An Ontario man was sentenced to 3 years’ probation and 120 days in jail for committing workers’ compensation insurance fraud and stealing wages from his workers, both felonies. Miguel Contreras, 36, the former owner of Ontario-based National Drywall, Inc., was also ordered to pay his insurance carrier $262,535 in underpaid workers’ compensation insurance premiums.

The conviction stems from a 2011 project in which Contreras was awarded the contract to install drywall at Joe Baca Middle School in Colton. “Because this was a ‘Public Works’ project, Contreras was required to pay his employees the current prevailing wage,” said the prosecutor in charge of the case. “However, he employed two schemes to avoid doing so.”

One method required some of his workers to “kick back” a portion of their pay on a weekly basis in order to keep their jobs. The other required some workers to alter their time cards to falsely indicate that their primary job duties included “stocking/scrapping,” which was paid at a much lower prevailing wage, when in fact they were framing and hanging drywall, which was paid at a much higher prevailing wage.

While this theft of wages was occurring, National Drywall submitted false payroll reports to its workers’ compensation insurance carrier, ICW Group, which resulted in a fraudulent reduction of its insurance premium.Contreras was originally arrested on Oct. 23, 2014. A year later, on Oct. 23, 2015, Contreras entered pleas to workers’ compensation insurance fraud, and theft of prevailing wages, and admitted his conduct was subject to California’s white collar crime enhancement.

In March 2015, the Little Hoover Commission issued a report highlighting the magnitude of California’s underground economy problem. An underground economy is one that includes activities that businesses try to hide from government licensing, regulatory, tax and law enforcement agencies, and is subsidized by businesses that otherwise would be legal operators but who are breaking the law to gain a leg up on their competition. The Little Hoover Commission believes California’s underground economy is costing the State upwards of $10 billion in annual tax revenue, money that could be used for funding education, law enforcement, and infrastructure improvements, or reducing taxes and insurance premiums for Californians who play by the rules.

According to District Attorney the theft of prevailing wages and workers’ compensation premium fraud that took place in this case are the types of illegal activity that feed California’s underground economy.