A California man is facing the possibility of prison time for his alleged involvement in a workers compensation scheme.
California Insurance Commissioner Dave Jones recently announced that Jeong M. Baek, 36, the owner of Baeks Brother Construction, Inc. has been arraigned on one felony count each for violating Penal Code Section 550 (b) (3), Insurance Fraud, Penal Code Section 664/118, Attempted Perjury, Insurance Code Section 11880 (a), Workers Compensation Insurance Premium Fraud, and Unemployment Insurance Code Section 2118.5, Failure to collect and/or pay taxes. If convicted, Baek could face up to five years in state prison on each insurance fraud count and restitution in the amount of approximately $68,632.67.[WCx]
According to investigators from the California Department of Insurance (CDI) Silicon Valley Regional Office, CDI received a suspected fraudulent claim referral from an insurer, stating they had a possible fraudulent insurance claim. Baek claimed to have had suffered an injury while working as a plumber in 2008.
After a short period of being off work and receiving disability benefits, Baek returned to work until 2009, when his claim was re-opened. Without any modified work available, Baek was laid off from his plumbing job and continued to receive disability benefits based on his plumbing job wages.
While Baek was unable to work, the insurer discovered that Baek owned and operated the construction business, Baeks Brother Construction, Inc., and had an active building permit in the City of Cupertino. The insurer later conducted surveillance of Baek and obtained video of him performing plumbing work. The investigation conducted by CDI revealed that for 18 months Baek operated his construction business while he collected nearly $60,000 in disability benefits.
While CDI investigated Baek’s insurance claim, it was discovered that Baek was also committing insurance fraud against a second insurance carrier, and failed to collect payroll taxes reportable to the Employment Development Department (EDD).
In his second case of fraud Baek obtained workers comp insurance for his construction business with the State Compensation Insurance Fund (SCIF). Investigators discovered that Baek fraudulently under-reported his employee payroll and misclassified employees in order to obtain a lower insurance premium.
The payroll that was hidden from the insurance carrier was also omitted from annual reports to the EDD, resulting in Baek’s company fraudulently avoiding to pay the required California employment taxes, giving his business an unfair advantage and thereby operating in the underground economy.[WCx]
The case is being prosecuted by the Santa Clara County District Attorney’s Office.
Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: firstname.lastname@example.org.
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
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