The owner of a San Mateo pest and janitorial services company who prosecutors say under-reported more than $10 million of payroll to avoid paying more than $2 million in workers’ compensation insurance was sentenced yesterday to a year in jail and ordered to repay the money.

Teresa Reif, 34, faced up to 17 years in prison after pleading no contest in April to eight various counts of fraud without any sentencing promises. On Tuesday, Judge Craig Parson instead handed down the year jail followed by five years supervised probation. She must also repay $1,651,148 to the State Compensation Insurance Fund and $451,310 to Berkshire Hathaway.

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Defense attorney Chuck Smith said he was “disappointed” in the sentence, calling the case a “sad, unfortunate situation” in which his client didn’t profit a nickel but insurance companies will now receive an extra $2 million. Prison was never a realistic concern, he said, but five years incarceration rather than the financial penalty would affect the life of her husband and three children much less significantly.

“She was given financial penalties akin to an inside trader,” Smith said. “This is unfair and far beyond the conduct that she committed.”

Smith had requested house arrest for Reif and said the Probation Department recommended the same.

The prosecution was pleased with the outcome, said District Attorney Steve Wagstaffe.

Reif has operated the business with her brother since 2003 as the fourth-generation offshoot of the family business, according to the company’s website. The site also notes it has “grown by providing superior service, at a reasonable price, with honesty and reliability for over 80 years.”

Between 2004 and 2009, Reif purchased workers compensation insurance through Redwood Fire & Casualty Insurance Company and the State Compensation Insurance Fund for her business, Genesis Building Services.

In 2008, the insurance company said it received conflicting data from Genesis staff about the number of employees and began suspecting it was under-reporting its payroll by approximately $544,440. Further investigation by the California Department of Insurance placed the under-reported amount at $10,657,776.69 which resulted in Reif avoiding paying $2,957,089.20 in insurance premiums.

The CDI claims Reif misrepresented both the number of employees and its payroll when applying for insurance, while insured and during annual audits conducted by the carriers. Genesis allegedly employed more than 140 employees but Reif reported less than half the staff and gave auditors fraudulent paperwork to support the false monthly reports.

During a search of the business, investigators actually found the fraudulent books, according to prosecutors.

After Reif surrendered to authorities in April 2011, Insurance Commissioner Dave Jones used the case as an example of what happens to those who commit fraud.

“Business owners should be on notice, egregiously under-reporting wages to avoid premium payments will not go unpunished,” Jones said in a prepared statement. “These violations will be fully investigated by my department.”

Reif was originally arrested on a $1 million warrant citing suspicion of 44 counts of fraud but was later released on her own recognizance.

Two Nash County residents are among seven arrested Wednesday in an insurance fraud scheme involving staged auto accidents in Wake County.

Three more suspects are being actively sought, including one from Nash County, according to information from N.C. Insurance Commissioner Wayne Goodwin.

Department of Insurance criminal investigators allege between May 7, 2012, and June 26, 2012, the suspects staged three auto accidents, during which suspects claimed to be injured. They allegedly submitted false insurance claims to Allstate Insurance, Nationwide Insurance, North Carolina Farm Bureau, Travelers Insurance and Progressive Insurance.

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All kinds of insurance fraud picks up when the economy suffers a downturn, said Marni Schribman, assistant director of public Information for the N.C. Department of Insurance.

“If someone is suspicious, we ask them to contact the office,” Schribman said.

The insurance commission essentially has its own police force of 20 sworn law enforcement officers. They investigate such claims.

“All they do is investigate insurance and bail bonding fraud,” Schribman said.

Here are the arrests made so far:

Erica Merritt, 21, of 804 S. Brooklyn Blvd., Nashville, was charged with three counts of obtaining property by false pretense, one count of attempting to obtain property by false pretense, three counts of insurance fraud and four counts of conspiracy to obtain property by false pretense. Merritt is being held on a $35,000 secured bond.

Sedrick Jones, 21, of 4629 S. Halifax Road, Rocky Mount, was charged with two counts of obtaining property by false pretense, two counts of insurance fraud and two counts of conspiracy to obtain property by false pretense. Jones is being held on a $10,000 secured bond.

Iwaun Harper, 39, of 105 Canal St., Conetoe, was charged with two counts of obtaining property by false pretense, one count of attempting to obtain property by false pretense, two counts of insurance fraud and three counts of conspiracy to obtain property by false pretense. Harper is being held on a $75,000 secured bond.

Morgan Hollins, 23, of 4536 Dilford Drive, Raleigh, was charged with one count of insurance fraud, one count of obtaining property by false pretense and one count of conspiracy to obtain property by false pretense. Hollins is being held on a $10,000 unsecured bond.

