Edgardo Cabrales Sr., 61, and his son, Edgar Cabrales Jr., 36, both of San Jose, are charged with five felony counts each of insurance fraud after a Department of Insurance investigation found they allegedly underreported $12 million in employee wages and payroll to save on workers’ compensation insurance premiums.

The Cabrales own two commercial cleaning companies in San Jose: Pine Building Maintenance (PBM) and Network Facility Management (NFM).

An investigation by the Department began after the State Compensation Insurance Fraud (SCIF) suspected the businesses of fraud.

The investigation discovered that since 2016 the Cabrales had only secured insurance coverage for a fraction of their PBM employees and they had never secured a workers’ compensation insurance policy to insure their NFM employees, even though the majority of their business was operated through NFM.

The father and son accomplices failed to report approximately $12 million in wages to SCIF in order to save money on insurance, resulting in $4.2 million in lost premiums.

In this case, Cabrales’ underreporting significantly lowered the premiums owed. Businesses that fraudulently lower their premiums benefit from an unfair market advantage, giving them the ability to charge less in labor costs, and thereby underbid businesses who pay the appropriate premiums.

Cabrales Jr. self-surrendered yesterday and his father, Cabrales Sr., was arrested on October 23, 2022, at the San Francisco International Airport. The Santa Clara County District Attorney’s Office is prosecuting this case.

Employers are required to maintain workers’ compensation insurance to cover their employees in the event of an accidental on-the-job injury. To ensure proper coverage, employers are required to accurately report the number of employees, job classifications, and the amount of payroll expended. One of the common ways in which employers avoid paying insurance premiums is to underreport a business’s payroll by providing false payroll reports to their insurance company.