Former Costa Mesa resident extradited to O.C. on suspicion of $1.4M workers’ comp fraud

A former Costa Mesa resident who allegedly defrauded businesses of more than $1.4 million by collecting insurance premiums on nonexistent policies pleaded not guilty last week to a slate of felony charges, including embezzlement, grand theft and forgery, officials reported.

Karyl Lynn Reed, 57, was arrested Oct. 7 in Seabreeze, Texas, and extradited to Orange County, where she faces 20 felony charges and enhancements for alleged criminal acts that took place between 2012 and 2019, according to an Oct. 27 release issued by the California Department of Insurance.

Officials say Reed, acting as an unlicensed insurance agent, collected premiums for workers’ compensation insurance through two businesses, Envoy Business Partners and Allenn Specialty Group, both run out of a Huntington Beach office suite.

A third business, Cultivate HR, Inc., is listed as operating from a residence on Costa Mesa’s Monte Vista Avenue.

Reed allegedly offered victims fraudulent certificates of insurance, causing them to believe they had valid coverage when they did not.

Investigators learned Reed also operated a staffing company without providing workers’ compensation coverage and personally administered employee injury claims. She collected premiums and payroll, employer and employee taxes and provided forged certificates of insurance, according to the release.

Insurance Commissioner Ricardo Lara said his department was dedicated to investigating and stopping unlicensed agents like Reed to better protect consumers and businesses.

“Local businesses are the lifeblood of our recovering economy,” he said in the release. “Ms. Reed’s alleged actions put these business owners’ livelihoods at risk by stealing their money and leaving them uninsured.”

Reed’s case is being prosecuted by the Major Fraud Unit of the Orange County district attorney’s office, which identified in a June 22 criminal complaint at least five businesses reportedly victimized by her fraudulent acts.

They included a property management company and autism therapy business in Los Angeles as well as a Santa Ana wholesale bakery and an assisted living facility in Long Beach.

Department of Insurance officials reported one victim learned something was wrong after attempting to verify certificates of insurance.

Another victim learned, only after an employee was injured, the business had no valid workers’ compensation coverage. A third, the release indicated, discovered funds paid to Reed’s staffing business were never remitted to the insurance company.

The three victims reportedly lost more than $1.4 million. Because Reed is believed to have taken more than $500,000, prosecutors charged her with a felony enhancement of aggravated white-collar crime that could prolong any prison sentence she would receive if convicted.

Reed is being held in an Orange County jail, according to an online inmate locator maintained by the Sheriff’s Department.

Court records indicate Reed is next scheduled to appear court on Dec. 10 for a pretrial mandatory settlement conference.

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