Insurance Commissioner Dave Jones Announces Arraignment of Bay Area Business Owner for Insurance Fraud
News: 2012 Press Release
Insurance Commissioner Dave Jones today announced that Frances Ann Doherty, 51, of Millbrae was arraigned in San Francisco Superior Court for 57 felony counts related to payroll theft and workers' compensation insurance premium fraud. Doherty was arrested yesterday afternoon and booked into the San Francisco County jail. Her bail has been set at $750,000.
This arrest is a result of a joint investigation headed by Investigators from the San Francisco County District Attorney's Office and Detectives from the California Department of Insurance (CDI).
"This case is an excellent example of inter-agency collaboration," said Commissioner Jones. "The underground economy is a real threat to California's law-abiding businesses and owners. Rooting out these bad actors and the fraud they commit is a top priority of my Department."
"The crimes we have charged against this employer are extremely serious," said San Francisco District Attorney George Gascón. "In order to win dozens of painting contracts with the City, the defendant promised to pay her workers San Francisco's prevailing wage, and job after job allegedly submitted false documentation showing that she did so. We intend to prove that over the course of three years the defendant underpaid her employees and pocketed over $600,000 that the City thought it was paying for those wages, and defrauded her workers' compensation insurance carriers out of over $100,000 in insurance premiums. This conduct not only victimizes workers who are desperately trying to make a living in a very tough economy, it also hurts the honest businesses that were unable to successfully compete for these projects which the defendant was able to underbid and win as a result of this scheme."
According to investigators, Doherty is the owner of Doherty Painting & Construction, a painting contracting company that was awarded numerous public contracts with the City and County of San Francisco, San Francisco Unified School District and other public agencies. Contractors on public work projects are required to pay their workers the prevailing wage and report to the public agency on a weekly basis that the appropriate wage was paid. The investigation revealed Doherty allegedly reported on 23 different public projects that her employees had been paid the prevailing wages on each and every project, with some projects lasting several months. Through the investigation, it was determined that the Doherty Painting workers were only paid a fraction of the wages that they were entitled to. The investigation further revealed that Doherty allegedly provided fraudulent information to public agencies that were doing compliance audits in an effort to conceal the prevailing wage violations.
Doherty also allegedly provided fraudulent employee payroll information to Redwood Fire & Casualty and Zurich Insurance companies from September 2006 through June 2009, which ultimately allowed her to pay lower workers' compensation insurance premiums to these carriers. The amount of premium paid on a workers' compensation policy is determined by the amount of employee payroll, the type of work each employee performs, and the safety record of the employer, commonly known as the experience modification factor. These factors combined will determine the risk to the insurance company and its exposure to loss. If an employer fraudulently reports their true payroll based upon these factors, the insurance company will not receive adequate payment for the risk incurred. A company such as Doherty Painting who is allegedly suspected of committing workers' compensation insurance premium fraud will have an unfair advantage over competitors in bidding for jobs, especially in the public works arena because public works projects typically are awarded to the company with the lowest bid.
The estimated loss to Redwood Casualty & Fire and Zurich Insurance is approximately $108,000. The estimated total loss in regards to insurance premiums and wages is approximately $700,000.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $289 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $394 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.