Workers’ Comp Fund Wins Suit

California’s state-backed workers’ compensation insurer has won a $14.6-million default judgment against two now-defunct Rancho Cucamonga companies involved in an alleged premium-shaving fraud.

The San Francisco-based State Compensation Insurance Fund accused Ideal Payroll Plus and Ideal Management, so-called professional employer organizations, of underreporting the pay of workers they leased to clients, mainly small companies in the San Bernardino area. The alleged underreporting allowed the leasing companies and their customers to fraudulently reduce their workers’ compensation insurance costs, the state fund alleged.

A civil suit filed by the state fund against two principals in the firms, David Clancy Jr. and Telma Mogue, isn’t affected by the judgment.

“I assure you these individuals will fight this thing with a vengeance,” said their attorney, Robert F. Schauer. He said his clients created a form of employee compensation, which included dividends placed in trust, as a legitimate mechanism to help firms deal with soaring workers’ compensation costs.

The allegedly fraudulent payroll reporting took place from March 2001 to May 2003, when the state fund canceled the companies’ policies after an audit, said Jim Zelinski, a state fund spokesman. The judgment handed down by San Bernardino County Superior Court Judge Ben Kayashima is “one of the largest awards of its type in the history of the California workers’ compensation system,” Zelinski said.

Information about the alleged false reporting has been shared with other government agencies, including the state Department of Insurance, the state Employment Development Department and the San Bernardino County district attorney’s office, Zelinski said.