institute of management accountants student night at the spectrum
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Institute of Management Accountants
Student Night at the Spectrum
Premium Fraud & Tax Evasion
DOMINIC I. DUGOChief, Insurance Fraud Division
San Diego County District Attorney’s Office
[email protected](619) 685-6534
By
October 14, 2013
SD Chapter of the Institute of Management Accts.
JESSE NAVARRODirector of Community Relations
San Diego County District Attorney’s [email protected]
(619) 531-3053
BONNIE M. DUMANIS
District Attorney
Mission Statement
The employees of the San Diego District Attorney,
in partnership with the community we serve,
are dedicated to the pursuit of truth,justice and protection of the innocent, and the prevention of crime through
the vigorous and professional prosecution
of those who violate the law.
San Diego County District Attorney’s OfficeDistrict Attorney Bonnie DumanisAssistant District Attorney Jesse
Rodriguez330 W. Broadway, Suite 1300San Diego, CA 92101(619) 531-4040 [email protected]
Public Safety Topics
• District Attorney’s Office Mission & Responsibilities
• Juvenile Justice & Criminal Court System• Anti-Bullying in Schools & Cyber-Bullying
Prevention• Child Abduction & Child Abuse Prevention• Internet Crimes Against Children & Adolescents• Elder Abuse• Domestic Violence & Restraining Orders• Hate Crimes
Public Safety Topics
• Gang Prevention & Enforcement• Narcotics Prevention & Enforcement• Driving Under the Influence & Consequences• Social Host Law/Underage Drinking &
Consequences• Check Enforcement Program & Embezzlement• Identity Theft & Consumer Protection• Real Estate, Immigration & General Fraud• Worker’s Compensation, Employer &
Employee Fraud
San Diego County District Attorney’s
OfficeContact for Public Safety Topics:
Jesse Navarro, Director of Community Relations
330 W. Broadway, Suite 1300San Diego, CA 92101
(619) 531-3053 www.SanDiegoDA.com
USAINSURANCE FRAUD
$80-$90 Billion a Year
USATAX EVASION
#1 Economic Crime followed by Insurance
Fraud
CAL. INSURANCE
FRAUD
$15 Billion a Year.Tax of $500 per Person.
Income Tax Evasion
CALIFORNIA
$6.5 Billion (FTB)
Underground Economy $100 Billion Annually
$5 Billion of Payroll Tax Loss
CALIFORNIA
CAL. WORKERS’ COMPENSATION FRAUDEst. $4 Billion per Year
OUTLINE
I. San Diego’s IF DivisionII. Deterrence ProgramIII. Premium Fraud and Tax Evasion
II.San Diego Insurance Fraud
Division
Grant Funded UnitsWorkers’ Compensation FraudAuto Theft Auto Insurance FraudDisability, Healthcare FraudLife Insurance Fraud
Staff16 Attorneys15 Investigators 8 Paralegals10 Support Staff
2012 - 2013 Workers’ Comp
San Diego
Prosecutions:115
Convictions: 121
Investigations: 516
II.San Diego’s
Deterrence Program
Billboards
Posters
Movie Ads
Ethnic Newspapers
Chambers of Commerce
TV Ads
Billboard Ads, 2009 & 2012
81 Billboards
4 to 6 Weeks
1 Million People a Day
Billboard
Billboard
Billboard
Billboard
Billboard
Billboard
Anti-Fraud Posters, 2009-2013
200,000
English/Spanish/Chinese
Numerous Employers
Workers’ Comp Poster
Movie Theater Ads, 2010
340 Movie Screens
1 Month
1 Million People
Workers’ Comp Movie Ad
Ethnic Newspapers, Anti-Fraud Ads,
2011-2013Spanish
Chinese
Vietnamese
Filipino
Arabic
African American
Brochures, 2008-2013
Mailer- 180,000
Journal Inserts- 16,000
Mailer- 185,000
TV Media – 2012 - 2013
Television PUBLIC SAFETY ANNOUNCEMENT
(PSA)13 Television Stations
English/Spanish/Vietnamese
2,000 PSAs
Radio Media – 2012-2013
KLQV 102.9 FM
KLNV 106.5 FM
Word Syndicated Radio
III. PREMIUM FRAUD
• False statement• Intent to
reduce proper rate or cost of workers’ comp insurance
Insurance Companies & State
Premium Fraud & Tax Evasion
Billions
$
Losing
San Diego Premium FraudTask Force
Summer 1996
San Diego DA
CDI
Franchise Tax Board
Labor Commissioner
Contractors’ Licensing Board
Employment Development Department
Task Force Members
2007 Berkley Study
Fraud 19% to 23% (2002)
$3.2 to 3.8 Billion in lost
premium.
