FOUR CHARGED IN $6 MILLION WORKERS' COMP FRAUD SCHEME

RIVERSIDE, CALIFORNIA, March 14, 2007: In the largest case of workers' compensation insurance fraud in the county's history, four defendants are in custody on six million dollars bail each. Each has been charged with 107 felony counts of defrauding insurance companies and the state government of insurance premium dollars and payroll and income taxes.

Carter Lee Pendergrass, 56, his son Joshua, 25, both of Palm Springs and Phillip Timothy Cassidy, 51, and his wife Karen, also 51, of San Bernardino have been booked into the Riverside County Jail.

Prosecutors have alleged that Carter Pendergrass and Phil Cassidy owned and operated a residential construction company under the various names of TF Ventures, All Service, Inc., and Total Framing. Assisted by the other two defendants, they deliberately under-reported wages to their workers' compensation insurance companies and to the California Employment Development Department, which collects state payroll taxes.

It is further alleged that they concealed the companies' claims histories to unlawfully reduce their workers' compensation insurance premiums and state unemployment taxes.

The four also worked together to defraud the insurance companies, State Compensation Insurance Fund and Redwood Fire & Casualty Company, of millions of dollars by intentionally misclassifying their employees, according to prosecutors.

Senior Deputy District Attorney Paul Fick explained that in certain construction trades insurance premiums are lower for more highly paid workers on the theory that those who are paid more have greater experience and are less likely to get injured. "They would report a worker who earned $11 an hour for a forty hour week as working only twenty hours, but at $22 per hour. That way, they saved more than half of the workers' comp insurance cost for that worker."

Additionally, the four have been charged with money laundering for passing money through a dummy company, McCollum Wood Products, McCollum being Karen Cassidy's maiden name. The funds were supposedly to purchase materials, but were used to pay some employees under the table and even to pay the defendants' household bills.

Evidence was seized from several locations when search warrants were served on January 25th.

"When businesses cheat the system this way, they unfairly underbid honest competitors. The crooks get rich, while the honest companies go out of business or leave California," said District Attorney Rod Pacheco.