Remarks by District Attorney Tony Rackauckas
Premium Insurance Fraud
April 30, 2009
Thank you for coming. I have here with me Insurance Commissioner Steve Poizner, John Barrett representing the Franchise Tax Board, and Lisa Curtis, Chief of the Investigation Division of Employment Development Department.
Yesterday, a joint task force of investigators arrested a husband a wife at their multi-million dollar Tuscan style Laguna Hills home. This case is the largest known Workers’ Compensation Insurance premium fraud case in California’s history.
To make these arrests and seize the evidence it took: 14 Orange County District Attorney investigators, 7 investigative assistants, and a deputy district attorney, 7 California Department of Insurance investigators, 18 investigators from the Franchise Tax Board, 11 investigators from the California Employment Development Department, 2 Riverside District Attorney Investigators, and one court appointed receiver.
They have been working hard to search and seize property at six locations in two counties. Among the items seized were the $500,000 in jewelry you see in this room, over $50,000 in cash, and an application to the “Real Housewives of Orange County” reality show.
Right now, people are hurting. The ‘Real Citizens of Orange County’ are struggling to keep their houses, put food on the table, and pay for necessities.
This husband and wife team was living a lavish lifestyle — a house with a $200,000 pool, driving two Ferraris, a Bentley, and a Range Rover, jet setting around the world, and power shopping at exclusive merchandisers like Bloomingdale’s, Chanel, Christian Louboutin, Gucci, Neiman-Marcus, Nordstrom, and Yves Saint Laurent. I don’t think they sell these brands at the Men’s Wearhouse, where I shop.
How did they support this lifestyle? By committing more than $38 million in premium insurance fraud and not paying their taxes. Unfortunately, this episode may be titled the “Real Insurance Fraud of Orange County.”
Michael Vincent Petronella, and his wife Devon Lynn Kile, 44, are charged with 106 felony counts including conspiracy grand theft, insurance fraud, and filing false tax returns, among others. If convicted on all counts, the defendants each face a sentence ranging from five years and four months to 102 years in state prison. Petronella and Kile are being held on $10 million bail each and are scheduled to be arraigned tomorrow.
Their company American Express Black card, which by law should only be used for legitimate business purpose, became a passport to personal excess — almost $440,000 on jewelry alone from 2005 to 2008, more than $425,000 spent on shopping sprees at luxury stores in 2008.
As we all know, businesses are fleeing California as their ability to compete against companies in other states and around the world is crippled by skyrocketing Workers’ Compensation Insurance and state taxes. Recently, a ratings board recommended Workers’ Compensation Insurance rates be hiked up by 24 percent.
Premium insurance fraud is committed when an employer intentionally misrepresents to the State or his insurance company the number of employees, the nature of work performed by certain employees, the amount of payroll, and the loss history of a business.
These types of crimes hurt the economy and the free market system. If deceitful employers pay Workers’ Compensation Insurance at significantly lower rates, their competitors lose because it forces them to compete against a company with lower operating costs.