|For Immediate Release
Case # 13CF2507
August 8, 2013
|Susan Kang Schroeder
Chief of Staff
PRESIDENT OF CLEANING COMPANY CONVICTED OF UNDERREPORTING PAYROLL BY OVER $8 MILLION RESULTING IN PREMIUM LOSS OF $898,000
SANTA ANA – A president of a cleaning company was convicted and sentenced today for underreporting his payroll by over $8 million resulting in a premium loss of over $898,000. Loksarang Dinkar Hardas, 53, Buena Park, pleaded guilty today to six felony counts of misrepresenting facts to State Compensation Insurance Fund (SCIF), three felony counts of misrepresenting facts to Worker’s Compensation Insurance company, and a sentencing enhancement for committing an aggravated white collar crime.
Hardas was sentenced to five years in state prison stayed pending successful completion of 10 years of formal probation, $250,000 fine, and restitution payment of $898,000.
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 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 insurance company the number of employees, the type of work performed, the amount of payroll, and the loss history. Many times employers will hide their employees under other uninsured business entities, and if and when an employee is injured, that employee will be transferred over to the insured entity. Since the insurance is for the benefit of the employee, an insurance company is liable for these unknown employees. 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 fraudulent 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.
Circumstances of the Fraud
Awesome Products has been operating since 1998 as a manufacturing and distribution company for household and commercial cleaning products across the nation.