Janitorial company owners arraigned for insurance fraud after allegedly underreporting $2.4 million in payroll
News: 2024 Press Release
SAN BERNARDINO, Calif. — Jose Arredondo, of Fontana, 50, and his wife, Olga Chaves, 45, were arraigned today on multiple felony counts of insurance fraud after a California Department of Insurance investigation found the couple allegedly underreported payroll for their janitorial company by over $2.4 million to illegally save on workers’ compensation insurance premiums and avoid payroll taxes.
The Department began its investigation after an employee of the janitorial company owned by Arredondo and Chaves sustained a work-related injury and the insurance company providing workers’ compensation insurance suspected fraud. The investigation found the employee who was injured worked for Team Janitorial since 2015; however, the workers’ compensation policy for the company began September 2018 through September 2019. This showed there was no prior coverage and employees were left uninsured.
The investigation found Arredondo and Chaves had a previous workers’ compensation insurance policy with a different insurance carrier from April 14, 2018, to July 11, 2018, under the business name Team Janitorial with a different business address. The policy was cancelled due to non-payment and because Arredondo and Chaves did not comply with the audit.
Arredondo and Chaves had a pattern of remaining with the insurance carrier until they were notified of an audit. They did not comply with the audits and changed workers’ compensation insurance carriers. At this point, Arredondo and Chaves made it appear as though their business was a new venture by changing the company name, ownership, and/or address. By changing the business entity and failing to disclose their true payroll, they were able to reduce their premiums, rate, and cost of insurance. They also claimed they had no subcontractors on the application yet they mailed subcontractor forms to their employees and they failed to report payroll to the Employment Development Department in order to evade payroll taxes.
An audit revealed Team Janitorial had an estimated payroll of $2,518,584 from April 14, 2018, through September 7, 2023. Arredondo and Chaves underreported payroll to their insurance carriers by approximately $2,408,584, which resulted in a premium loss of approximately $436,717.
The San Bernardino County District Attorney’s Office is prosecuting this case.
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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.
