Institute of Management Accountants
Student Night at the Spectrum
Premium Fraud & Tax Evasion
BONNIE M. DUMANIS
District Attorney By JESSE NAVARRO
Director of Community Relations San Diego County District Attorney’s Office
[email protected] (619) 531-3053 SD Chapter of the Institute of Management Accts.
DOMINIC I. DUGO
Chief, Insurance Fraud Division San Diego County District Attorney’s Office
[email protected] (619) 685-6534 October 14, 2013
Mission Statement The employees of the San Diego District Attorney, in partnership with the community we serve, are dedicated to the pursuit of truth, justice and protection of the innocent, and the prevention of crime through the vigorous and professional prosecution of those who violate the law.
San Diego County District Attorney’s Office District Attorney Bonnie Dumanis Assistant District Attorney Jesse Rodriguez 330 W. Broadway, Suite 1300 San Diego, CA 92101 (619) 531-4040 www.SanDiegoDA.com
[email protected]
Public Safety Topics • • • • • • • •
District Attorney’s Office Mission & Responsibilities Juvenile Justice & Criminal Court System Anti-Bullying in Schools & Cyber-Bullying Prevention Child Abduction & Child Abuse Prevention Internet Crimes Against Children & Adolescents Elder Abuse Domestic Violence & Restraining Orders Hate Crimes
Public Safety Topics • • • • • • • •
Gang Prevention & Enforcement Narcotics Prevention & Enforcement Driving Under the Influence & Consequences Social Host Law/Underage Drinking & Consequences Check Enforcement Program & Embezzlement Identity Theft & Consumer Protection Real Estate, Immigration & General Fraud Worker’s Compensation, Employer & Employee Fraud
San Diego County District Attorney’s Office Contact for Public Safety Topics: Jesse Navarro, Director of Community Relations 330 W. Broadway, Suite 1300 San Diego, CA 92101 (619) 531-3053 www.SanDiegoDA.com
USA INSURANCE FRAUD $80-$90 Billion a Year
USA TAX EVASION #1 Economic Crime followed by Insurance Fraud
CAL. INSURANCE FRAUD $15 Billion a Year. Tax of $500 per Person.
Income Tax Evasion
$6.5 Billion (FTB) CALIFORNIA
Underground Economy $100 Billion Annually
$5 Billion of Payroll Tax Loss CALIFORNIA
CAL. WORKERS’ COMPENSATION FRAUD Est. $4 Billion per Year
OUTLINE
I. San Diego’s IF Division II. Deterrence Program III. Premium Fraud and Tax Evasion
II. San Diego Insurance Fraud Division Grant Funded Units
Workers’ Compensation Fraud Auto Theft Auto Insurance Fraud Disability, Healthcare Fraud Life Insurance Fraud
Staff
16 Attorneys 15 Investigators 8 Paralegals 10 Support Staff
2012 - 2013 Workers’ Comp San Diego Prosecutions: 115 Convictions: 121
Investigations: 516
II. San Diego’s Deterrence Program Billboards
Movie Ads
Posters
Ethnic Newspapers
Chambers of Commerce
TV Ads
Billboard Ads, 2009 & 2012
81 Billboards 4 to 6 Weeks 1 Million People a Day
Billboard
Billboard
Billboard
Billboard
Billboard
Billboard
Anti-Fraud Posters, 2009-2013 200,000 English/Spanish/Chinese
Numerous Employers
Workers’ Comp Poster
Movie Theater Ads, 2010 340 Movie Screens
1 Month 1 Million People
Workers’ Comp Movie Ad
Ethnic Newspapers, Anti-Fraud Ads, 2011-2013 Spanish Chinese
Vietnamese Filipino
Arabic African American
Brochures, 2008-2013 Mailer- 180,000
Journal Inserts- 16,000 Mailer- 185,000
TV Media – 2012 - 2013
Television PUBLIC SAFETY ANNOUNCEMENT (PSA) 13 Television Stations English/Spanish/Vietnamese 2,000 PSAs
Radio Media – 2012-2013
KLQV 102.9 FM
Word Syndicated Radio
KLNV 106.5 FM
III. PREMIUM FRAUD • False statement • Intent to reduce proper rate or cost of workers’ comp insurance
Insurance Companies & State
Losing
Billions
$
Premium Fraud & Tax Evasion
San Diego Premium Fraud Task Force Summer 1996
Task Force Members San Diego DA CDI
Franchise Tax Board Labor Commissioner
Contractors’ Licensing Board Employment Development Department
2007 Berkley Study Fraud 19% to 23% (2002) $3.2 to 3.8 Billion in lost premium. 75% of Payroll in high risk not reported.
2007 Berkley Study
Conclusion: NASCAR saying
“If you ain’t cheatin, you ain’t tryin.”
2007 New York Study Fraud 15% to 20% $500 million to $1 billion in lost premium.
Boston Big Dig Tunnel Workers Reported to Carrier as Clerical. Loss: $11 million
• Workers’ Compensation Required of Employers • Coverage SCIF or Private Carrier
Workers’ Comp Premium Payroll x Class Rate x Experience Modification
PAYROLL x CLASS RATE x EXP. MOD
$300,000 x 10% ($10 per $100) x 1 = $30,000 Landscaper
PAYROLL x CLASS RATE x EXP. MOD
$100,000 x 10% ($10 per $100) x 1 = $10,000 Landscaper
$300,000 x 10% ($10 per $100) x 1 = $30,000
PAYROLL x CLASS RATE x EXP. MOD
$300,000 x 40% ($40 per $100) x 1 = $120,000
Tree trimmer $300,000 x 10% ($10 per $100) x 1 = $30,000 Landscaper
PAYROLL x CLASS RATE x EXP. MOD $300,000 x 10% ($10 per $100) x 2 = $60,000 Landscaper
$300,000 x 10% ($10 per $100) x 1 = $30,000
Three Types of Premium Fraud 1. Underreport Payroll • • •
Cash Pay Independent Contractors Labor paid in Rent, Vehicle, Supplies
Three Types of Premium Fraud 2. Misclassification a. Type of Work landscaper v. tree trimmer janitor v. roofer clerical v. construction b. Hourly Wages (Dual Wages) Concrete over $24 hr. Carpentry over $26 hr. Plastering over $25 hr. Roofing over $23 hr.
Three Types of Premium Fraud 3. X-Mod Evasion a. Identity Change Same Company, change name b. Fail to Report Injuries Injured workers not provided WC Benefits.
Consequences of Premium Fraud
Unfair Competition Theft to Insurance Carrier
Who Uncovers Premium Fraud?
Competitors Employees Tax auditors Insurance company auditors
Payroll Tax Evasion
Crime often committed with premium fraud
Payroll Taxes • Employer - 1 Employee and Payroll Over $100 in Calendar Quarter • Employer - Files Quarterly Payroll Tax Returns (DE9)
CALIFORNIA
Payroll Taxes
Out of Employer’s Pocket
1. Unemployment Tax 2. Training Tax Withheld From Employee’s Wages 3. Personal Tax Income 4. Disability Insurance Tax CALIFORNIA
Payroll Tax Evasion 1. Underreport Employee Wages 2. Failure to Report Employee Wages 3. Employer Withholds/ Pockets Employee’s Taxes
Consequences of Tax Evasion 1. Reduce Costs
2. Pocket Employees Taxes 3. Unfair Competition
Formula For Success Law Enforcement Insurance Industry
Public Awareness
Questions?
Institute of Management Accountants
www.IMASD.org
Jared Sanderson, President
