Premium Fraud and Tax Evasion

Transcription

1 Premium Fraud and Tax Evasion AASCIF Super Conference ~ San Diego CA Bonnie M. Dumanis District Attorney By DOMINIC I. DUGO Chief, Insurance Fraud Division dominic.dugo@sdcda.org (619) October 4, AASCIF

2 USA Insurance Fraud $80-$90 Billion a Year USA

3 USA Tax Evasion #1 Economic Crime followed by Insurance Fraud USA

4 Insurance Fraud $15 Billion a Year. Tax of $500 per Person CALIFORNIA

5 Insurance Fraud # 1 Economic Crime followed by Tax Evasion CALIFORNIA

6 Income Tax Evasion $6.5 Billion (FTB) CALIFORNIA

7 Underground Economy $100 Billion Annually $5 Billion of Payroll Tax Loss CALIFORNIA

8 What to do?

9 OUTLINE I. California Grant Funding II. San Diego Insurance Fraud Division III. Prevention Plan IV. Premium Fraud V. Payroll Tax Evasion

10 I. Insurance Fraud Grant Funds $100 Million District Attorneys $50 Million Dept of Insurance $50 Million CALIFORNIA

11 Grant Programs Workers Comp Auto Insurance Disability/Healthcare/Life $50 million $45 million $5 million CALIFORNIA

12 Source of Grant Funds Workers Comp Employers Pay Auto Insurance Drivers pay $1.80 per Insured Vehicle CALIFORNIA

13 II. San Diego Insurance Fraud Division Grant Funded Units Workers Compensation Fraud Auto Theft Auto Insurance Fraud Disability, Healthcare Fraud Life Insurance Fraud Staff 16 Attorneys 15 Investigators 6 Paralegals 10 Support Staff 1 Legal Nurse Consultant

14 III. San Diego s Prevention Program Brochures Billboards Posters Chamber of Commerce Movie Ads Ethnic Newspapers

15 Brochures, Business Mailer- 180,000 Journal Inserts- 16,000

16 Billboard Ads, Billboards 4 to 6 Weeks 1 Million People a Day

17 Billboard

18 Billboard

19 Billboard

20 Billboard

21 Billboard

22 Billboard

23 Anti-Fraud Posters, ,000 English/Spanish/Chinese Numerous Employers

24 Workers Comp Poster

25 Workers Comp Poster

26 Workers Comp Poster 26

27 Movie Theater Ads, Movie Screens 1 Month 1 Million People

28 Workers Comp Movie Ad

29 Auto Insurance Movie Ad

30 Ethnic Newspapers, Anti-Fraud Ads, 2012 Spanish Chinese Vietnamese Filipino Arabic African American Korean

31 Chinese Newspaper Ads San Diego Los Angeles San Francisco Epoch Times San Diego New Times

32 Vietnamese Newspaper Ads San Diego Thuong Mai The Freeviet News

33 Hispanic Newspaper Ads El Latino Frontera Star News The Californian

34

35 TV Media

36 Radio Media KLQV FM KLNV FM

37 IV. What is Premium Fraud False statement Intent to reduce proper rate or cost of workers comp insurance

38 Is Premium Fraud a Crime? YES; Felony Insurance Code 11880a, 11760a Penalty: years prison CALIFORNIA

39 Insurance Companies Billions $ WC Premium Fraud

40 Premium Fraud 2007 California Study If you ain t cheatin, you ain t tryin. Fraud 19% to 23% (2002) $3.2 to $3.8 Billion 2007 New York Study Fraud 15% to 20% $500 million to $1Billion

41 Premium Fraud

42 Workers Compensation Required of Employers Coverage Premium defined CALIFORNIA

43 Payroll x Class Rate x Exp. Mod = WC Premium $300,000 x 10% ($10 per $100) x 1 = $30,000 Landscaper

44 Payroll x Class Rate x Exp. Mod = WC Premium $100,000 x 10% ($10 per $100) x 1 = $10,000 Landscaper $300,000 x 10% ($10 per $100) x 1 = $30,000

45 Payroll x Class Rate x Exp. Mod = WC Premium $300,000 x 40% ($40 per $100) x 1 = $120,000 Tree trimmer $300,000 x 10% ($10 per $100) x 1 = $30,000 Landscaper

46 Payroll x Class Rate x Exp. Mod = WC Premium $300,000 x 10% ($10 per $100) x 2 = $60,000 Landscaper $300,000 x 10% ($10 per $100) x 1 = $30,000

47 How is Premium Fraud Committed? 1. Underreported payroll 2. Misclassify employees 3. Experience modification evasion

48 Premium Fraud 1. Underreport payroll 2. Misclassify employees 3. Experience modification evasion PAYROLL x CLASS RATE x EXP. MOD

49 Consequences of Premium Fraud Unfair Competition Theft to Insurance Carrier

50 Who Uncovers Premium Fraud? Competitors Employees Tax auditors Insurance company auditors

51 3 Year History WC File Payroll Tax Returns Income Tax Returns

52 Collect and Review Entire File Underwriting Audit Claims

53 Underwriting File Application Policy Period Risk Evaluation Questionnaire Who signed documents?

54 Audit File Who conducted audit? Interview auditors. Who provided the audit information? Payroll Reports.

55 WC Injury Files Types of injuries. Job descriptions. Wage information. How long worker employed? Who signed injury reports?

56 Suspect(s) Owners Corporate Officers Bookkeepers & Accountants Foreman Family Members

57 Search Warrant

58 Identify Location(s) Business office Suspects residence Bookkeeper or accountant office Banks

59 San Diego Premium Fraud Task Force Summer 1996

60 Task Force Members San Diego District Attorney Department of Insurance Franchise Tax Board Labor Commissioner Contractors Licensing Board Employment Development Department

61 V. Payroll Tax Evasion Crime often committed with premium fraud

62 Payroll Taxes Employer - 1 Employee and Payroll Over $100 in Calendar Quarter Employer - Files Quarterly Payroll Tax Returns (DE6) CALIFORNIA

63 Payroll Taxes Out of Employer s Pocket 1. Unemployment Tax 2. Training Tax Withheld From Employee s Wages 3. Personal Tax Income 4. Disability Insurance Tax CALIFORNIA

64 Payroll Tax Evasion 1. Underreport Employee Wages 2. Failure to Report Employee Wages 3. Employer Withholds/ Pockets Employee s Taxes

65 Consequences of Tax Evasion 1. Labor Major Cost of Business 2. Reduce Overhead by Pocketing Employees Taxes 3. Reduce Costs

66 Is Payroll Tax Evasion a Crime? YES; Felony Unemployment Insurance Code, & Penalty: years prison CALIFORNIA

67 Formula For Success Law Enforcement + Insurance Industry Public Awareness