Father and Daughter in Central Calif. Workers’ Comp. Fraud Must Repay Over $600K

October 5, 2012

Jerry Buffington, 69, and Cynthia Russell, 47, have pled guilty in Kern County Superior Court to one count each of workers’ compensation insurance premium fraud and eight counts each of tax evasion and were ordered to pay restitution to California’s State Compensation Insurance Fund in the amount of $475,100 and $127,899 to the Employment Development Department.

Both have been ordered to serve 10 years’ probation.

According to detectives from the California Department of Insurance Fraud Division, Buffington was the owner and president of Safehome Inc., and Buffington’s daughter, Cynthia Russell, was the chief financial officer.

Their guilty pleas are a result of an investigation led by CDI’s Fraud Division while working with the San Joaquin Valley Premium Fraud Task Force.

In 2007 State Fund discovered Safehome Inc. was underreporting their employee payroll to avoid paying the proper premium. An audit was completed and indicated that Safehome Inc. had failed to pay the proper premiums for their workers’ compensation policy in the amount of $477,285. Additionally, State Fund determined the business was operating out of its classification, which was registered as an alarm company, yet several employees were operating as roofers. The payroll related to the roofing portion of the business was never reported to either SCIF or EDD, according to investigators.

During the investigation a separate set of payroll records was located and corroborated the evidence that the business had not reported payroll to SCIF and EDD as required. The task force investigated the case and filed a complaint with the Kern County District Attorney’s Office, which charged the two with insurance fraud and tax evasion.

Buffington was convicted of one felony count for violating 11880(a) of the insurance code Section, false or fraudulent statement, four felony counts for violating unemployment insurance code Section 2117.5, failure to file return or report, and four felony counts for violating unemployment insurance code Section 2118.5, failure to collect or pay taxes.

Russell was convicted of one felony count for false or fraudulent statement, four felony counts for failure to file return or report, and four felony counts for failure to collect or pay taxes. In addition, she was ordered to perform 400 hours of community service.

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