On August 23rd, 2018

Three People Charged with Tax & Workers’ Comp Insurance Fraud An EDD and OCDA investigation

SANTA ANA- On August 16, 2018, three people, Luis Enrique Perez, 49, of Yorba Linda, Veronica G. Lake, 47, of Mission Viejo and Scott Wesley Smith, 36, of Orange, were charged with defrauding a workers’ compensation insurance company by misrepresenting uninsured injured workers as employees of a different company. They are also charged with failing to report wages, withhold payroll taxes, and pay employment taxes for wages earned to California Employment Development Department (EDD). If convicted they face a maximum sentence of more than 16 years in state prison.

“These types of investigations can be long and complicated,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  “Creating schemes to skirt around employment laws to avoid paying taxes and other business related expenses, not only hurts the the state,  it’s a crime.”

In 2013, Luis Perez owned and operated several temporary employee staffing companies including BaronHR, LLC.  Lake worked for Perez as his Controller, while Smith worked as the Director of Safety. In September 2013, Smith formed Titan Personnel, Inc. and acted as its CEO, CFO, Secretary and sole Director.

Despite losing its workers’ compensation insurance on July 1, 2013, Perez is accused of unlawfully continuing to operate BaronHR and contract with outside companies to provide temporary employees.

Between December 2013 and September 2014, the defendants are accused of conspiring to fraudulently report 47 injured employees of BaronHR as employees of Titan to American International Group, Inc. (AIG) to avoid liability for its employees who were injured at work, and to hide BaronHR’s failure to obtain workers’ compensation insurance as mandated by law.

As a result, AIG became liable for approximately $393,000 worth of expenses for claims of individuals not covered by their insurance policy.

The defendants are further accused of conspiring to commit tax fraud by failing to report, withhold, and pay employment and personal income tax for 36 BaronHR employees, including individuals they attempted to report to AIG as Titan Personnel employees, to the EDD.

The Orange County District Attorney Bureau of Investigation and the California Employment Development Department jointly investigated this case.

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