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Workers’ compensation premium fraud can range from misclassifying a few workers into safer jobs than what they actually perform, falsely reporting employees as independent contractors, or setting up dummy companies to “hide” employees to keep payroll, and in turn, workers’ compensation premiums artificially low.

In yet another case of alleged premium fraud, Felipe Saurez Barocio, 63, of Atwater, owner of Agriculture Services, Inc., and his daughter, Angelita Barocio-Negrete, 33, of Merced, were arraigned on multiple felony counts of insurance fraud. Prosecutors say the company allegedly underreported employee payroll by $11 million in order to fraudulently reduce the business’s premium for workers’ compensation insurance by over $2.5 million.

The California Department of Insurance said that the alleged fraud potentially left employed farm workers without insurance coverage and at financial risk.

State Compensation Insurance Fund filed a suspected fraudulent claim with the California Department of Insurance alleging potential insurance fraud last October.

SCIF reported that Barocio, as owner of a farm labor contracting business, allegedly under reported employee payroll in order to reduce the proper rate of insurance premiums owed to SCIF.

An investigation by the California Department of Insurance revealed that between 2015 and 2019, Barocio and his daughter, who worked as the office manager, provided SCIF with fabricated quarterly employee payroll reports.

The Department discovered a missing $11 million in payroll when they compared the quarterly reports submitted to SCIF to the quarterly reports submitted to the Employment Development Department.

This underreporting of employee payroll resulted in a total loss of $2,582,142 in insurance premiums.

Barocio and his daughter, Barocio-Negrete, will return to court on October 27, 2020. The Merced County District Attorney’s Office is prosecuting this case.

“When businesses illegally underreport payroll and employees they create an unfair advantage that places legitimate businesses at a competitive disadvantage,” said Insurance Commissioner Ricardo Lara.

“We all pay the price for insurance fraud through increased costs for services and higher premiums.”