A temporary staffing firm and its principals will be back in court next week to face criminal charges that they intentionally misled State Compensation Insurance Fund about the nature of the work performed by its employees to obtain lower workers’ comp premiums, in other words, that used incorrect class codes. The damage is estimated at more than $18 million over a three-year period, and that has the duo facing a possible prison sentence of more than two decades.
Accused of the felony charges are David Zahler, 52, of Huntington Beach; David Tai, 66, of Hacienda Heights; and their company, Bellflower-based Staffing Services Inc. Zahler is the company’s CEO and Tai is its CFO.
“I haven’t read all of the discovery that was provided to us, but I can tell you that Mr. Zahler is a well-respected member of the community, and we hope that down the road we will be successful in defending these charges,” Ronald Ziff, a Los Angeles attorney representing Zahler and the company, told Workers’ Comp Executive. “When we next go back to court, our intention is to enter a not-guilty plea, which is a total denial of the charges that the DA’s office has filed. We’re going to vigorously defend this case.”
The misrepresentations allegedly began in the fall of 2002 and continued through 2005, according to the criminal complaint filed by the Los Angeles County District Attorney’s Office. The complaint notes that the actions amount to fraud and embezzlement, and involved a pattern of related felony conduct.
In addition to the potential prison sentence, a conviction could result in $40 million in fines and the duo being ordered to pay $20 million in restitution.
For its part, SCIF is keeping a low profile while the prosecutors handle the case. “State Fund places a high priority on combating workers’ comp fraud. Staffing Services’ actions to avoid paying $20 million dollars in premium hurts all employers and injured workers,” SCIF spokeswoman Jennifer Vargen noted in an email to Workers’ Comp Executive, adding that the carrier was limited in what it could say about the case, with criminal prosecution pending.
Ziff noted that the defendants are free on bail. Zahler’s bail was set at $1 million and Tai’s was $100,000.