Adante Howell, 23, of 1705 Brown Owl Drive, Raleigh, was charged with one count of attempting to obtain property by false pretense and one count of conspiracy to obtain property by false pretense. Howell is being held on a $10,000 unsecured bond.

Roger Trevon Howell, 22, of 1705 Brown Owl Drive, Raleigh, was charged with one count of attempting to obtain property by false pretense and one count of conspiracy to obtain property by false pretense. Howell is being held on a $10,000 unsecured bond.

Brittany White, 23, of 4902-B Arcadian Court, Raleigh, was charged with one count of obtaining property by false pretense, one count of insurance fraud and one count of conspiracy to obtain property by false pretense. White is being held on a $10,000 secured bond.

Allstate and Farm Bureau representatives alerted the Department of Insurance after discovering that all three accidents involved the same suspects as either passengers or drivers. More than $84,000 had been paid by the insurance companies to the suspects for their medical claims, state officials said.

Investigators are seeking these three additional suspects:

Maurice Ricks, 31, of 120 Tony Drive, Rocky Mount, is wanted for three counts of obtaining property by false pretense, one count of attempting to obtain property by false pretense, four counts of conspiracy to obtain property by false pretense and three counts of insurance fraud.

Derrick Fortune, 25, of 4902 Arcadian Court, Raleigh, is wanted for one count of obtaining property by false pretense, one count of insurance fraud and one count of conspiracy to obtain property by false pretense.

Corey Jones, 28, of 3912 Old Coach Road, Raleigh, is wanted for one count of obtaining property by false pretense, one count of insurance fraud and one count of conspiracy to obtain property by false pretense.

Investigators are requesting the public’s assistance in locating these suspects. Anyone with information on their whereabouts is asked to contact the North Carolina Department of Insurance Criminal Investigations Division at 919-807-6840.

Since 2009, criminal investigators have received more than 16,800 complaints, resulting in 720 arrests and 380 criminal convictions, according to state figures.

State officials said more than $50 million in restitution and recoveries have been made to victims.

However, an estimated 10 cents of every dollar paid in insurance premiums goes toward the payment of fraudulent claims, officials said. To report suspected fraud, call the Department of Insurance Criminal Investigations Division at 919-807-6840. Callers don’t have to identify themselves.

SAN ANTONIO – The Trouble Shooters were first to uncover a big, local towing company was violating state rules and overcharging drivers. Now Trouble Shooter Jaie Avila has learned two former Bexar Towing officials are being investigated for insurance fraud, involving cars they towed.

Bexar towing makes a lot of money hauling off vehicles around San Antonio, about $200,000 a month, according to court testimony. The company had enough financial muscle to fight the city in court when police accused Bexar Towing of overcharging consumers.

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Until recently Bexar Towing was paying out $2,000 a week to each of the company’s four owners. Police claim that wasn’t enough for two of the owners, Joe Guerrero and Christopher Morales.

“The allegations against both of these individuals are insurance fraud,” said Adriana Biggs, who heads up the white collar crime division at the district attorney’s office.

Biggs says the cases against Guerrero and Morales involve bogus insurance claims on two expensive, luxury cars.

“They were not owned by the person who made the insurance claim, so you have proceeds going to the wrong individual,” Biggs said.

Here’s how it worked, according to police reports: Last year Guerrero’s company towed a Mercedes. The owner thought it had been stolen.

Two months later the car was involved in a crash. The driver ran off but was later identified as Bexar Towing part-owner Joe Guerrero. A witness picked him out in a photo lineup.

Guerrero claimed he wasn’t driving the Mercedes, and that it had been stolen from him. The police report says Guerrero then filed an insurance claim for the damage from the crash.

“There’s also tampering with a government record, which is the title which would prove ownership of the vehicle, so they’re interconnected cases,” said Adriana Biggs with the D.A.’s office.

The other situation involved a BMW. The insurance company paid out $34,500 for hail and water damage to the car, even though Guerrero was no longer the registered owner. He had sold the BMW to his partner Christopher Morales.

The insurance company went looking for the car and was told it had been sold at one of Bexar Towing’s auctions. However, the police report says the insurance company later found the BMW in Morales’ driveway.

The insurance fraud investigation has set off a power struggle at Bexar Towing.
The other owners are trying to force out Guerrero and Morales.

We spotted Joe Guerrero at a smaller towing company owned by his brother, but when we asked to speak to Guerrero and Morales we were told they weren’t there.

I did talk to Guerrero on the phone, and he denied committing insurance fraud but declined an on camera interview.

Bexar towing had no comment. The other owners are currently involved in a lawsuit with Guerrero and Morales for control of the company. The district attorney’s office says they’re looking at more insurance claims and the investigation could expand to include more people.