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Attorney General Brown Files Charges Against Granite Bay Concrete Company for Tax Evasion and Insurance Fraud
SACRAMENTO – Attorney General Edmund G. Brown Jr. today announced criminal charges against the owner of a Placer County concrete company who submitted false payroll reports, misrepresented the status of his employees as independent contractors, and owes the state $230,000 in back taxes.
“This company cheated the state out of hundreds of thousands of dollars in taxes and workers’ compensation premiums by submitting phony data and disguising wages as payments to independent contractors,” Brown said.
Thomas Bernhardt, the founder and chief executive of T.B. Concrete, Inc. in Granite Bay, and his wife Rachel Bernhardt, the company’s office manager, are scheduled to be arraigned today in Placer County Superior Court on 15 felony counts of payroll tax evasion and workers’ compensation insurance fraud. Both are free on bail.
In 1999, Thomas Bernhardt, a licensed contractor, started T.B. Concrete, which performed concrete work for retail construction and other projects in Northern California. Rachel Bernhardt prepared the workers’ paychecks and submitted payroll reports to the state and to its workers’ compensation insurance carrier.
In its joint investigation, launched in December 2008 with the Employment Development Department, the state agency that collects payroll taxes, and the Department of Insurance, Brown’s office found that the Bernhardts intentionally under-reported wages by disguising the funds as payments made to independent contractors in order to illegally reduce the company’s state payroll tax and workers’ compensation expenses. Because of the nature of their employment, T.B. Concrete’s workers should have been classified as employees with legally mandated protections and benefits, and their wages should have been reported in full to the state and the company’s insurance carrier.
Both payroll taxes and workers’ compensation premiums are based on total wages. The investigation into T.B. Concrete found that from 2004 through 2009, the company under-reported the wages of 111 workers by $2.1 million, approximately 85 percent of the company’s payroll. T.B. Concrete’s state payroll tax liability is more than $230,000 on the under-reported wages.
During the same period, T.B. Concrete also failed to report nearly 85 percent of it payroll to the State Compensation Insurance Fund, which was T.B. Concrete’s workers’ compensation carrier. In addition, the Bernhardts misrepresented workers’ job classifications in order to further reduce premiums. For example, some concrete workers were classified as clerical workers. The under-reporting and misclassifications cost the State Compensation Insurance Fund more than $180,000 in lost premiums.
Workers’ compensation insurance covers employees’ lost wages when they are unable to work because of a work-related injury. When a company intentionally misclassifies employees as independent contractors, these workers may have difficulty obtaining benefits when they are injured on the job because they were not reported as employees.
The Attorney General's investigation was conducted by the office’s Underground Economy Unit. Brown created the unit in 2007 to protect workers by investigating businesses for suspected violations of state wage and labor laws.
A copy of the complaint is attached.