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Insurance Commissioner Dave Jones Announces Arraignment of General Contractor for Insurance Fraud

News: 2012 Press Release

For Release: April 24, 2012
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov

Insurance Commissioner Dave Jones Announces Arraignment of General Contractor for Insurance Fraud
El Sobrante man allegedly collected $60,000 while operating business

Insurance Commissioner Dave Jones today announced that Jeong M. Baek, 36, the owner of Baeks Brother Construction, Inc. has been arraigned on one felony count each for violating Penal Code Section 550 (b) (3), Insurance Fraud, Penal Code Section 664/118, Attempted Perjury, Insurance Code Section 11880 (a), Workers' Compensation Insurance Premium Fraud, and Unemployment Insurance Code Section 2118.5, Failure to collect and/or pay taxes. If convicted, Baek could face up to five years in state prison on each insurance fraud count and restitution in the amount of approximately $68,632.67.

According to Investigators from the California Department of Insurance (CDI) Silicon Valley Regional Office, in June 2010, CDI received a suspected fraudulent claim referral from an insurer, stating they had a possible fraudulent insurance claim. Baek claimed to have had suffered an injury while working as a plumber in 2008. After a short period of being off work and receiving disability benefits, Baek returned to work until 2009, when his claim was re-opened. With no modified work available, Baek was laid off from his plumbing job and continued to receive disability benefits based on his plumbing job wages. While Baek was unable to work, the insurer discovered that Baek owned and operated the construction business, Baeks Brother Construction, Inc., and had an active building permit in the City of Cupertino. The insurer later conducted surveillance of Baek and obtained video of him performing plumbing work. The investigation conducted by CDI revealed that from May 2009 through November 2010, Baek operated his construction business while he collected nearly $60,000 in disability benefits.

While CDI investigated Baek's insurance claim, it was discovered that Baek was also committing insurance fraud against a second insurance carrier, and failed to collect payroll taxes reportable to the Employment Development Department (EDD). In June 2009 Baek obtained workers' compensation insurance for his construction business with the State Compensation Insurance Fund (SCIF). Investigators discovered that Baek fraudulently under-reported his employee payroll and misclassified employees in order to obtain a lower insurance premium. The payroll that was hidden from the insurance carrier was also omitted from annual reports to the EDD, resulting in Baek's company fraudulently avoiding to pay the required California employment taxes, giving his business an unfair advantage over law-abiding companies and thereby operating in the underground economy.

This case is being prosecuted by the Santa Clara County District Attorney's Office.



Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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