California authorities have made massive allegations of workers’ comp fraud against an employer.
The Orange County District Attorney has charged the owners of three California roofing businesses with $38 million in workers’ comp fraud.
Michael Petronella and Devon Kile are accused of skirting comp payments by under-reporting the number of employees working for their companies and by discouraging their workers from filing claims. They both face between five and 102 years in prison.
Officials started an investigation when an employee of one of the companies fell off a roof and collected $6,000 in workers’ comp coverage.
The employee said he was working for Petronella Roofing, which had workers’ comp coverage. In fact, he was on a different company’s payroll, Western Cleanoff. Western had no comp insurance because it claimed it didn’t have any employees.
The indictment cites 41 other instances of employees who filed comp claims while on the payroll of uninsured companies owned by Petronella and Kile.
The district attorney accuses the two owners of playing a shell game of shuffling payrolls to make fraudulent claims for uncovered workers who were injured.
Why should other companies care?
Does comp fraud by some companies impact others who do the right thing and purchase proper insurance coverage?
One obvious reason it does: Companies without proper comp insurance have lower costs and can charge less than competitors.
Here’s another reason: Fraud is a key factor behind high comp insurance rates for other companies. When employers under-report the number of insured workers to reduce their comp premiums, it looks like there are fewer workers in a particular industry.
Comp premiums are based on injury rates in an industry. If the number of total workers is too low, but the number of injured workers stays the same, it appears that an industry has a higher accident rate than it actually does.
In California, where this case took place, the state Workers’ Compensation Insurance Bureau recently recommended a 24% average increase in comp premiums.
In a recent poll on Safety News Alert, only 19% of respondents said the current workers’ comp laws were just about right.
What do you think about the state of workers’ comp? Let us know in the Comments Box below.
The Orange County Register has more about this fraud case here and here.
