Central Valley business owners arrested in workers' comp fraud case
October 25, 2012
• Floor care business owners charged with 61 felony counts in $5 million scheme
• “Epitomize the underground economy in California”
The apparent owners of a Fresno-based commercial floor care business have been arrested for workers' compensation premium fraud, failure to pay taxes, tax evasion, and grand theft, according to state Insurance Commissioner Dave Jones.
Charged are Osvaldo Molina, 40, of Fresno; Fortino Galeno, 46, of Fresno; and Alicio Galeno, 41, of Los Angeles.
Mr. Molina and Fortino Galeno have each been charged with 61 felony counts and Alicio Galeno has been charged with 23 felony counts.
"These deceitful business owners epitomize the underground economy in California," says Mr. Jones. "Bringing them to justice will level the playing field for honest business owners and help to keep California businesses and employees further protected."
According to detectives from the San Joaquin Valley Premium Fraud Task Force, Floor Care Systems was incorporated in California in July 2002 by Mr. Molina, however, the investigation revealed that Fortino Galeno was the true owner of the business. Floor Care Systems operated in Fresno and Los Angeles counties, cleaning floors in supermarkets.
Investigators learned that between April 2007 and October 2011 Messrs. Molina and Galeno are suspected of under-reporting over $5,000,000 in employee payroll to their insurance carrier.
The apparent fraud cost insurers an estimated $782,000 in workers' compensation premiums and caused the state to miss out on $187,000 in withholdings, says Mr. Jones.
Detectives also found evidence indicating that Alicio Galeno failed to pay minimum wage to employees and locked employees inside their work area without proper supervision, says Mr. Jones.
The investigation into Floor Care Systems centered on the misrepresentation of employee payroll to insurance carriers reducing the proper premium, and improper reporting to the Employment Development Department.
If convicted on all charges, Messrs. Molina and Fortino Galeno could receive up to one year in county jail, or receive two to five years in prison for each felony count or pay fines up to $50,000 or double the value of the fraud, or by both imprisonment and fine. Alicio Galeno could receive up to one year in county jail or state prison for each felony count.