One of the recurring themes of this blog is that a business owner must pay his payroll taxes. The government considers Trust Fund taxes to be their money and they will always investigate payroll tax crimes.
Similarly, workers compensation is sometimes run through government and pseudo-government agencies. In California, there is the State Compensation Insurance Fund. The State Fund is a non-profit public-enterprise fund run like a mutual insurance company. However, it was created by the state of California. That makes it a pseudo-government agency. It’s a very bad idea to commit fraud against the government; it’s even worse to get caught.
George Osumi II has a construction business in Irvine. He apparently has his workers compensation insurance through State Fund. Mr. Osumi allegedly had a unique and, if proven, quite illegal method of lowering his insurance costs: He reported on his workers compensation report $3.5 million less in payroll than his actual payroll. That did allegedly save him several hundred thousand dollars in insurance costs. It’s also a felony. And since Mr. Osumi is alleged to have done underreported his wages 18 times, that’s 18 felony counts.
Adding to Mr. Osumi’s problems is that he is also alleged to have withheld state taxes and not remitted them. State tax agencies are just as certain to go after business owners as the IRS if you don’t remit withheld taxes. In total, Mr. Osumi faces 71 felony counts including perjury (he’s alleged to have lied to the State Contractor’s Board in stating that his business did not require workers compensation insurance), identity theft, and a host of state tax charges. Mr. Osumi is looking at up to 63 years in prison if found guilty on all the charges.