California Insurance Commissioner John Garamendi announced the convictions of two suspects, Wade Peebles, 55, and Gigi Peebles, 41, for workers’ compensation insurance premium fraud, payroll tax fraud and conspiracy, following a California Department of Insurance (CDI) Fraud Division investigation.
The Peebles were convicted of three felony counts of workers’ comp insurance premium fraud, 40 felony counts of payroll tax fraud and one felony count of conspiracy on February 15. The investigation reportedly revealed that they were intentionally underreporting payroll to their workers’ comp insurance carriers. The two are scheduled to be sentenced on April 12.
The convictions were a result of six arrests from May of 2005. The suspects were arrested for workers’ comp insurance premium fraud and payroll tax fraud. Kevin Stimson Killeen, 44, Peter Morin, 42, Robert Hartford Wyckoff Jr., 55, and Gabor Maghera, 32, were also arrested during the May 2005 arrests. The legal proceedings for Killeen, Morin, Wyckoff and Maghera are pending. The case is being prosecuted by the Santa Clara County District Attorney’s Office.
The Peebles, Killeen and Morin owned and operated a construction framing company in Saratoga called Castle Rock Industries (Castle Rock), also known as Sequoia Construction Company. The CDI’s initial investigation revealed that between July 2000 through November 2004, Castle Rock Industries was found to have intentionally underreported payroll to its workers’ comp insurance carriers by as much as $4,049,238.
The fraudulent underreporting resulted in a premium loss to the carriers of approximately $1,893,878. During this time period, Castle Rock had been insured by Clarendon National Insurance Company, the State Compensation Insurance Fund (SCIF), and Virginia Surety Company. Due to the fact that Castle Rock was not paying the proper workers’ comp insurance premiums, it was able to successfully outbid competitors for several public works projects.
Evidence initially seized from Castle Rock’s bank and payroll accounts reportedly revealed an additional $916,920 in payroll that was unreported to the workers’ comp insurance carriers. The seized evidence showed Castle Rock had been paying employees cash and that the workers’ comp claims process was circumvented by paying medical providers directly for the treatment of injured employees.
As a result of evidence seized during the May 2005 search warrants, CDI conducted a revised audit of Castle Rock’s payroll, which resulted in the discovery of an approximate total premium loss of $1,245,048.
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