|For Immediate Release
Case # 09CF1067
November 30, 2011
|Susan Kang Schroeder
Chief of Staff
WOMAN SENTENCED FOR $30 MILLION PREMIUM INSURANCE FRAUD SCAM WITH ROOFING CONTRACTOR HUSBAND
*This is the largest known Workers’ Compensation Insurance fraud case in California’s history
SANTA ANA – A woman who co-owned three roofing contractor businesses with her husband was sentenced today for committing $30 million in premium insurance fraud in one of the largest known Workers’ Compensation Insurance fraud case in California’s history. Devon Lynn Kile, 46, Laguna Hills, pleaded guilty April 12, 2011, to a court offer to 36 felony counts of misrepresenting facts to the State Compensation Insurance Fund (SCIF), 15 felony counts of willful failure to pay tax to the Employment Development Department (EDD), 10 felony counts of failing to file a return with the intent to evade tax, six felony counts of willful failure to file tax returns, six felony counts of filing false tax return, one felony count of making fraudulent statements, and sentencing enhancements for excessive taking over $2.5 million and white collar crime over $500,000. Kile was sentenced to 10 years in state prison stayed pending successful completion of 10 years of formal probation. Kile served two years in County jail while her case was pending. She was ordered to pay $1.3 million in restitution to EDD, $1.5 million in restitution to the Franchise Tax Board (FTB), and restitution to SCIF is to be determined.
Kile’s co-defendant husband Michael Vincent Petronella, also known as Michael Constantine, 52, was sentenced Nov. 4, 2010, to 10 years in state prison. He was found guilty by a jury Feb. 11, 2010, of 33 felony counts of insurance fraud and the sentencing enhancement for aggravated white collar crime over $500,000 was found true. He was ordered by the court to pay $500,000 in restitution to SCIF. The Orange County District Attorney’s Office (OCDA) is appealing Petronella’s restitution amount, arguing for additional restitution to cover the millions of dollars in loss.
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 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.