“It’s important that businesses report the true and proper amount of payroll as it pertains to workers’ compensation, in order to properly maintain the fund and to be sure all businesses are operating on a level field.” – CSLEA President Alan Barcelona
MERCED– As the result of a California Department of Insurance (CDI) investigation, on April 25, 2023, four Merced family members were arraigned for multiple counts of insurance fraud. The investigation revealed the businesses owned and/or operated by these four had allegedly underreported payroll by millions of dollars, leading to an illegal underpayment of over $2.1 million in workers’ compensation insurance premiums.
This alleged fraud was discovered after a previous CDI investigation which resulted in the sentencing of a father and daughter for a similar underreporting scheme. The daughter in that investigation, Angelita Barocio-Negrete, was also the office manager and bookkeeper for two additional family-owned farm labor contracting businesses in Merced County. An investigation into these businesses revealed they, too, allegedly underreported payroll to their insurance carrier.
According to a CDI press release, between December 2007 and January 2013, Negrete M. Agriculture Inc., owned by Maria Negrete-Melchor, 55, and her daughter-in-law Melissa Bourbois, 39, had a workers’ compensation insurance policy issued by State Compensation Insurance Fund. Maria’s daughter, Angelita Barocio-Negrete, 36, was the office manager and bookkeeper. During this time, they reported $552,517 in payroll to State Fund. A forensic audit revealed Negrete M. Agriculture Inc. actually had $4,026,125 in payroll, resulting in an alleged underreporting of $3,473,608.
The CDI investigation also revealed that between November 2012 and November 2015, Negrete & Son’s Ag Inc., owned by Albaro Barocio, 39, had a workers’ compensation insurance policy also issued by State Compensation Insurance Fund. Albaro’s sister, Angelita Barocio-Negrete, was the office manager and bookkeeper. During this time, the insured reported $654,091 in payroll to State Fund. A forensic audit revealed Negrete & Son’s Ag Inc. actually had $4,679,409 in payroll, resulting in an alleged underreporting of $4,025,317.
The alleged underreporting by both companies resulted in a loss of $2,165,308 in premium by State Fund.
Underreporting of workers’ compensation insurance in California is illegal and undermines the financial stability of the insurance system, which shifts costs onto other policyholders. It also jeopardizes the availability of benefits for injured workers, hindering their access to necessary support. Unfair competition also arises as fraudulent businesses gain an advantage over ethical ones.
These consequences destabilize the insurance system, compromise benefits for injured workers, and create an unfair business environment, ultimately harming consumers in terms of higher costs, limited access to support, and reduced economic stability. Experts at the Department of Insurance are dedicated to protecting consumers by rigorously investigating cases of alleged illegal acts by insurance companies and individuals.
All four family members are scheduled to return to court on August 1, 2023. The Merced County District Attorney’s Office is prosecuting this case.