Woman Pleads Guilty to Felony Charge

Sandra Canas, a resident of Daly City, California, pleaded guilty on May 11 to a felony charge of workers' compensation insurance fraud. Canas was arrested on Nov. 10, 2004 by investigators from the California Department of Insurance Fraud Department for receiving income while receiving workers' comp benefits and misrepresenting her level of disability to her doctor. Canas is barred from receiving any workers' comp benefits, or from re-opening this case. Canas is scheduled for sentencing on Aug. 17, when the judge could order full restitution and up to one year in jail.

The San Mateo County District Attorney's office prosecuted the case, which was jointly investigated by the CDI Fraud Division and Keenan & Associates.

Canas, who was an employee of South San Francisco Unified School District at the time of the original work injury, was hired and paid as a housekeeper during the period she was receiving disability payments and did not notify her claims adjuster at the Redwood City branch of Keenan & Associates.

Former Framers Owners Sentenced

Investigators announced that Jay Neal Wright, a former Bay Area businessman and owner of Highland Framers of Northern California Inc., was formally sentenced in Alameda County Superior Court to three years in state prison and ordered to pay $3.1 million in restitution following his conviction on two felony counts of premium fraud and one felony count of employment tax evasion.

His son, Jay Neal Wright II, was sentenced to five years felony probation and ordered to pay $300,000 in restitution for conviction on two counts of grand theft. The sentences follow "no contest" pleas entered by the two men on March 7, 2005.

On June 16, 2003, Wright and Wright II were indicted by the Alameda County Criminal Grand Jury on multiple felony counts of workers' comp insurance premium fraud and employment tax evasion following a lengthy investigation led by the CDI Fraud Division and the Alameda County District Attorney's Office, which prosecuted the case.

The investigation was assisted by the California Employment Development Department, the California Franchise Tax Board, and the Arizona Department of Insurance. Others assisting the investigation were personnel from the State Compensation Insurance Fund and the Golden Eagle Insurance Company.

Early in the investigation, during 2001, investigators indicated that an attorney who had worked for Highland Framers of Northern California Inc., Timothy Miller, of Riverside, California, pleaded guilty to one felony count of premium fraud and was sentenced to serve five years probation, pay $50,000 in restitution to carriers, and relinquish his license to practice law. He further agreed to testify for the State in the case against Wright, Sr. and Wright, II.

According to investigators, the case was first brought to light by SCIF, which submitted a suspected fraud referral to the CDI Fraud Division. The referral alleged that several policies SCIF had underwritten and subsequently suffered large losses on during the early to mid-1990s all seemed to be closely related to the Wrights and to Highland Framers of Northern California Inc., even though the policies had been applied for under apparently unrelated company names and ownership.

The subsequent investigation by CDI revealed that Jay Neal Wright and his son, Wright, II, headed a large residential framing company, Highland Framers of Northern California Inc., with a multi-million dollar payroll doing business primarily in and around Alameda and Contra Costa Counties throughout much of the 1990s.

In late 1993, the Wrights represented to insurers and state employment tax authorities that they had divested themselves of their carpentry labor force, and instead were using outside sub-contractors for their labor. However, a close examination of the alleged sub-contractor companies used after 1993 revealed that at least two, including Valley Framing of California Inc. and Highland Valley Framers Inc., were merely shell corporations that operated under the direct control, both financially and operationally, of Highland Framers of Northern California Inc., and the Wrights.

Investigators believe that the shell corporations, which were created with the assistance of former attorney Timothy Miller, were intentionally made to appear unrelated to Highland Framers of Northern California Inc. in order to evade their liabilities for workers' comp insurance premiums and state employment taxes. Total restitution ordered to be paid between the two men is broken down as $1,183,000 to SCIF, $917,000 to Golden Eagle Insurance Company, and $1,000,000 to the EDD.

Three Suspects Arraigned

Three suspects were arraigned May 11 in Ventura County Superior Court in connection with a workers' comp premium fraud investigation conducted by the CDI Fraud Division.

Tomer Rotholz, a former licensed contractor, was arraigned on a felony complaint charging him with four counts of premium fraud. Licensed contractor Yosef (Joseph) Khatib was arraigned on a felony complaint charging him with two counts of premium fraud. Catherine Larson was also arraigned and charged with four counts of premium fraud. If convicted, each of the defendants could be sentenced to a $50,000 fine or double the amount of the fraud, and up to five years in state prison. The case is being prosecuted by the Ventura County District Attorney's Office.

The arraignments followed a joint investigation by the Department, the Division of Labor Standards Enforcement, EDD, Franchise Tax Board, Contractors State License Board, and National Insurance Crime Bureau.

Rotholz, of Woodland Hills, was arraigned on a felony complaint charging him with four counts of premium fraud. Khatib, of Sherman Oaks, was arraigned on a felony complaint charging him with two counts of premium fraud. Catherine Larson, of Canoga Park, was also arraigned and charged with four counts of premium fraud. If convicted, each of the defendants could be sentenced to a $50,000 fine or double the amount of the fraud, and up to five years in state prison. The case is being prosecuted by the Ventura County District Attorney's Office.

According to investigators, Tapuz Enterprises Inc. was a licensed contracting business owned and operated by Rotholz. Tapuz Enterprises was involved in landscape and maintenance contracting and was awarded several public works projects. Tapuz Enterprises and Rotholz allegedly underreported its payroll to SCIF and California Indemnity from 1998 to January 2002 by $834,006 and $853,174 respectively. Tapuz Enterprises and Rotholz were debarred from public works projects by the Department of Labor Standards Enforcement and had their contractor's licenses suspended.

Rotholz then created Nativ Engineering Inc. and allegedly conspired with Khatib, a former employee of Tapuz Enterprises, and continued business operations and the criminal activity under Nativ Engineering. Khatib obtained a contractor's license and workers' comp insurance with virtually the same employees as Tapuz. Tapuz Enterprises Inc., now operating as Nativ Engineering Inc., allegedly underreported its payroll to State Fund from May 2002 to November 2004 by $422,631. The total amount of alleged underreported payroll was $2,109,812.

Investigators allege Larson, an employee of Rotholz, was instrumental in the fraud perpetrated by Tapuz and ultimately, Nativ. She was the main point of contact for insurance carriers, state agencies and vendors in matters involving insurance, bonding and payroll. While working for Tapuz, she certified all the payroll reports that were submitted to State Fund and California Indemnity from 1998 to January 2002. Larson and Khatib certified Nativ's payroll reports that were submitted to State Fund.

Reseda Broker Pleads Guilty to Forgery

Insurance broker Sajjad Hussain Shaikh, also known as Adam Shaikh, of Reseda, California has pled guilty to one count of forgery. Shaikh was sentenced to three years of summary probation and ordered to pay a $1,410 fine on May 24, 2005. Shaikh conducted business as Outstanding Services Insurance Agency, and previously used the name Year 2000 Insurance Services for insurance sales.

According to investigators, on March 24, 2004, the CDI received a complaint from United States Liability Insurance Group, alleging that someone had forged a United States Liability Insurance Company Errors and Omissions Declarations page. The forged declarations page listed Year 2000 Insurance Services as the insured.

Shaikh forged four United States Liability Insurance Company Errors and Omissions declarations pages for his own insurance business, covering the period from April 25, 1999 through April 25, 2003. Shaikh submitted these forged declarations pages to Western United Insurance Company, Infinity Select Insurance Company, Arrowhead General Insurance Agency Inc., Carnegie General Insurance Agency Inc., and Robert Moreno Insurance Services, in order to obtain brokerage agreements to do business with the companies.