California Insurance Commissioner Announces Arrest Of Business Owners For Workers’ Comp Fraud


Oakland, CA ( - Insurance Commissioner Dave Jones recently announced that Allan Pacheco, 57, and his wife Carolina Pacheco, 47, both of Redwood City have been arrested on felony charges related to the failure to pay workers' compensation insurance premiums. Allan Pacheco's bail has been set at $50,000 and Carolina Pacheco's bail has been set at $20,000.

“This is a very tragic case in which a work-related accident claimed the life of an employee,” said Commissioner Jones. “Now, due to the alleged fraud committed by the company owners, his family has suffered not only a great loss of a loved one but also the insurance benefit they should have received and were entitled to.”

According to Detectives of the California Department of Insurance (CDI) Fraud Division, Silicon Valley Regional Office, the Pacheco's were co-owners of A & F Engineering in San Mateo and were contracted with Redwood City to perform street light repairs. On December 22, 2009, an employee, Jose Villanueva, was run over by a company truck at the intersection of Marine Parkway and Twin Dolphin Drive in Redwood City and subsequently passed away en route to the hospital.

Upon Villanueva's death, a workers' compensation claim for the death benefit was submitted to A & F's carrier. During an investigation by the carrier into the facts of the loss, it was discovered that Allan Pacheco allegedly lied as to the true nature of work his employees were conducting; stating they only did inside electrical work. This was done in an effort to obtain a workers' compensation policy at a cheaper rate. Upon policy inception, the insurer did not cover road, height or depth exposure. Due to Pacheco's misrepresentation, the workers' compensation policy was rescinded and thus no death benefit was paid to Villanueva's widow and three children.

CDI's investigation revealed that approximately four months prior to the death claim another employee of A & F Engineering was injured on the job while lifting a utility box on the street. This employee was driven to the hospital and allegedly told by his employer to report that the injury occurred at home rather than on the job. Additionally, Allan and Carolina Pacheco, upon notice of this injury also failed to report the injury to the insurer and instead reimbursed the employee for his private medical insurance deductible. Had this injury been accurately reported the policy would have been rescinded prior to the death claim and a new policy would have been purchased, thus possibly providing the death benefit to Villanueva's family.

Due to the misrepresentation on the application for workers' compensation insurance, A & F Engineering failed to pay the correct amount of premium to their carrier. It was determined that had A & F Engineering accurately reported the type of work their employees were doing when securing workers' compensation insurance, they would have owed an additional $11,496 in premium for the policy periods between 2007 and 2009. In addition, due to this misrepresentation, the death benefits were not paid which would have been approximately $650,000 plus burial benefits.

Allan Pacheco and Carolina Pacheco were each charged with one felony count for violating Penal Code Section 550 (b)(3). Additionally, Allan Pacheco was charged with one felony count for violating Insurance Code Section 11760(a), and one felony count for violating Insurance Code Section 1871.4 (a)(4). This case is being prosecuted by the San Mateo County District Attorney's Office. If convicted, Carolina Pacheco faces up to five years in state prison and a $50,000 fine and her husband, Allan Pacheco, faces up to five years in state prison and approximately $660,000 in restitution.

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