Building a Criminal Case For Prosecution of Public Works Violations ORANGE COUNTY DISTRICT ATTORNEY S OFFICE PUBLIC WORKS UNIT

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1 Building a Criminal Case For Prosecution of Public Works Violations ORANGE COUNTY DISTRICT ATTORNEY S OFFICE PUBLIC WORKS UNIT

2 The District Attorney s Office created a new Public Works / Prevailing Wage Violation Unit within our Workers Compensation Insurance Unit in June This unit was created in response to contractors underpaying their employees prevailing wages, low bidding on Public Works contracts and the unlawful disregard for the laws governing public works. OCDA PUBLIC WORKS UNIT

3 GUIDELINES FOR FILING A CASE WITH THE OCDA Project in Orange County or Contractor s Office in Orange County Synopsis of the Case Interviews and/or Employee Questionnaires Recordings, Documents, Checks, and any Evidence Given to you by Employee Prevailing Wage Determination for Time Periods Investigated Any documents you have obtained from Awarding Body or Contractor

4 DOCUMENTS REQUESTED Copies of all NONREDACTED certified payroll records from ALL contractors on the project. We are requesting payroll records from Start to Finish or Date Bid Proposal, original bid documents, bid application, Contractors Bid, Bid Summary (Showing contractors who bid on the projects, breakdown of the contractors bids, and bid spread between each contractor s Total Bid) Workers Compensation Policy (Do you have the actual policy or did you rely on the CSLB License information) Contract between the Awarding Body/General Contractor and the Suspect Contractor. (Does the contract contain Prevailing Wage Agreement or is this a separate document)

5 DOCUMENTS REQUESTED Pre-construction logs and notes Inspector Logs (These can be a goldmine!) Fringe benefit statement to verify that benefits were paid (PW 26) Wages and civil assessments against contractor (Did you check with DIR or other agencies to see if the contractor had previous violations) Interviews or questionnaires with workers Division of Apprenticeship Standards form (PWC 100) Photographs

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7 BUILDING A CASE Preliminary Report (CCC, Unions, DIR, Other) Insurance Employment Development Department (EDD) Department of Industrial Relations Division of Labor Standards Contractor State License Board (CSLB) Interview workers Corporate Documents Documents from Awarding Body or General Contractor Search Warrant for Contractor s office Search Warrant for Banks, Homes, Other

8 BUILDING A CASE Search Warrant (Probable Cause to believe that a search will yield evidence related to a crime) Looking for employee files, evidence of true employee wages, timesheets, certified payrolls, receipts, bank account information, computers, etc. Evidence Review Regional Computer Forensics Lab Filing the case Court

9 COMMON VIOLATIONS Show less hours on CPR s to match prevailing wage Falsifying documents (Violation Penal Code 115) Did you keep a calendar? Did you fill out a timecard? Did you sign a log? Who kept track of the hours on the jobsite? How many days a week do you work (which days)? What are your hours? How much were you paid? Don t show workers on Certified Payroll Records (If they don t exist I don t have to claim them) Do you know the names of your co-workers? Did you take any photos of yourself or other workers?

10 COMMON VIOLATIONS Set wages (ex. $ a day) Not paying prevailing wage Do you know what prevailing wage is? Who told you how much you would be paid? Who gives you your check? Do you have copies of your checks? Cash kickbacks / Threats ( Give me the money or you re fired ) (Violation of Labor Code 1778) What is the procedure for giving back money? Cash payments / Pay one worker and have them pay others Were you given additional money to pay other workers? Do you have copies of the check? Where do you bank? Do you use check cashing business, liquor store, other?

11 COMMON VIOLATIONS Having workers sign a blank timecard Were you required to sign a timecard that was blank? Were you required to sign a timecard with incorrect hours? Claimed the workers received a loan or they are repaying the contractor for purchasing items from the company Have you ever received a loan from the contractor or are you paying back the contractor for something you purchased (ex. Tools, Vehicle)? Have you ever signed a document (Loan or Timecard)? Pay the worker the correct wage (CPR s are correct) and then have them go to the contractors bank, cash the check, and either deposit money directly into contractors account or bring cash back Did you make a copy or take a photo of the bank receipt?

12 COMMON VIOLATIONS Failure to fund fringe benefit account Does your company have a fringe benefit account? How much is deposited into the account? Are you receiving disbursements from the account? Do you receive statements? Who presented the idea for the account? Failure to issue wage earnings voucher (Violation of Labor Code 226) Do you receive an earnings statement? Do you still have them? Secret LCP Misclassification What type of work did you perform on the jobsite?

13 COMMON VIOLATIONS Underreporting to Insurance Company and/or EDD (Premium Fraud Violation of Unemployment Insurance Codes and ) Failure to report worker injuries (Keeps the business workers compensation insurance experience modification [ X-Mod ] low) Have you ever been injured on the jobsite? Never had insurance or cancelled their insurance, fake policies Failure to dispatch apprentices, pay into the training fund, or hiring more apprentices than journeyman so they can pay at a lower wage Claim their employees are independent contractors/1099 (Violation of Labor Code 1771 & 1772) Do you have your W-2 forms (1099 Form)? Were you told which form you would receive?

14 ADDITIONAL QUESTIONS Do you read, write, or speak English? Did you take photos / video while on the jobsite? Who hired you? Who was your immediate supervisor? Where is the main office for the company? Has anyone told you what to say to an Inspector if questioned?

