A Spring Valley, California-based plumbing contractor and owner of GPS Plumbing was ordered to pay $1,030,062 as part of a guilty plea for underpaying workers' compensation premiums, the San Diego County District Attorney's Office recently announced. As part of the plea deal, the owner was also sentenced to two years' probation and 320 hours of community service, in addition to paying $10,000 monthly for restitution.
A district attorney's office representative stated that "Employers who engage in premium fraud are not only breaking the law, they also gain an unfair advantage over their competitors."
The fraud was discovered during a State Compensation Insurance Fund audit of GPS Plumbing's records. Investigators found significant discrepancies between wages reported to the Employment Development Department and those reported during policy audits conducted by the State Fund. The audit revealed millions of dollars in unreported payroll from June 2016 through May 2021.
The State Fund's Special Investigation Unit submitted its findings to the San Diego County District Attorney's Office and the California Department of Insurance, leading to the contractor's prosecution.
Insurance fraud costs U.S. consumers an estimated $80 billion to $90 billion annually. California alone accounts for approximately $15 billion per year, and insurance fraud is considered the second-largest economic crime in the country after tax evasion. "San Diego plumbing contractor ordered to pay over $1 million in workers' compensation fraud case" www.cbs8.com. (Apr. 02, 2025).
Commentary
Contractors who take fraudulent shortcuts rarely do well in the long run. The long-term risks of sanctions, fines, or imprisonment far outweigh any short-term financial benefits that may be had as a result of fraudulent behavior.
All contractors should aspire to the ethical considerations set out in Federal Acquisition Regulation (FAR) 52.203-13 (Contractor Code of Business Ethics and Conduct), which states in part:
(b)Code of business ethics and conduct.
(1) Within 30 days after contract award, unless the Contracting Officer establishes a longer time period, the Contractor shall—
(i) Have a written code of business ethics and conduct; and
(ii) Make a copy of the code available to each employee engaged in performance of the contract.
(2) The Contractor shall-
(i) Exercise due diligence to prevent and detect criminal conduct; and
(ii) Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.
Had this California contractor followed this code of conduct, her business assets and reputation would be intact.
