Calif. Contractor Sentenced for Insurance Fraud

California Insurance Commissioner Dave Jones announced that Monica Mui Ung, 51, owner and president of NBC General Contractor Corp. (NBC), has entered guilty pleas in Alameda Superior court for violating section 11880 of the Insurance Code, section 1778 of the Labor Code, and admitted an enhancement of section 186.11 of the Penal Code. Ung was sentenced to four years in state prison (execution of sentence suspended), 10years felony probation and to repay $350,000 in restitution pro rata for the individual workers and $850,000 to the State Compensation Insurance Fund (SCIF). Provided Ung does not violate the terms of her probation, she will not serve any prison time.

According to the Department of Insurance, in this case, many of the workers are non-English speaking and were fearful of coming forward.

“They found themselves part of a captive labor force working in the underground economy, and victimized by the predatory practices of dishonest employers,” said Alameda County District Attorney Nancy O’Malley.

A joint investigation conducted by CDI’s Fraud Division, Employment Development Department (EDD), the U.S. Department of Labor, and SCIF revealed that Ung, along with her office manager and payroll specialist, made intentional misrepresentations to SCIF regarding their payroll and job classifications of 70 employees, illegally saving NBC a significant amount in workers’ compensation premiums owed to its carrier, SCIF. The majority of the work NBC performed involved public works projects, such as the Moscone Club House, El Cerrito City Hall, Fox Court Apartments and Piedmont Elementary School. Such projects mandate compliance with state law, specifically the state prevailing wage law, and union requirements. Ung’s office manager and payroll specialist have previously entered guilty pleas in this case and have been sentenced.

The investigation also revealed that from May 1, 2003 through May 1, 2007, NBC was awarded at least 27 public works projects in Alameda, Contra Costa, San Francisco, San Mateo and Marin counties. The cost of NBC’s workers’ compensation insurance was determined by the employee hourly rate of pay, the total amount of employee payroll, and the job classification of the employee. By falsely reporting the type of work performed by employees and wages paid them, NBC not only exposed SCIF to additional risk they were not aware of, but allowed NBC to operate at an advantage over honest employers who correctly reported their payroll and risk, CDI said.

Public works projects are normally awarded to the lowest bidder. Business owners, such as the owners of NBC, who engage in falsely reporting information used by its carrier to calculate premiums owed allowed them a competitive advantage over honest contractors, thereby giving them the ability to underbid other competitors, and get jobs they might not otherwise have gotten.

In addition, investigators allege that NBC did not pay prevailing wage, overtime, sick leave, and other statutory benefits as required under labor laws. NBC falsely issued certifications on payroll reports as to the hours worked and amounts paid to its workers as part of its overall criminal scheme. This resulted in payroll losses to 43 individual workers identified as victims in the case between 1999 and 2008. Individual workers were fearful of coming forward as most are non-English speaking, and are therefore a captive labor force working in the “underground economy,” essentially unprotected from the predatory practices of dishonest employers, CDI said.

The Court has restricted Ung’s two contracting licenses and she is barred from using both until all restitution is repaid and the court approves. She was sentenced to 10 years felony probation (reducible to three years upon full restitution and court approval). This case was prosecuted by the Alameda County District Attorney.

Source: CDI

Topics California Fraud Contractors