CALIFORNIA DEPARTMENT OF INSURANCE
FOR IMMEDIATE RELEASE:
October 21, 2019
CONTACT: Michael Soller or Byron Tucker (916) 492-3566 / (916) 661-0556 cell
Alleged fraud discovered when worker was injured on jobsite; $50,000 loss to the insurer
SACRAMENTO, Calif. — Herbert Allen Kelly III, 65, of Rancho Murieta, owner of Kelly Roofing Company, was arrested Friday on six felony counts of workers’ compensation fraud after allegedly underreporting his business’ payroll and number of employees resulting in a loss to his insurer of $50,000.
“When business owners operate in the underground economy, they are cheating the system and create an unfair advantage that puts legitimate businesses at risk,” said Insurance Commissioner Ricardo Lara. “We all pay the price for insurance fraud through increased costs for services and higher premiums.”
On January 12, 2015, while employed with Kelly Roofing Company, a worker slipped and fell from a roof at a jobsite, falling approximately 25 feet. As a result of the employee’s injuries, a workers’ compensation claim was opened with Kelly’s insurer, State Compensation Insurance Fund (SCIF), and to date SCIF has paid approximately $730,175 in medical and disability payments. Following the incident, Cal/OSHA conducted an inspection of the jobsite with Kelly who advised he had three employees.
SCIF conducted audits of Kelly Roofing Company on a yearly basis to verify premium and payroll. Kelly reported approximately $31,685 in payroll for the December 2012 to December 2013 policy period, yet reported $0 in payroll and no employees for the remainder of the policy period, 2014 through 2018.
During the SCIF audit for policy period 2015, when the accident occurred, Kelly reported he had no employees. However, SCIF noted Kelly Roofing Company had a workers’ compensation claim in January 2015. Kelly alleged he only paid the injured worker $500 for a single day of work and did not have any payroll records for him.
Department of Insurance detectives served search warrants on both Kelly and Kelly Roofing Company’s bank accounts and conducted an audit of bank records. Detectives discovered approximately $89,781 in total audited payroll with up to 15 possible employees. The department confirmed Kelly Roofing Company had employees during the period when Kelly claimed he had no employees and no payroll. The audited payroll was ultimately forwarded to SCIF who determined Kelly Roofing Company owed approximately $50,000 in unpaid past premiums.
This case is being prosecuted by the Sacramento County District Attorney’s Office.