3 at Chatsworth firm charged with fraud
Three executives of a Chatsworth flooring and carpet installation company have been charged with defrauding the state’s biggest workers’ compensation insurer of nearly $11 million, a Los Angeles County prosecutor said Monday.
Top executives at Cover-All Inc. underreported their payroll to the State Compensation Insurance Fund by nearly $32 million from September 2001 to April 2006, saving the company $10.98 million in premiums, said Deputy Dist. Atty. Michael O’Gara, who brought charges in the case.
The company is a flooring subcontractor with 1,500 employees in 30 states, said Jonathan M. Levitan, Cover-All’s general counsel. O’Gara said the company does 95% of its business for Home Depot.
“They’re big, big contributors to the community,” Levitan said. “It’s not like you’re talking about a renegade company.”
Insurance fund auditors noticed that the company’s reported payroll under its workers’ compensation insurance policy differed from what the company was reporting to the state Employment Development Department, which collects payroll taxes and administers unemployment benefits.
“You mess around with that [Employment Development] agency and you can get in a lot of trouble,” said Lauren Hersh, a spokeswoman with the California Department of Insurance, which investigated the case. The State Compensation Insurance Fund “looked like an easier target.”
Prosecutors charged Gad Leshem, 59, Zeev Golan, 54, and Irit Golan, 52, all of Northridge, with four counts of premium fraud and one count of conspiracy Wednesday.
Leshem is the company’s president and chief executive, Zeev Golan is vice president and his wife, Irit Golan, is the company’s executive secretary and payroll supervisor, prosecutors said. The Golans are alleged to have prepared the fraudulent documents, which Leshem approved.
The charges each bring a maximum sentence of five years in prison. O’Gara sought to hold the three on $6.5 million bail each because of the amount of the alleged fraud and because each holds dual U.S.-Israeli citizenship. However, a judge reduced the bail to $100,000 each Friday.
Levitan referred comments on the criminal charges against the executives to Janet Levine, a Los Angeles attorney representing Leshem. She said her client had done “absolutely nothing illegal. He is proud of his record as an employer.”