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Institute of Management Accountants Student Night at the Spectrum.

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Presentation on theme: "Institute of Management Accountants Student Night at the Spectrum."— Presentation transcript:

1 Institute of Management Accountants Student Night at the Spectrum

2 Premium Fraud & Tax Evasion DOMINIC I. DUGO Chief, Insurance Fraud Division San Diego County District Attorney’s Office dominic.dugo@sdcda.org (619) 685-6534 By October 14, 2013 SD Chapter of the Institute of Management Accts. JESSE NAVARRO Director of Community Relations San Diego County District Attorney’s Office jesse.navarro@sdcda.org (619) 531-3053 BONNIE M. DUMANIS District Attorney

3 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.

4 San Diego County District Attorney’s Office District Attorney Bonnie Dumanis Assistant District Attorney Jesse Rodriguez 330 W. Broadway, Suite 1300 San Diego, CA 92101 (619) 531-4040 www.SanDiegoDA.com PublicAffairs@sdcda.org

5 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

6 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

7 San Diego County District Attorney’s Office Contact for Public Safety Topics: Jesse Navarro, Director of Community Relations 330 W. Broadway, Suite 1300 San Diego, CA 92101 (619) 531-3053 www.SanDiegoDA.com

8 USA INSURANCE FRAUD $80-$90 Billion a Year

9 USA TAX EVASION #1 Economic Crime followed by Insurance Fraud

10 CAL. INSURANCE FRAUD $15 Billion a Year. Tax of $500 per Person.

11 Income Tax Evasion CALIFORNIA $6.5 Billion (FTB)

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

13 CAL. WORKERS’ COMPENSATION FRAUD Est. $4 Billion per Year

14 OUTLINE I.San Diego’s IF Division II.Deterrence Program III.Premium Fraud and Tax Evasion

15 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 8 Paralegals 10 Support Staff

16 2012 - 2013 Workers’ Comp San Diego Prosecutions:115 Convictions: 121 Investigations: 516

17 II. San Diego’s Deterrence Program Billboards Posters Movie Ads Ethnic Newspapers Chambers of Commerce TV Ads

18 Billboard Ads, 2009 & 2012 81 Billboards 4 to 6 Weeks 1 Million People a Day

19 Billboard

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25 Anti-Fraud Posters, 2009-2013 200,000 English/Spanish/Chinese Numerous Employers

26 Workers’ Comp Poster

27 Movie Theater Ads, 2010 340 Movie Screens 1 Month 1 Million People

28 Workers’ Comp Movie Ad

29 Ethnic Newspapers, Anti-Fraud Ads, 2011-2013 Spanish Chinese Vietnamese Filipino Arabic African American

30 Brochures, 2008-2013 Mailer- 180,000 Journal Inserts- 16,000 Mailer- 185,000

31 TV Media – 2012 - 2013

32 Television PUBLIC SAFETY ANNOUNCEMENT (PSA) 13 Television Stations English/Spanish/Vietnamese 2,000 PSAs

33 Radio Media – 2012-2013 KLQV 102.9 FM KLNV 106.5 FM Word Syndicated Radio

34 III. PREMIUM FRAUD False statement Intent to reduce proper rate or cost of workers’ comp insurance

35 Insurance Companies & State Premium Fraud & Tax Evasion Billions $ Losing

36 San Diego Premium Fraud Task Force Summer 1996

37 San Diego DA CDI Franchise Tax Board Labor Commissioner Contractors’ Licensing Board Employment Development Department Task Force Members

38 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.

39 2007 Berkley Study “If you ain’t cheatin, you ain’t tryin.” Conclusion: NASCAR saying

40 2007 New York Study Fraud 15% to 20% $500 million to $1 billion in lost premium.

41 Boston Big Dig Tunnel Workers Reported to Carrier as Clerical. Loss: $11 million

42 Workers’ Compensation Required of Employers Coverage SCIF or Private Carrier

43 Workers’ Comp Premium Payroll x Class Rate x Experience Modification

44 $300,000 x 10% ($10 per $100) x 1 = $30,000 Landscaper PAYROLL x CLASS RATE x EXP. MOD

45 $100,000 x 10% ($10 per $100) x 1 = $10,000 Landscaper $300,000 x 10% ($10 per $100) x 1 = $30,000

46 $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 PAYROLL x CLASS RATE x EXP. MOD

47 $300,000 x 10% ($10 per $100) x 2 = $60,000 Landscaper $300,000 x 10% ($10 per $100) x 1 = $30,000 PAYROLL x CLASS RATE x EXP. MOD

48 Three Types of Premium Fraud 1.Underreport Payroll Cash Pay Independent Contractors Labor paid in Rent, Vehicle, Supplies

49 Three Types of Premium Fraud 2. Misclassification a. Type of Work landscaper v. tree trimmer janitor v. roofer clerical v. construction b. Hourly Wages (Dual Wages) Concrete over $24 hr. Carpentry over $26 hr. Plastering over $25 hr. Roofing over $23 hr.

50 Three Types of Premium Fraud 3. X-Mod Evasion a. Identity Change Same Company, change name b. Fail to Report Injuries Injured workers not provided WC Benefits.

51 Consequences of Premium Fraud Unfair Competition Theft to Insurance Carrier

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

53 Payroll Tax Evasion Crime often committed with premium fraud

54 Payroll Taxes Employer - 1 Employee and Payroll Over $100 in Calendar Quarter Employer - Files Quarterly Payroll Tax Returns (DE9) CALIFORNIA

55 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

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

57 Consequences of Tax Evasion 1. Reduce Costs 2. Pocket Employees Taxes 3. Unfair Competition

58 Formula For Success Law Enforcement Insurance Industry Public Awareness

59 Questions?

60 Institute of Management Accountants www.IMASD.org Jared Sanderson, President


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