Case # 13CF1738
Date: November 13, 2015
MAN SENTENCED TO PRISON FOR $2 MILLION TAX EVASION AND INSURANCE FRAUD SCHEME
*His wife was previously convicted and sentenced for her involvement in the same scheme
SANTA ANA, Calif. – A man was sentenced today for owing nearly $2 million from a tax evasion and insurance fraud scheme. Rand Robert Gordon, 61, Laguna Hills, pleaded guilty Feb. 19, 2015, to five felony counts of misrepresenting facts to the State Compensation Insurance Fund (SCIF), one felony count of filing a false tax return, 10 felony counts of willful failure to file or make fraudulent tax return, two felony counts of making false statements, two felony counts of making false statements to discourage injured worker from claiming benefits, 20 felony counts of failing to file a return with intent to evade tax, 20 felony counts of willful failure to pay tax, and a sentencing enhancement for aggravated white collar crime over $500,000. He was sentenced to one year and four months in state prison. Rand Gordon paid $385,000 in restitution and was ordered to the remaining $2 million dollars by civil judgment.
Michele Louise Gordon, 62, Laguna Hills, pleaded guilty Feb. 19, 2015, to four felony counts of willful failure to file or make fraudulent tax returns and one felony count of filing a false tax return. She was sentenced to three years formal probation, pay a $5,000 fine, and $464,560 restitution. The defendants paid the Franchise Tax Board (FTB) $123,189.12 toward the restitution and ordered to pay the remaining restitution of $341,370.88 by civil judgment.
Circumstances of the Case
Rand and Michele Gordon owned and operated moving service companies under the business names Gordon Moving Services Inc., Gordon Moving and Storage Inc., GMS Solutions, and various other names.
On Oct. 30, 2006, Rand Gordon obtained an insurance policy for his company with SCIF. He failed to make quarterly payments to SCIF and the policy was subsequently cancelled on Jan. 26, 2009. On March 26, 2009, Rand Gordon renewed his insurance policy with SCIF. On each of those policies, Rand Gordon knowingly made false and fraudulent statements by underreporting his payroll to SCIF and failed to pay taxes to the Employment Development Department (EDD).
Between January 2006 and December 2010, Rand Gordon underreported premiums to SCIF and taxes to EDD. The Gordons kept the taxes meant to go to EDD and used it for their personal income. During that time period, the Gordons failed to file tax returns or gave false information to FTB. Rand Gordon owed $875,000 to SCIF, $878,905.11 to EDD, and $649,730 to FTB.
On Jan. 9, 2008, Rand Gordon told one of his workers, John Doe 1, to lie about how an injury occurred during a work assignment, while the defendant was driving the victim to a hospital.
On Sept. 3, 2009, Rand Gordon dissuaded John Doe 2 from filing a workers compensation claim for an injury sustained at work with the intent of keeping his loss history at a minimum to keep the premium on his insurance low. John Doe 2 filed a workers compensation claim.
SCIF contacted John Doe 2 regarding his workers compensation claim. While the claim was under review, SCIF discovered potential fraud and submitted a report to the Premium Fraud Task Force regarding the Gordons’ account. The Orange County District Attorney’s Office Bureau of Investigation, EDD, FTB, and California Department of Insurance investigated this case.
Law Regarding Premium Insurance
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 workers’ compensation insurance company and EDD, who oversee the collection of payroll taxes. Workers’ compensation insurance rates are determined by a formula, which takes into consideration the number and type of employees and the company’s history of injury claims.
Premium insurance fraud is committed when an employer intentionally misrepresents to the state or insurance company the number of employees, the type of work performed, the amount of payroll, and the loss history. These illegal misrepresentations allow deceitful employers to calculate and purchase workers’ compensation insurance at a significantly lower premium rate, or to avoid purchasing the insurance at all. This practice places their competitors at a disadvantage because it forces them to compete against a company with fraudulently lower operating costs.
Premium fraud drives up the cost of insurance premiums for legitimate businesses that pay higher rates for their employees’ workers’ compensation insurance coverage. 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 workers’ compensation benefits intended to meet their physical, psychological, and financial needs for a work-related injury.
Deputy District Attorney Debbie Jackson of the Insurance Fraud Unit prosecuted this case.