SANTA ANA – A Laguna Hills man convicted in what prosecutors called California’s largest workers’ compensation premium fraud scheme was sentenced Thursday to 10 years in state prison.
Michael Vincent Petronella, 51, was found guilty in February of 33 felony counts of insurance fraud, and a sentencing enhancement for aggravated white collar crime over $500,000.
Petronella faced a sentence ranging from probation to 48 years and eight months in prison.
“There is no doubt in my mind that Mr. Petronella, for the purpose of reducing premiums, massively underreported payroll,” Orange County Superior Court Judge Richard M. King said.
King said the underreporting and the crime’s sophistication factored into his decision.
He ordered Petronella to pay $500,000 in restitution to the California State Compensation Insurance Fund. Prosecutors wanted King to order Petronella to pay millions of dollars, but King said the state could pursue further judgments in civil court.
The judge also imposed two fines that totaled $550,000.
Petronella, who spoke before the sentence was imposed, asked for probation, saying the state’s prosecution has devastated his family.
“I would ask you, your Honor, please have mercy on me. Please have mercy on me,” he said. “I need to see my children. I would never ever put my children or employees in jeopardy like that.”
“They want to give me 38 years, and take everything I own,” he said. “I take full responsibility about the convoluted way I did premiums, but it was not to deceive (the California State Compensation Insurance Fund).”
One of his ex-employees, Salvadore Baiahona, spoke in court, and asked the judge to let Petronella go.
“He was the kind of employer who would teach us to do what to do best … (he) provided enough work for us so we can feed our families,” Baiahona said.
The business was closed with the arrest of Petronella and his wife, Devon Kile, in April 2009.
“We lost our great jobs, houses, medical benefits,” Baiahona added.
Deputy District Attorney Shaddi Kamiabipour said she was disappointed in the judge’s restitution order. She wanted Petronella to pay $35 million back to the state.
“The court’s ruling establishes that it pays to commit fraud,” she said.
She also wanted Petronella to spend 37 years behind bars.
“He has taken no responsibility for his conduct,” Kamiabipour said. “When he gets out, he’ll do it again.”
Petronella’s attorney, Tom Dunn, said the sentence was fair, though he would have liked to see his client get less time. Dunn also commended the judge for his “thoughtful and sound” decision on restitution.
State officials and prosecutors say the couple operated a $38 million workers’ compensation insurance-fraud scheme.
State law requires that employers must have workers’ compensation insurance for their employees, and submit payroll records showing the number of employees and their income, prosecutors said. This information helps determine workers’ compensation insurance rates.
Premium insurance fraud is committed when an employer intentionally misrepresents the number of employees, the type of work performed, the amount of payroll, and the loss history, prosecutors said.
Petronella and Kile, who owned three businesses, including Petronella Roofing, were accused of underreporting the number of employees and discouraging workers from filing claims from 2000 to 2008.
Prosecutors, who held a news conference after the couple’s arrest, said Petronella and Kile declined to pay for employees’ insurances and taxes, and instead used the money for personal expenses, including buying two Ferraris, hundreds of thousands of dollars worth of jewelry, and Gucci, Chanel and Burberry handbags and shoes.
Earlier in the week, Petronella told the judge the investigation has bankrupted him. He said he provided “self-insurance” for employees by paying for their individual medical bills.
He also criticized the California State Compensation Insurance Fraud.
“You are in a hostage position as an employer. It’s either their way or the highway. It’s so unfair,” he added.
Kile, 44, awaits trial.
Written by: Rachanee Srisavasdi. To read this OC Register Article click here.