On June 1, 2021, the California Department of Insurance announced that the owner of a Los Angeles County construction company has been arraigned on charges related to a $25 million workers’ compensation fraud scheme. Nissim Vaknin of Encito, California is facing felony fraud charges on the grounds that he intentionally understated his company’s payroll. In this article, our Fresno workers’ compensation defense lawyers discuss the fraud charges against the California man.

Allegations: Payroll Understated by Nearly 95%

According to the charges filed by California prosecutors, Mr. Vaknin defrauded his workers’ compensation insurer over the course of four years—starting in the Fall of 2014 and extending into 2018. During that time, he reported that his company had an annual payroll of approximately $4 million. In 2018, California insurance regulators conducted a comprehensive investigation into the Southern California construction company. The agency assessed that the true annual payroll of the business was close to $75 million. By intentionally understating company payroll by nearly 95% over the course of four years, Mr. Vaknin allegedly underpaid workers’ compensation premiums by $25 million.

Workers’ Compensation Fraud Can be Charged as a Felony Criminal Offense in California

Workers’ compensation fraud is a significant issue in California. State officials estimate that the total annual cost of workers’ compensation fraud in California could be as high as $3 billion. Depending on the specific circumstances of the case, workers’ compensation fraud can be charged as either a misdemeanor or felony offense. A conviction on felony workers’ compensation fraud charges carries maximum penalties of a $150,000.00 fine and up to five years in prison.

Notably, business owners who commit workers’ compensation fraud by intentionally underreporting payroll could also face civil enforcement action. California regulators may take action against a business owner or a business that fails to comply with workers’ compensation requirements, including the requirement to ensure that all employees—part-time and full-time—are properly covered by no-fault workers’ compensation insurance.

All Businesses are Hurt by Workers’ Comp Fraud

This case is being handled by the District Attorney for Los Angeles County. The California Department of Insurance is handing prosecutors the results of its investigation into the construction. Notably, California regulators will continue to take enforcement action against workers’ compensation insurance fraud. As a representative for the agency explained in a press release about this case, companies that intentionally underreport their payroll hurt other businesses who “pay for this fraud through higher premiums.”

Get in Touch with Our California Workers’ Compensation Defense Attorneys Today

At Yrulegui & Roberts, our California workers’ compensation defense specialists have the skills and legal knowledge that you can count on in complex cases. If you have any questions about workers’ compensation insurance fraud, we are here as a resource. Contact us today for more information. With offices located in Fresno, Sacramento, and Bakersfield, we represent clients throughout the entire region, including in Redding, Stockton, San Luis Obispo, and San Jose.