Case # 15CF2616
Date: November 25, 2015
MAN ARRAIGNED ON CHARGES OF TAX EVASION AND INSURANCE FRAUD FOR FAILING TO REPORT OVER $5.6 MILLION IN PAYROLL
*Defendant also failed to pay $384,000 in taxes
SANTA ANA, Calif. – A man was arraigned today on charges of tax evasion and insurance fraud for failing to report over $5.6 million in payroll and failing to pay over $384,000 in taxes. Darrin Shawn Wilson, 50, Newport Beach, is charged with 15 felony counts of misrepresenting facts to the State Compensation Insurance Fund (SCIF), five felony counts of misrepresenting facts to a workers’ compensation insurance company, 20 felony counts of failing to file a return with the intent to evade tax, 20 felony counts of willful failure to pay tax, and a sentencing enhancement for white collar crime and committing a theft exceeding $500,000 and a taking that exceeded $200,000. The defendant is out of custody on $500,000 bail and is scheduled for a pre-trial Feb. 9, 2016, at 8:30 a.m. in Department C-55, Central Justice Center, Santa Ana.
What is premium insurance fraud?
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 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.
This type of deceptive under or non-reporting drives up the cost of insurance premiums for legitimate businesses, which pay higher rates for their employee’s workers’ compensation insurance. These legitimate businesses are less competitive against crooked companies who are able to under-bid their competitors due to lower business costs resulting from insurance fraud. This also endangers injured employees who may be denied the workers’ compensation benefits intended to meet their physical, psychological, and financial needs for a work-related injury.
Circumstances of the Case
Wilson is the sole principal for American Blacktop Incorporated, dba Seal-It, an asphalt and paving company, and The Mavrick Company, a property management company.
Between Jan. 1, 2009, and July 31, 2012, Wilson is accused of obtaining a workers’ compensation policy of insurance for these companies and failing to report all of the payroll for his workers’ to SCIF in the amount of $4.3 million for the policy periods of 2009 to 2012.
On Aug. 1, 2012, Wilson is accused of purchasing a workers’ compensation policy of insurance from the insurance company, AIG. He is accused of underreporting payroll for the AIG policy in an amount exceeding $1.3 million for the time period of Aug. 1, 2012, through Dec. 31, 2013.
The insurance fraud came to light when a claim was submitted to SCIF from an injured worker who reported that he had fallen approximately 12 feet from a ladder while working for the Mavrick Company and suffered work-related injuries. Wilson is accused of disputing the claim, stating that the worker was employed by a painting company subcontractor at the time of the injury. SCIF in attempting to determine whether to accept or deny the claim learned that the painting company subcontractor was unlicensed and uninsured.
In construction, to be a subcontractor, one must hold a valid Contractor’s State License and must have a workers’ compensation insurance policy for its employees. Without a valid license and insurance, the subcontractors would be in fact employees of the employing company, thus in this case Mavrick Company. Wilson was required to disclose all payroll to the insurance companies in order to determine the premium for the policy, and he is accused of hiring numerous unlicensed and uninsured workers asserting they were subcontractors in an attempt to avoid paying premium.
From January 2009 through Dec. 31, 2013, Wilson is accused of failing to report to the EDD, accurate payroll in quarterly reports and failed to collect, account for, and pay over taxes required by law.
Deputy District Attorney Debbie Jackson of the Insurance Fraud Unit is prosecuting this case.