75% of Payroll in high
risk not reported.
2007 Berkley Study
“If you ain’t cheatin, you ain’t tryin.”
Conclusion: NASCAR saying
2007 New York Study
Fraud 15% to 20%
$500 million to $1 billion in lost
premium.
Boston Big Dig
Tunnel Workers Reported to
Carrieras Clerical.
Loss: $11 million
• Workers’ Compensation Required of Employers
• Coverage SCIF or Private Carrier
Workers’ Comp Premium
Payroll x Class Rate x Experience
Modification
$300,000 x 10% ($10 per $100) x 1 = $30,000
Landscaper
PAYROLL x CLASS RATE x EXP. MOD
PAYROLL x CLASS RATE x EXP. MOD
$100,000 x 10% ($10 per $100) x 1 = $10,000
Landscaper
$300,000 x 10% ($10 per $100) x 1 = $30,000
$300,000 x 40% ($40 per $100) x 1 = $120,000
Tree trimmer$300,000 x 10% ($10 per $100) x 1 = $30,000Landscaper
PAYROLL x CLASS RATE x EXP. MOD
$300,000 x 10% ($10 per $100) x 2 = $60,000Landscaper
$300,000 x 10% ($10 per $100) x 1 = $30,000
PAYROLL x CLASS RATE x EXP. MOD
Three Types of Premium Fraud
1. Underreport Payroll
• Cash Pay• Independent
Contractors• Labor paid in
Rent, Vehicle, Supplies
Three Types of Premium Fraud2. Misclassification
a. Type of Worklandscaper v. tree
trimmerjanitor v. rooferclerical v. construction
b. Hourly Wages (Dual Wages)Concrete over $24 hr.Carpentry over $26 hr.Plastering over $25 hr.Roofing over $23 hr.
Three Types of Premium Fraud 3. X-Mod Evasion
a. Identity ChangeSame Company,
change name
b. Fail to Report Injuries
Injured workers not provided WC Benefits.
Consequences of Premium Fraud
Unfair Competition
Theft to Insurance Carrier
Who Uncovers Premium Fraud?
CompetitorsEmployeesTax auditorsInsurance company
auditors
Payroll Tax Evasion
Crime often committedwith premium fraud
Payroll Taxes• Employer - 1 Employee and Payroll Over $100 in
Calendar Quarter
• Employer - Files Quarterly Payroll Tax Returns (DE9)
CALIFORNIA
Payroll Taxes
CALIFORNIA
Out of Employer’s Pocket
1.Unemployment Tax
2.Training Tax
Withheld From Employee’s Wages
3. Personal Tax Income
4. Disability Insurance Tax
Payroll Tax Evasion
1. Underreport Employee Wages
2. Failure to Report Employee Wages
3. Employer Withholds/ Pockets Employee’s Taxes
Consequences of Tax Evasion
1. Reduce Costs
2. Pocket Employees Taxes
3. Unfair Competition
Formula For Success
Law Enforcement
Insurance Industry
Public Awareness
Questions?
Institute of Management Accountants
www.IMASD.org
Jared Sanderson, President