State Raids Taint CheckMate Founder
By SHERRI CRUZ
Orange County Business Journal
Last week’s insurance raid of Orange-based CheckMate Staffing Inc. threw an unwelcome spotlight on the employment agency and its founder Luis “Lou” Perez.
Perez, who started CheckMate in 1990, has grown the company into Orange County’s largest Hispanic-owned business, according to the Orange County Business Journal’s list of minority-owned business.
For 2002, CheckMate reported sales of $160 million, a 62 percent rise from a year earlier. Revenue has nearly tripled since 1999, when the company counted $63 million in sales. Perez said his goal is to reach $1 billion in annual sales by 2008, according to a 2001 article in Fortune Small Business.
Last week, investigators from the state Insurance Department and the San Bernardino County Sheriff’s Department searched CheckMate’s Orange headquarters and 21 other California offices on suspicion of workers’ compensation insurance fraud.
The effort is part of a stepped-up drive against suspected workers’ compensation fraud by state Insurance Commissioner John Garamendi.
“I am certainly understanding of what Garamendi’s concerns are, but this is not it,” said Joseph Cavallo, Perez’s attorney.
CheckMate and its executives haven’t been charged with anything. The company is being sued by the State Compensation Insurance Fund on charges it shorted the state-backed insurer of $5.8 million. A trial is set for May.
Cavallo said he hasn’t heard from authorities since the raid. Officials told him he could hear something in 10 days, he said.
He called the situation a public relations nightmare for Perez. “He really wants to correct this,” Cavallo said. “Everybody’s kind of dumbfounded right now.”
Perez, whose father was a migrant farmer and whose mother Maria worked as a maid, hasn’t been afraid to flaunt his wealth. Some of his reported assets include about a dozen cars, including a Lamborghini and a Bentley, and courtside seats for the Clippers and Lakers.
The state Insurance Department and the San Bernardino District Attorney’s office had been looking into CheckMate for months prior to last week’s raid, according to Tracy Bartell, San Bernardino’s deputy district attorney.
Workers’ comp fraud is a hot-button issue for employers who say it is behind runaway premiums. They point to what they say are abuses of the system by workers, doctors, lawyers and chiropractors.
Fraud by employers is the flipside. That can happen when an employer misclassifies the type of work their employees do, or misrepresents the actual number of workers they have.
Workers’ comp premium rates are based on payrolls and job classification. Employers pay higher rates for more accident-prone jobs, such as construction, manufacturing or warehouse operations.
In premium fraud cases, Bartell said her office investigates time cards, paychecks and payroll registration. Companies report payroll numbers to the state’s Employment Development Department each quarter. Investigators compare those numbers to those the company reports to its insurance carrier. Employer fraud cases can take a long time to investigate, she said.
