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Business owners charged in fraud
(Press-Enterprise, The (Riverside, CA) (KRT) Via Thomson Dialog NewsEdge) Mar. 15--The owners of a home-building company and two other people have been charged with 107 counts of defrauding insurance carriers and the state government of more than $6 million, according to the Riverside County district attorney's office.
It is the largest case of workers-comp fraud in county history, prosecutors said.
Carter Lee Pendergrass, 56, and his son, Joshua, 25, both of Palm Springs, and Phillip Timothy Cassidy, 51, and his wife, Karen, also 51, both of San Bernardino, were arrested late last week. Bail is set at $6 million for each person .
Carter Pendergrass and Phillip Cassidy are the owners and operators of TF Ventures, All Service Inc. and Total Framing, according to prosecutors.
Attorneys for Pendergrass and Cassidy couldn't be reached for comment.
Prosecutors say the men, assisted by the other defendants, underreported wages in 2003- 05 to their workers-compensation insurance companies and to the state Employment Development Department, which collects state payroll taxes.
They also concealed claims histories to reduce workers-compensation insurance premiums and unemployment taxes, and intentionally misclassified employees, said Paul Fick, senior deputy district attorney for Riverside County.
For instance, the defendants in this case reported $11-an-hour employees who worked 40 hours as $22-an-hour employees who worked 20 hours, Fick said.
Since insurance premiums are often lower for highly paid construction workers because insurance providers assume those employees are more experienced and less likely to be injured, the defendants were able to get better rates, Fick explained.
Businesses were tempted to cheat on workers-comp insurance beginning in 2003 when rates were so high and companies were leaving California, Fick said. Since then, government official s have tried to reform the system, and rates have declined.
"Once they start and get away with it, we have found that people in this kind of operation do it every way they can," Fick said. "We hope fewer people will take the risk of cheating now that rates are lower and situation isn't so critical."
So far, the district attorney's office hasn't been able to discern whether the number of workers-comp fraud cases is going up or down, Fick added.
The defendants were also charged with money laundering. Prosecutors said they created a dummy company called McCollum Wood Products, which was used to pay employees under the table instead of to purchase materials.
A receiver has been appointed to run the company.
A hearing is set for March 22 for all four defendants.
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Copyright (c) 2007, The Press-Enterprise, Riverside, Calif.
Distributed by McClatchy-Tribune Business News.
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