The $2 million SJC Tree-Trimming Fraudsters

Posted by CotoBlogzz

Rancho Santa Margarita, CA - James and  Dorothy  Klinger, husband and wife who own two businesses for gardening and tree-trimming will be arraigned today on charges of committing $2 million in fraud, according to the Orange County District Attorney's (OCDA) office.

  James Joseph Klinger, 64, and Dorothy Louise Klinger, 63, both of San Juan Capistrano, are each charged with 29 counts of misrepresenting facts to State Compensation Insurance Fund, 28 counts of failing to file a return with intent to evade tax, 28 counts of willful failure to pay taxes, five felony counts of misrepresenting facts to a workers' compensation insurance company and sentencing enhancements for loss over $100,000 and taking involving more than $500,000. Joseph Klinger is additionally charged with 11 felony counts each of filing false tax returns and willful failure to file or make fraudulent tax returns. Dorothy Klinger is additionally charged with 7 felony counts each of filing false tax returns and willful failure to file or make fraudulent tax returns. They are out of custody on $50,000 bail

Joseph Klinger and his wife Dorothy Klinger have co-owned and operated Modern Tree Service, Inc. and Jamo's Gardening since the 1970's as two separate companies. Between 2003 and 2010, they are accused of setting up Jamo's Gardening with the express purpose of hiding Modern Tree Service, Inc. employees' payroll. The defendants are accused of paying almost all of Jamo's Gardening expenses and payroll with money from Modern Tree Services, Inc.

The defendants are accused of fraudulently classifying Jamo's Gardening as a landscape gardening business instead of a tree-trimming business, allowing them to insure tree-trimmers as gardeners to substantially lower the insurance premiums. Due to the nature of the job, the insurance premium for tree-trimmers is a higher cost then the insurance premium for a gardener.

Joseph and Dorothy Klinger are accused of keeping two sets of financial documents, one set of records showing the actual income and payroll expenses for each company and the other showing an edited version, which was used to underreport lower levels of income and wages to the State and insurance companies. They are accused of not reporting over half of the actual payroll for both businesses to the insurance companies or the Employment Development Department (EDD). The defendants are accused of not reporting over $3.6 million in income to the Franchise Tax Board (FTB) on the tax returns from 2004 through 2009, and over $3 million in employee wages to the EDD and insurance carriers.

In July 2009, the State Compensation Insurance Fund audited one of the businesses and found large amounts of money transferred from Modern Tree Service, Inc. to Jamo's Gardening to pay for payroll and expenses. Further investigation by FTB and EDD uncovered the tax fraud. The defendants are accused of committing $2 million in fraud, totaling $5.5 million including penalties and interest.

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