Three accused of multi-million workers comp fraud

SAN FRANCISCO
May 27, 2009 12:02am

Three Bay Area businesspeople have been arrested on 48 counts of workers' compensation insurance fraud, labor code violations and tax fraud, according to the California Department of Insurance.

Monica Mui Ung, 49, of Alamo; Joey Ruan, 31, of San Leandro; and Tin Wai Wu, 28, of Millbrae were arrested Tuesday.

"When businesses cheat the system to save money, they are only setting themselves up to pay later -- by serving time in prison," says state Insurance Commissioner Steve Poizner.

The investigation revealed that Ms. Ung owned and operated NBC General Contractors Inc., a general building contracting company that focused primarily on public works projects such as El Cerrito City Hall and Piedmont Elementary School.

From May 2003 to May 2007, NBC was awarded at least 27 public works projects in Alameda, Contra Costa, San Francisco, San Mateo and Marin Counties.

The cost for NBC's workers' compensation insurance was determined by employee wages, total amount of payroll and job classifications of the employees.

Ms. Ung and Messrs. Ruan and Wu allegedly lied to their workers' compensation insurance carrier to misclassify the type of work their employees were performing, as well as falsely reporting the hourly wage of more than 70 employees, saving them a significant amount in workers' compensation premiums, says Mr. Poizner.

By allegedly falsely reporting the type of work performed by employees and wages paid, NBC exposed the workers' compensation insurer to additional risk and allowed the company to engage in unfair business practices by giving an advantage over employers who correctly reported their payroll and risk, the insurance commissioner says.

Because public works projects are typically awarded to the lowest bidder, the alleged fraud gave NBC a significant advantage over competitors, Mr. Poizner says. The alleged false reporting resulted in a total loss of premiums of more than $1.45 million.

Additionally, investigators allege that NBC did not pay overtime or sick leave to employees, as required under labor laws. These losses are estimated at $3.6 million in unpaid wages to 19 employees.