15 YOU NEED TO MONITOR YOU CAN T MONITOR IF YOU DON T REVIEW THE CERTIFIED PAYROLL REPORTS Labor Code The body awarding the contract for public work shall take cognizance and promptly report any suspected violations to the Labor Commissioner.

16 CONTRACTOR STATE LICENSE BOARD (CSLB)

17 CONTRACTOR STATE LICENSE BOARD (CSLB)

18 CSLB WEBSITE CHECKLICENSE.ASPX

19 WCIRB WEBSITE

20 CRIMINALLY PROSECUTING A CASE Too much is never enough!

21 WHAT CASES WE ARE INTERESTED IN REVIEWING Repeat offenders Numerous victims Not just poor bookkeeping/ be skeptical! We look at all projects/statute of limitations

22 COMMON CHARGING SECTIONS Labor Code 1778 Taking and receiving portion of worker s wage on Public Works Penal Code 115(a) Record false and forged Instrument Insurance Code 11760(a) Misrepresent Facts to Worker s Compensation Insurance Company Insurance Code 11880(a) Cover s fraud against SCIF Unemployment Insurance Code Failure to properly report payroll taxes Unemployment Insurance Code Willful failure to pay tax

23 LABOR CODE (a) Each contractor and subcontractor shall keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by him or her in connection with the public work. Each payroll record shall contain or be verified by a written declaration that it is made under penalty of perjury, stating both of the following: (1) The information contained in the payroll record is true and correct. (2) The employer has complied with the requirements of Sections 1771, 1811, and 1815 for any work performed by his or her employees on the public works project.

24 LABOR CODE 1776 (c) The certified payroll records shall be on forms provided by the Division of Labor Standards Enforcement or shall contain the same information as the forms provided by the division. The payroll records may consist of printouts of payroll data that are maintained as computer records, if the printouts contain the same information as the forms provided by the division and the printouts are verified in the manner specified in subdivision (a).

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27 PREMIUM FRAUD California Labor Code Section 3700 requires all employers except for State agencies to obtain Workers Compensation Insurance for their employees. This insurance may be obtained from a private insurance company or from the State Compensation Insurance Fund (SCIF). Premiums for this insurance are based on three factors: (1) a standard rate for the classification of work being performed, (2) a risk factor based on the company s past history of claims, and (3) the total payroll for the period being insured. HOW TO CALCULATE PREMIUMS Payroll x Rate x Experience Modification (Ex Mod) = PREMIUM DUE Paid per reporting period, such as quarterly, monthly, yearly, etc..

28 CONSEQUENCES OF EMPLOYER PREMIUM FRAUD Unfair Competition Theft to Insurance Carrier Other employers must pay lost premiums through increased rates Theft and added risks to employees

29 WORKER S COMPENSATION INSURANCE RATING BUREAU (WCIRB) Sets the rules for Reporting payroll Job classifications Recommends rates Changes in employer entities Maintains employer loss histories Maintains employer ex-mods

30 HOW EMPLOYER PREMIUM FRAUD IS COMMITTED Underreporting of Payroll Not reporting all employee payroll to the insurance carrier. Misclassification of Payroll To classify workers under a classification rate that generates a lower premium. Experience Modification Evasion To evade a loss history and fraudulently obtain a new experience modification rate.

31 WORKER MISCLASSIFICATION Journeyman vs. Entry Level Carpenter Laborer vs. Tender Laborer vs. Cement Mason Laborer vs. Office Staff

32 EMPLOYMENT DEVELOPMENT DEPARTMENT (EDD) EDD Payroll Tax Evasion EDD collects personal income taxes, disability insurance, unemployment insurance, and employment training taxes from employers. These taxes are based upon the employee s gross wages. Underreporting employee wages is a common scheme used to evade employment taxes.

33 STANDARD OF PROOF-PRESUMPTION IS IN FAVOR OF THE DEFENDANT Reasonable doubt Trial Preponderance Grand Jury Preliminary Hearing

34 CRIMINAL CASE PROCEDURE Complaint Grand jury Arraignment Arraignment Discovery Discovery Preliminary Hearing Trial Trial CONVICTION

35 DISCOVERY OBLIGATIONS Request for information Same team! Potentially risking the case Case does not end when you resolve your claim!

36 CONTRACTOR STATE LICENSE BOARD California Penal Code 23 The court can order: Criminal proceeding License to engage in a business or profession by a state agency pursuant to provisions of the Business and Professions Code or the Education Code, or the Chiropractic Initiative Act to furnish pertinent information, make recommendations regarding: Specific conditions of probation, or Provide any other assistance necessary to promote the interests of justice and protect the interests of the public Substantially related to the qualifications, functions, or duties of a licensee

37 STATISTICS (JULY 2011 PRESENT) Search Warrants Served: 36 Includes business, homes, banks, etc. Cases Filed: 6 Southland Construction (Completed - Received 2 years prison) SDB Construction (Court Case pending) AAA HVAC (Court Case pending) Malcon Civils (Court Case pending) Zolman Construction (Completed (2) defendants received 6 months jail time and 3 years probation) Siapin Horticulture (Court Case pending) Grand Jury Indictments: 4 Reza Mohammedi (Southland Construction) Sourin Babayan (SDB Construction) Daniel Siapin (Siapin Horticulture) Gabriel Siapin (Siapin Horticulture)

38 Contact Information: DDA Donde McCament (714) Investigator Elaine Noce (714) QUESTIONS?