Alfredo Ayala and Juan Luis Ayala owned farm labor contracting businesses and shared business offices and office staff.
The Grand Jury of Tulare County returned an indictment charging them with workers’ compensation insurance and tax fraud by underreporting their payroll amounts.
Alfredo and Juan stipulated to a factual basis for their pleas based on police reports and grand jury proceedings, and Alfredo pleaded no contest to workers’ compensation insurance fraud and tax fraud, Juan to tax fraud, and both agreed to pay restitution to the Employment Development Department (EDD), and requested a restitution hearing to determine restitution owed to their workers’ compensation insurance companies.
After a hearing, the trial court awarded a total of $8,170,326 in restitution to the insurance companies measured by the amount of lost premiums caused by defendants’ false payroll reporting.
Defendants argue on appeal that the trial court erred in calculating restitution because (1) the prosecutor failed to present evidence that defendants’ criminal conduct caused payment of lowered premium amounts to the insurers and, even if the evidence was sufficient, that (2) the trial court should have calculated the premium owed on only the unreported payroll amount and the unreported payroll amount should have been calculated based upon only the voided payroll check amounts reflected in defendants’ computers.
The prosecutors responded that defendants “Harvey” waivers established they fraudulently underreported their businesses’ payroll to the insurers and the trial court properly determined the insurers’ economic losses by calculating the premiums that should have been paid to the insurers based upon the corrected payroll amounts. A “Harvey” waiver permits the sentencing court to consider the facts underlying dismissed counts and enhancements when determining the appropriate disposition for the offense or offenses of which the defendant stands convicted. (People v. Munoz (2007) 155 Cal.App.4th 160, 167.)
The Court of Appeal concluded that the trial court did not abuse its discretion in calculating $8,170,326 in restitution in this case and affirmed the judgments, but it vacated an erroneous $250 presentence investigation report fee imposed by the trial court in the unpublished case of People v Ayala -F083941 (March 2023).
The insurance companies involved in this case obtained records that the district attorney’s office had seized from defendants’ businesses and used them to conduct fraud audits. Representatives from each carrier testified at the restitution hearing. Daniel Harold was an IT technician who worked for JA Contracting, and testified for the Defendant. At the conclusion the trial court ordered a total of $8,170,326 in restitution to SCIF, SeaBright, Ullico, Liberty Mutual and Meadowbrook.
The trial court did not abuse its discretion in ordering defendants to pay restitution to their workers’ compensation insurance companies. California crime victims have a constitutional and statutory right to receive full restitution for economic losses suffered as a result of a defendant’s criminal conduct. (Cal. Const., art. I, § 28, subd. (b)(13); Pen. Code, § 1202.4, subds. (a)(1), (3)(B), (f).)
Defendants’ pleas of no contest and accompanying Harvey waivers establish that defendants intentionally and falsely underreported their monthly payroll to the insurers to pay lower premiums. Furthermore, the willful underpayment of insurance premiums constitutes an economic loss under section 1202.4.
Section 1203.1 “gives trial courts broad discretion to impose probation conditions to foster rehabilitation and to protect public safety.” (People v. Anderson (2010) 50 Cal.4th 19, 26.)
The methodology adopted by the trial court appears rational and did not produce an arbitrary result. (See Giordano, supra, 42 Cal.4th at p. 665.) Therefore, the court of appeal presumed the judgments are correct, and to set them aside defendants must affirmatively show error. (Id. at p. 666.)
At the conclusion of an exhaustive review of the evidence presented by each carrier, the Opinion concluded that “To the extent the scope and nature of defendants’ misconduct precludes an exact determination of the insurers’ losses, the equities favor the insurers as far as calculating the amount of restitution that is due. (See Prosser (2007) 157 Cal.App.4th 682, 691; People v. Baker, supra, 126 Cal.App.4th at p. 469.) After reviewing all the relevant considerations, we are satisfied there is a factual and rational basis for the trial court’s restitution order. No abuse of discretion or other ground for reversal has been shown.”