180 hours of community service. Some may think he got off easy without jail time. But 180 hours equals four-and-a-half weeks of full-time work or about 22 full Saturdays. (No small matter.) The moral of the story is that defrauding government programs comes with a high price.

To report fraud in the state of California program, call the hotline at 888-782-8338 or email at SIUMailbox@scif.com.

Today’s Fraud of the Day comes from the article, “Modesto business owner sentenced for workers’ comp fraud,” published Dec. 27, 2019 in WorkersCompensation.com.

Modesto, CA. (WorkersCompensation.com) – Michael Zendejas, 47, of Turlock, was sentenced to 180 hours of community service, three years formal probation and ordered to pay $944,718 in restitution after pleading no contest to insurance fraud for underreporting payroll by approximately $4.9 million that resulted in a $944,718 loss to his insurer.

Zendejas, as the owner and president of Trinity Personnel Inc., an employment agency that provides temporary workers, obtained a workers’ compensation policy from State Compensation Insurance Fund (SCIF) in September 2014 through December 2016. SCIF performed an audit of the policy and found that Zendejas significantly underreported the company’s payroll by $4.9 million and number of employees in order to receive a lower workers’ compensation insurance premium.

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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.