Friday, February 12, 2010

Laguna Hill's Fraudster Convicted, Wife charged, in California's Largest Insurance Scam

 Posted By CotoBlogzz 02-12-2010 07:00 PM

SANTA ANA, CA - Michael Constantine was convicted today of committing premium insurance fraud with his wife, in one of the largest known Workers' Compensation Insurance fraud case in California's history. Michael Vincent Petronella, also known as Michael Constantine, 51, was found guilty by a jury of 33 felony counts of insurance fraud and the sentencing enhancement for aggravated white collar crime over $500,000 was found true. The defendant now faces a sentence ranging from probation up to 48 years and eight months in state prison at his sentencing on April 23, 2010.

Petronella's wife Devon Lynn Kile, 44, both of Laguna Hills, is also charged in this case.  Kile is in-custody on $250,000 bail and is scheduled for a pre-trial mental health competency hearing Feb. 18, 2010.
 At the time of their arrest, Petronella and Kile owned three businesses including Petronella Corporation, Western Cleanoff, Inc., and The Reroofing Specialists, Inc. (also known as Petronella Roofing).  The businesses were located in Costa Mesa and Cathedral City, Riverside County, and had clients primarily in Southern California which included the Ocean Institute in Dana Point, the Pacific Amphitheater in Costa Mesa, and other commercial properties.

In March 2006, an employee of Petronella fell from a roof and sustained injuries. A payroll stub was submitted to the State Compensation Insurance Fund (SCIF), listing his employer as Western Cleanoff, Inc., which SCIF did not insure. SCIF is a quasi-governmental non-profit insurance company established by the California State Legislature.  SCIF reported the suspected fraudulent claim to the Orange County District Attorney's Office (OCDA) and Department of Insurance (DOI).

Following a 2-year investigation by the OCDA, with assistance from several agencies (listed below), Petronella and Kile were arrested April 29, 2009, at their Laguna Hills home. A search of six locations including two residences, two businesses, a storage unit and a Certified Public Accountant's office turned up more than $500,000 in jewelry, $51,000 cash, and an application from Kile to be featured on the Bravo series Real Housewives of Orange County. A Receiver was appointed by the Court to oversee the seized property and determine which items and properties should be held as collateral or sold at auction as payment for back due taxes.   

The Orange County District Attorney's office arguement:
Beginning in 2000, Petronella and Kile obtained Workers' Compensation Insurance for their three companies through SCIF. Between 2000 and 2008, Petronella fraudulently submitted 42 claims for uninsured injured workers and underreported $29 million in payroll to SCIF in order to avoid paying his Workers' Compensation Insurance premiums. The couple engaged in a scheme that resulted in SCIF incurring more than $253,000 in uncovered injured worker claims and insurance premium losses in the millions. Petronella and Kile reported $3 million in payroll to SCIF, while having an actual payroll of $32 million, ten times more than reported.

Beginning in 2000, SCIF performed annual audits of Petronella and Kile's companies, during which they provided false employee and payroll records. Between 2000 and 2008, Petronella and Kile fraudulently reported a $2.9 million payroll to SCIF for The Reroofing Specialists, Inc., while reporting $16.6 million in payroll to EDD for the same company during the same time period. Beginning in 2003, Petronella and Kile fraudulently reported no payroll to SCIF for Western Cleanoff, Inc., while reporting in excess of $13.9 million in payroll to EDD for the same company between 2000 and 2008. Between 2007 and 2008, they paid unreported payroll in excess of $200,000 in cash to day laborers.

In order to avoid paying Workers' Compensation Insurance for all of his employees, Petronella and Kile underreported the number of workers employed at each business, including claiming none for Western Cleanoff, Inc. Petronella fraudulently filed 42 claims for employees injured while working for The Reroofing Specialists, Inc. to obtain insurance coverage for the injured employee without paying for the insurance. The injured employees have since been identified as Western Cleanoff, Inc. and Petronella, Inc. employees.

The couple, who lived in Laguna Hills at the time of their arrest, owned five properties in California and Texas and multiple luxury vehicles including a Bentley, two Ferraris, and a Range Rover. Between 2005 and 2007, Petronella and Kile spent more than $2.1 million on their American Express credit card for personal items. They spent thousands of dollars on jewelry, shoes, clothes, and other personal items at stores including Balenciaga, Bloomingdale's, Chanel, Christian Louboutin, Gucci, Kitson, Neiman-Marcus, Nordstrom, Yves Saint Laurent, and others. 

This case was investigated by the OCDA and the Orange County Premium Fraud Task Force, a collaboration of investigators from OCDA, DOI, EDD, Franchise Tax Board, and Contractors State License Board. 

Deputy District Attorney Shaddi Kamiabipour of the Workers' Compensation Insurance Fraud Unit is prosecuting this case.

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