News: 2007 Press Release

MONTEREY - Insurance Commissioner Steve Poizner announced today a longtime Monterey County construction contractor faces charges after a California Department of Insurance (CDI) investigation showed he had been leaving his employees uninsured for on-the-job injuries. Herman L. Johnson, 64, of Marina, CA, is scheduled to appear in Monterey County Court January 23, 2007 to enter a plea.

"This kind of fraud is particularly unconscionable," said Insurance Commissioner Steve Poizner. "What Mr. Johnson did was put his own greed above the welfare of the people he employed. If any one of these workers had been injured on the job- and that's not uncommon in the construction industry- that employee and his family could have faced financial ruin."

Johnson had been doing business in Monterey County for approximately 26 years as Buzz's Drywall. He allegedly hired and employed staff, for many years, without providing workers' compensation insurance. Johnson has been charged by the Monterey County District Attorney's Office with four felony counts of committing perjury on a contractor's license application and several renewal applications for a partnership that never existed; four misdemeanor counts of failing to provide for workers' compensation; one misdemeanor count of fraudulent use of a contractor's license number; one misdemeanor count of contracting without a license; and one misdemeanor count of unlawful advertising.

According to investigators, on March 14, 1980, Herman L. Johnson obtained a state contractor's license as a sole owner of Buzz's Drywall. When Johnson's license lapsed ten years later, he continued to operate his business, employing uninsured workers until he encountered legal problems in 2000. Needing to show he had a contractor's license, Johnson recruited a friend who had an active license and convinced him to form a dummy partnership in order for Johnson to get a new expedited license from the Contractors State License Board (CSLB). With the aid of his friend, Johnson circumvented the license requirements and ran his dummy partnership for years, renewing the license every two years, and each time certifying under penalty of perjury that he and his friend were running the business together. In addition, Johnson had filed with the CSLB a certification that he was not employing any persons as to be subject to the workers' compensation insurance requirements. That certification and Johnson's license were both found to be phony when Johnson was recently caught on a job site in Pebble Beach with a handful of workers hanging drywall. Some of the workers reported they had been working for Johnson for years.

Johnson was first arraigned on January 9, 2007, but did not enter a plea at that time. He will return to court on January 23, 2007 for further arraignment. The potential loss in this case is estimated at more than $64,219.

"When employers intentionally underinsure or under-report they undermine a system designed to protect everyone," said Commissioner Poizner. "Schemes to avoid payroll taxes, labor laws, and workers' compensation insurance premiums undercut legitimate businesses who cannot compete, workers are denied the benefits to which they are entitled, consumers are exposed to unexpected liabilities and shoulder unfair tax burdens, and the State of California is significantly harmed and limited in providing necessary services."

There are an estimated 800,000 employers in California, and approximately 30% do not have workers' compensation insurance.