|For Immediate Release
Case # 12ZF0129
August 30, 2013
|Susan Kang Schroeder
Chief of Staff
BUSINESS OPERATOR SENTENCED TO SIX YEARS IN STATE PRISON FOR STEALING $2.7 MILLION WORTH OF WINE FROM CLIENTS’ STORAGE LOCKERS AND UNDER-REPORTING OVER $3.5 MILLION IN PAYROLL
SANTA ANA – A business operator was convicted and sentenced to six years in state prison today for stealing $2.7 million worth of wine from his clients’ storage lockers and under-reporting over $3.5 million in payroll to his workers’ compensation insurance carrier.
George Osumi II, 65, Irvine, pleaded guilty today to 18 felony counts of misrepresenting facts to State Compensation Insurance Fund (SCIF), 14 felony counts of failing to file a return with intent to evade tax, 14 felony counts of willful failure to pay tax, 14 felony counts of willful failure to pay unemployment insurance and employment training tax, nine felony counts of willful failure to pay disability insurance deductions, one felony count of identity theft, and one felony count of perjury. He faces sentencing enhancement allegations for misrepresenting facts to SCIF, committing an aggravated white collar crime over $500,000, property damage over $65,000, and crime-bail-crime (Case #12ZF0129).
Osumi also pleaded guilty today to three felony counts of second degree commercial burglary, one felony count each of grand theft, embezzlement by employee, receiving stolen property, and one misdemeanor count for possession of burglary tools with sentencing enhancements for aggravated white collar crime over $500,000 property damage over $1.3 million, and crime-bail-crime (Case #12CF2828). Osumi is scheduled for a restitution hearing Nov. 1, 2013, at 9:00 a.m. in Department C-30, Central Justice Center, Santa Ana.
What is Premium Insurance Fraud and Why Does it Hurt the Economy?
California law requires that all employers maintain workers’ compensation insurance for their employees. Payroll records showing the number of employees and their income must be submitted to both the insurance company and the Employment Development Department (EDD), who oversee the audit and collection of payroll taxes and employment records for workers in California. Workers’ compensation Insurance rates are determined by a formula, which takes into consideration the factors above and the company’s loss history on claims.
Premium insurance fraud is committed when an employer intentionally misrepresents to the State or his/her insurance company the number of employees, the nature of work performed by certain employees, the amount of payroll, and the loss history. These illegal misrepresentations allow deceitful employers to purchase workers’ compensation insurance at a significantly lower rate, or to avoid purchasing the insurance at all. This practice also places their competitors at a disadvantage because it forces them to compete against a company with lower operating costs.