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OCDASeal

Orange County District Attorney
Press Release


Tony Rackauckas, District Attorney
401 Civic Center Drive West
Santa Ana, CA 92701

For Immediate Release
Case # 13CF2507






August 8, 2013

Contacts:

Susan Kang Schroeder
Chief of Staff
Office: 714-347-8408
Cell: 714-292-2718

Farrah Emami
Spokesperson
Office: 714-347-8405
Cell: 714-323-4486

PRESIDENT OF CLEANING COMPANY CONVICTED OF UNDERREPORTING PAYROLL BY OVER $8 MILLION RESULTING IN PREMIUM LOSS OF $898,000

 

SANTA ANA – A president of a cleaning company was convicted and sentenced today for underreporting his payroll by over $8 million resulting in a premium loss of over $898,000. Loksarang Dinkar Hardas, 53, Buena Park, pleaded guilty today to six felony counts of misrepresenting facts to State Compensation Insurance Fund (SCIF), three felony counts of misrepresenting facts to Worker’s Compensation Insurance company, and a sentencing enhancement for committing an aggravated white collar crime. 

 

Hardas was sentenced to five years in state prison stayed pending successful completion of 10 years of formal probation, $250,000 fine, and restitution payment of $898,000. 

 

What is Premium Insurance Fraud?

California law requires that all employers maintain workers’ compensation insurance for their employees. Payroll records showing the number of employees and their income must be submitted to both the workers’ compensation insurance company and EDD, who oversee the collection of payroll taxes. Workers’ Compensation Insurance rates are determined by a formula, which takes into consideration the number and type of employees and the company’s history of injury claims.

 

Premium insurance fraud is committed when an employer intentionally misrepresents to the insurance company the number of employees, the type of work performed, the amount of payroll, and the loss history. Many times employers will hide their employees under other uninsured business entities, and if and when an employee is injured, that employee will be transferred over to the insured entity. Since the insurance is for the benefit of the employee, an insurance company is liable for these unknown employees. These illegal misrepresentations allow deceitful employers to calculate and purchase workers’ compensation insurance at a significantly lower premium rate, or to avoid purchasing the insurance at all. This practice places their competitors at a disadvantage because it forces them to compete against a company with fraudulently lower operating costs.

 

Premium fraud drives up the cost of insurance premiums for legitimate businesses that pay higher rates for their employees’ workers’ compensation insurance coverage. These legitimate businesses are less competitive against fraudulent companies who are able to under-bid their competitors due to lower business costs resulting from insurance fraud. This also endangers injured employees who may be denied workers’ compensation benefits intended to meet their physical, psychological, and financial needs for a work-related injury.

 

Circumstances of the Fraud

Awesome Products has been operating since 1998 as a manufacturing and distribution company for household and commercial cleaning products across the nation.

In 2001, Hardas applied and received a SCIF policy for Awesome Products but the defendant did not inform SCIF that he leased a majority of his labor from one of his three leasing companies he owned.

 

On July 10, 2008, Hardas insured his labor leasing companies with The Hartford insurance company but failed to disclose his policy with SCIF.

 

From July 10, 2008, to Dec. 2, 2010, Hardas underreported over $8 million of his payroll to both SCIF and The Hartford which resulted in a premium loss of $898,000.

 

SCIF began investigating the fraud after an employee working for one of the labor leasing companies, owned by the defendant, filed an insurance claim after suffering an injury at work. SCIF learned that the employee worked out of the same facility as Awesome Products but was employed through one of the labor leasing companies owned by the defendant.

 

SCIF reported this to the Orange County District Attorney Bureau of Investigation who investigated this case.

 

Deputy District Attorney Debbie Jackson of the Insurance Fraud Unit prosecuted this case.

 

 

www.orangecountyda.com  401 Civic Center Drive West, Santa Ana, CA 92701

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