Two former owners of a Walnut Creek-based painting and construction company have been charged in Alameda County along with a third man in a fraud scheme that cost insurance carriers about $5 million, authorities said.
Eric Oller and Brian Mitchell each were charged with one felony count of conspiracy to commit a crime, six counts of felony insurance fraud and two counts of workers' compensation fraud, according to a statement from the Alameda County District Attorney's Office and California Department of Insurance.
The two once owned Signature Painting and Construction Inc., which operates throughout the Bay Area. Oller also is the owner of Valhalla Consulting.
Authorities also said they charged Yama Sekander, the owner of A-1 World Class Painting, with one count of felony workers' compensation fraud.
All three men have pleaded not guilty to the charges.
According to authorities, Mitchell used Valhalla Consulting and A-1 World Class Painting as a shell company to pay employees at Signature Painting and Construction from 2017-18.
The intent of this pay-method was to illegally reduce SPC's workers' compensation insurance premium, authorities said. In the scheme, authorities said SPC misrepresented or left out information about the company's structure and payroll costs to its insurance carriers to reduce those premiums.
"If a business creates an environment where they falsely pay a lower insurance premium, that company has an unfair competitive advantage over one that is law-abiding," Alameda County District Attorney Nancy O'Malley said in a statement.
Prosecutors allege Michell illegally misclassified employees and underreported payroll costs to reduce the insurance premiums. An employer must pay higher premiums as the riskiness of the job increases, authorities said.
Mitchell and Oliver also are accused of entering into agreements to move employees from one company to another to save money on workers' compensation costs. Authorities have accused Mitchell of using Sekander's A-1 company to obtain a workers' compensation policy for the SPC company.
The SPC owners paid some of the employees under the table and instructed other injured employees to report working for one company, when they actually were working for another, authorities said, adding that this allowed the SPC to avoid paying or reporting their proper taxes.
Authorities said insurance carrier SCIF lost approximately $3.1 million as a result of the scheme, while AmTrust lost approximately $1.9 million.
The state's Compensation Insurance Fund submitted a fraud referral against the company in 2019, and authorities began to investigate. The crimes go back to 2015, authorities said.