Four members of a family in Merced were arraigned this week on multiple counts of insurance fraud following an investigation by the Department of Insurance. The probe revealed that businesses owned and operated by these individuals had allegedly engaged in underreporting payroll by millions of dollars, resulting in an illegal underpayment of over $2.1 million in workers’ compensation insurance premiums.
According to a press release by the Department of Insurance, this case of alleged fraud came to light after a previous investigation which led to the conviction of a father and daughter involved in a similar underreporting scheme. Angelita Barocio-Negrete, the daughter in that case, was also the office manager and bookkeeper for two additional family-owned farm labor contracting businesses in Merced County. An investigation into these enterprises uncovered a similar pattern of underreporting payroll to their insurance carrier.
The businesses under scrutiny in the recent investigation include Negrete M. Agriculture Inc., owned by Maria Negrete-Melchor, 55, and her daughter-in-law Melissa Bourbois, 39. Angelita Barocio-Negrete, Maria’s daughter, served as the office manager and bookkeeper for this company. During the period from December 2007 to January 2013, the reported payroll to the State Compensation Insurance Fund was $552,517. However, a forensic audit reportedly revealed that the actual payroll was $4,026,125, indicating an underreporting of $3,473,608.
Another business involved in the investigation is Negrete & Son’s Ag Inc., owned by Albaro Barocio, 39, with Angelita Barocio-Negrete as the office manager and bookkeeper. Between November 2012 and November 2015, the reported payroll to the State Fund was $654,091, whereas the audit uncovered an actual payroll of $4,679,409, resulting in an underreporting of $4,025,317.
The underreporting by both companies led to a loss of $2,165,308 in premiums for the State Fund. Under California law, underreporting workers’ compensation insurance is illegal and has far-reaching consequences. It undermines the stability of the insurance system, transferring costs to other policyholders. It also jeopardizes the availability of benefits for injured workers, hindering their access to vital support. Moreover, fraudulent businesses gain an unfair economic advantage over ethical ones, creating an environment of unfair competition.
The arraignment of all four family members took place on April 25, and they are scheduled to return to court on August 1. The Merced County District Attorney’s Office is prosecuting the case.