Suspended Prison Sentences for Contractors Convicted of Workers’ Compensation Fraud

According to a report from the King City Rustler, two contractors from Monterey County—Elias Perez Jr. and Alejandra Perez—have received suspended prison sentences for their role in a major workers’ compensation fraud scheme that was perpetrated between 2013 and 2017. Both defendants were placed on felony probation for seven years. Here, our Monterey County workers’ compensation defense lawyers explain what we know about this case in more detail.

Workers’ Compensation Fraud: Labor Contractors Underreported Payroll By More than $17 Million

In a recent criminal proceeding in Monterey County, a California judge handed two three-year suspended prison sentences to Elias Perez Jr. and Alejandra Perez, a brother and sister from King City who operated a labor contracting company. A joint investigation by multiple agencies determined that the duo operated a company that employed more than 1,500 farmworkers without properly reporting payroll. During the period in which the violation occurred (2013 to 2017), the labor contractors underreported their payroll by more than $17 million.

Notably, the case against the Perez siblings began in July 2016 after a complaint from an injured worker led to an investigation by the California Department of Insurance. This inquiry revealed that the defendants had significantly underreported in an effort to reduce insurance premiums. They were charged with felony fraud in November 2020. Additionally, they were hit with major financial penalties. Both of the Perez siblings are facing seven years of felony probation.

Underreported Payroll is a Material Misrepresentation—Felony Offense in California

Underreported payroll constitutes a material misrepresentation and is classified as a felony offense in California. It is a very serious legal violation that involves deliberately falsifying payroll records to reduce insurance premiums or evade taxes.

Conviction for underreporting payroll carries significant legal consequences, including potential imprisonment. Indeed, the underreporting of payroll can lead to a felony workers’ compensation insurance fraud charge that can carry a maximum state prison sentence of five years.

An employer that underreports its payroll can face additional financial sanctions as well. Notably, the employer can be fined double the amount of the workers’ compensation premium that should have been paid for the offending period if its payroll was reported accurately.

State Regulators Continue Multi-Year Crackdown on Workers’ Compensation Fraud

Some studies put the total losses caused by workers’ compensation fraud in California in excess of $1 billion per year. State lawmakers have earmarked a lot of money in an effort to combat fraud, including by employers, health care professionals, and employees. With these funds, state regulators and state and local law enforcement agencies are intensifying their multi-year crackdown on workers’ compensation fraud.

Contact Our Monterey County Workers’ Compensation Defense Lawyer

At Yrulegui & Roberts, our Monterey County workers’ compensation defense attorneys put the needs and interests of our clients first. Call us now or contact us online for your confidential case review. We provide workers’ compensation defense services throughout Monterey County, including in Salinas, Gonzales, Greenfield, King City, and Pacific Grove.