Worst Case Scenario

Construction worker has an accident while working

Today’s “Fraud of the Day” article is sobering because it is an example of a worst case scenario of what happens when a business owner neglects to carry workers’ compensation insurance. The owner of a California construction company that helped fight back the Soberanes Fire in 2016 is now being held responsible for compensating the family of a worker who died from an on-the-job accident. When investigators from the Monterey County District Attorney’s Office delved into the accident, they found that the construction company owner had a history of workers’ compensation fraud and tax fraud.

The construction company owner had a lucrative contract with Cal Fire, also known as the California Department of Forestry & Fire Protection. (Cal Fire and the State of California require that any contractors they work with have workers’ compensation coverage for their employees.)

When the fire broke out, the construction company owner hired a 35-year-old man to operate a bulldozer. Unfortunately, while fighting the fire that burned down more than 132,000 acres in Monterey County and Los Padres National Forest, the man was killed when the bulldozer he was operating overturned.

As investigators with the Monterey County District Attorney’s Office opened an investigation into the death, they discovered that the construction company owner neglected to register his business with the California Employment Development Department. Neither did he cover his employees with workers’ compensation insurance. It also turns out that the Monterey County business owner not only filed a false insurance document with his customer, but he also neglected to file payroll tax returns with the Employment Development Department and did not withhold payroll taxes from his employees’ wages. (His crimes are stacking up.)

Get this – the 34-year-old construction company owner pleaded not guilty to all the charges against him. (He also waived the right to a jury trial, which meant the court would decide the case.) When the court weighed in, the judge found the business owner guilty of tax fraud and workers’ compensation fraud. When sentenced, he will face four years and eight months in prison and restitution to the deceased employee’s family. Failing to file payroll tax returns with the intent to evade taxes could add another three years and a $20,000 fine.

Workers’ compensation not only provides injured employees with adequate medical coverage and other benefits, it also protects a business owner from being sued. While the injury that related in the employee’s death in today’s case may not have been prevented, the employee’s family could have been compensated for their loss if the employer had paid his insurance premiums. Now it looks like he will have to pay for his crimes by serving time behind bars and may even lose his company. (That’s not the worst thing. The family of the deceased employee includes a wife and two young children. They not only have to deal with the loss of their loved one, but their future is reliant upon the outcome of the judge’s decision.)

Today’s “Fraud of the Day” is based on an article, “Judge finds business owner guilty of fraud after death of bulldozer operator during Soberanes Fire,” published by the Monterey Herald on October 18, 2019.

SALINAS — Judge Andrew Liu on Thursday found Ian Nathaniel Czirban guilty of payroll tax evasion, submitting false documents to Cal Fire and failing to carry workers’ compensation insurance following the death of Robert Reagan III during the Soberanes Fire.

Czirban, owner of Czirban Concrete Construction, hired Reagan to operate a bulldozer at the wildfire. Reagan, 35, died July 26, 2016, when the bulldozer overturned and rolled down an embankment as he helped battle the Soberanes Fire. The fire took almost three months to contain and devoured more than 132,000 acres in Monterey County and Los Padres National Forest.

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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.