A California contractor pleaded guilty to workers' compensation fraud after underreporting payroll. The court ordered restitution and jail time. Scope of Cover found the restitution order was for over $925,000. The case also involved payroll tax evasion, which caused an additional loss of approximately $342,405 to the state's Employment Development Department. The contractor's actions resulted in significant financial and legal consequences, including jail sentences for the individuals involved.
Key figures
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Hall was sentenced on multiple felony counts to two years of probation with full search and seizure, 120 days in jail, and ordered to pay over $925,000 in restitution to State Compensation Insurance Fund (SCIF) and Employment Development Department (EDD).Open the source
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Soruco was sentenced to one year of probation with full search and seizure, 120 days in jail, and was also ordered to pay over $925,000 in restitution to SCIF and EDD after pleading guilty to multiple misdemeanor charges.Open the source
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The investigation further revealed unreported payroll to SCIF, leading to a premium loss of approximately $585,666.Open the source
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Investigators also discovered Hall and Soruco committed payroll tax evasion by failing to report employees and payroll to California’s EDD from October 15, 2013 through February 6, 2019 which resulted in a payroll tax loss to EDD of approximately $342,405.Open the source
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Failing to have workers' compensation coverage is a criminal offense. Section 3700.5 of the California Labor Code makes it a misdemeanor punishable by either a fine of not less than $10,000 or imprisonment in the county jail for up to one year, or both.Open the source
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Additionally, the state issues penalties of up to $100,000 against illegally uninsured employers.Open the source
#What Happened in the Soruco Case
According to public records, Carmen Hall Soruco and Antonio Soruco pleaded guilty to workers’ compensation fraud charges. The charges stemmed from their failure to report employees and payroll to their insurer, the State Compensation Insurance Fund (SCIF).
The case also involved payroll tax evasion. Records show they failed to report employees and payroll to California’s Employment Development Department (EDD).
#Restitution and Financial Losses
The court ordered both Carmen Hall Soruco and Antonio Soruco to pay over $925,000 in restitution. This figure covers losses to both the insurer and the state.
The underreported payroll directly impacted the workers' compensation insurer. The failure to report resulted in a premium loss of approximately $585,666 for SCIF. Separately, the payroll tax evasion led to a loss of approximately $342,405 for the EDD.
| Recipient | Approximate Loss |
|---|---|
| State Compensation Insurance Fund (SCIF) | $585,666 (from premium fraud) |
| Employment Development Department (EDD) | $342,405 (from tax evasion) |
#Jail Time and Probation
The consequences included incarceration. Carmen Hall Soruco was sentenced to 120 days in jail.
Antonio Soruco also received a jail sentence of 120 days. His sentence additionally included one year of probation with terms of full search and seizure.
#What California Law Requires of Employers
California law mandates that all employers carry workers' compensation insurance. This rule applies even to businesses with only one employee and includes employers in the construction industry.
They can purchase a policy from a licensed insurance company or obtain it through the State Compensation Insurance Fund (State Fund).
Licensees are required to submit either a valid Certificate of Workers' Compensation Insurance or a valid Certification of Self-Insurance to the board.
#State Penalties for Being Uninsured
In California, it is classified as a criminal offense.
A conviction can lead to a fine of not less than $10,000 or imprisonment for up to one year, or both.
These fines can be up to $100,000 against employers found to be illegally uninsured.
#How to Check Your Own Payroll Reporting
Workers' compensation premiums are calculated based on employee payroll. The Soruco case demonstrates the legal risk of misreporting this information. The contractors were charged for failing to report employees and payroll.
Contractors should ensure payroll figures submitted to their insurer are consistently accurate and complete. Mistakes or intentional underreporting can lead to audits, demands for back premiums, and potential fraud charges.
Frequently asked questions
What did the contractors in the Soruco case do wrong?
According to the record, they pleaded guilty to workers' compensation fraud charges. This was for failing to report employees and payroll to their insurer, the State Compensation Insurance Fund (SCIF). They also committed payroll tax evasion by not reporting to the EDD.
What sentences did the contractors receive?
Carmen Hall Soruco was sentenced to 120 days in jail. Antonio Soruco was sentenced to 120 days in jail plus one year of probation that included terms of full search and seizure.
Does every California employer need workers' comp insurance?
Yes. California law requires all employers to carry workers' compensation insurance, even if they only have one employee.
What happens if a California contractor doesn't have workers' comp?
Failing to have workers' compensation coverage is a criminal offense. The penalty can be a fine of no less than $10,000, imprisonment for up to one year, or both. The state can also issue separate penalties of up to $100,000 against illegally uninsured employers.
Sources
- California Department of Insurance: Press release 016-2022 (workers' compensation premium fraud, Soruco Structures)California Department of Insurance · retrieved
- CSLB: Workers' compensation insurance for licenseesContractors State License Board · retrieved
- California DIR: Workers' compensation FAQCalifornia Division of Workers' Compensation · retrieved
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