Salvatore Carbone, age 58, has pleaded no contest to a charge of workers’ compensation insurance fraud. He has been sentenced to 40 days in jail and three years’ probation. The judge suspended the statutory $10,000 penalty; it will remain suspended if he completes his probation satisfactorily.
Carbone operates and owns Sal’s Alley Side Café and Carbone’s Bar, in Monterey, California. Both locations opened in 2007 and are located next to each other on Monterey’s popular Lighthouse Street. In 2017, the Monterey County District Attorney’s Office received information that Carbone had lied to the State Compensation Insurance Fund (SCIF) about the number of people he employed. The Workers’ Compensation Fraud Unit investigated and confirmed that, for the period of August 2014 to August 2015, Carbone had fraudulently claimed he was the sole employee at Carbone’s Bar.
By claiming he had no employees, Carbone was able to pay lower workers’ compensation insurance premiums than he should have paid. Workers’ compensation insurance represents a sizeable overhead for businesses. Faced with competition in the marketplace, it can be hard for companies to turn a profit. An increasing number of businesses have been found to have misclassified their employees or misrepresented the number of employees in order to reduce their workers’ compensation overheads.
With premiums 176 percent higher than the national average until 2016, California was top of the national workers’ compensation insurance rankings, according to a report by the State of Oregon. In 2018, New York overtook California as the most expensive state for workers’ compensation premiums. Nonetheless, premiums still cost employers an average of $2.87 for every $100 of payroll. This is only the average cost—for many employees, such as construction workers, premiums will be considerably higher.
While this kind of fraud may, in the short term, help business owners such as Carbone, in the long term it raises costs for companies that do follow the rules. The Monterey County District Attorney’s office reminded the public that, according to state law, all employers must have workers compensation for all their employees. This ensures there are enough resources to cover medical costs and benefits for employees who are injured on the job.
Investigators at the Workers’ Compensation Fraud Unit examined business records and payroll relating to Carbone’s businesses. In addition, they interviewed Carbone, his accountant, and his employees. The evidence showed Carbone had misrepresented payroll specifically so the SCIF would give him a lower workers’ compensation insurance rate.
In an August post to the Facebook Page for Carbone’s Bar, Carbone wrote about how he felt the city of Monterey was actively trying to close down bars and restaurants through draconian or unreasonable laws. “As you all are aware,” he wrote, “the Bull and Bear is being forced out of business… I am asking for your help in saving them and all the bars and restaurants in Monterey. It is just a matter of time before the city shuts us all down for one reason or another.”
The maximum penalty for misrepresenting payroll to obtain a reduced workers’ compensation premiums is five years in county jail and a fine of double the amount the fraud was worth.
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