Esparto fireworks owner also accused of suspected payroll fraud, cheating the state

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At least six people were arrested Thursday in connection to the Esparto blast that killed seven people last year. Also behind the these criminal charges was an investigation into another matter: insurance premium fraud.

The company that owned the Esparto facility has been accused of suspected workers’ compensation premium fraud by California, allegedly cheating the state out of thousands of dollars it believes it is owed.

The California Department of Insurance Fraud Division reported that Devastating Pyrotechnics allegedly did not report wages and failed to pay the necessary funding for worker’s compensation, resulting in a loss of $74,099.28 to the state, according to documents obtained by The Sacramento Bee.

The 76-page referral from the agency, filed last summer and titled “Suspected Fraudulent Claim Report,” documents multiple allegations of fraud against owner Kenneth Chee.

“Kenneth Chee, owner of Devastating Pyrotechnics Inc is suspected of underreporting payroll… by not reporting all wages, including cash payments made to employees,” the report states.

Chee was arrested at Disney World and faces felony charges, including seven counts of murder.

Yolo County District Attorney Jeff Reisig requested the investigation by the State Compensation Insurance Fund’s Special Investigation Unit on July 10, after the July 1 blast. The report came back 20 days later. According to its website, the unit is charged with investigating allegations of “suspected fraud to the California Department of Insurance’s Fraud Division and district attorneys throughout the state.”

“State Compensation Insurance Fund strongly recommends that your agency make an independent determination as to the existence of fraud, based on a thorough review of all available records and information,” the document states. Reisig continues to present the Esparto case to a criminal grand jury. Yolo Chief Deputy District Attorney Melinda Aiello said the insurance fraud referral “is still pending as it is part of the ongoing criminal investigation.”

The documents show that Chee ran the company by paying workers almost exclusively under the table. The exception to those cash payments were four individuals with close ties to Chee — one was his wife Marlene Phan.

Chee earned $240,000 in reported wages from the company between 2021 and 2023. Phan earned $204,000 during that same period.

“Records indicated that there were four employees being paid by DPI: Marlene Phan, Emma Chee, Aiden Chee, and excluded officer Kenneth Chee,” the investigation concludes.

According to the documents, Chee paid his other employees in cash — including those who later died in the explosion.

Detailed wage reports from the California Employment Development Department for the seven employees who perished show no reportable income from Devastating Pyrotechnics, despite several of the men having been associated with the company for years.

Neil Li, the company’s longtime general manager, for example, had no wages reported to the state between 2020 and 2025 from Devastating Pyrotechnics. According to the documents, John Brooke, the company’s insurance broker, told investigators after the explosion that Li earned approximately $120,000 annually.

Douglas Horngrad, Chee’s attorney, did not respond to a request for comment from his law firm, or his client Chee.

Former Sacramento County District Attorney Ann Marie Schubert said the insurance fraud investigations provides troubling new details to an already disturbing picture.

“This investigation appears to be an example of determining broader nefarious behavior,” she said. “It’s not uncommon in cases like this where the individuals are skirting the system in every way you can imagine. Ripping off the government. Ripping off the taxpayers. Ripping off their own employees.”

Schubert said in a phone interview she believes the Yolo DA’s investigation “is looking at every aspect of these individuals’ lives, whether that involves insurance fraud or homicide, to determine exactly what kind of criminal behavior they were engaged in.”

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