MAN TO BE ARRAIGNED FOR EMBEZZLING OVER $350,000 IN EMPLOYEE WAGES FROM PUBLIC WORKS CONTRACTS AND FILING FALSE TAX RETURNS TO HIDE THEFT
*This is the first prosecution in Orange County for fraud related to a public works contract
SANTA ANA – A man will be arraigned on an indictment tomorrow for embezzling over $350,000 in employee wages from public work contracts and filing false tax returns to hide his theft. This is the first prosecution of its kind in Orange County for fraud related to a public works contract. Reza Mohammedi, 57, Tustin, is charged with 15 felony counts of failing to file a return with the intent to evade tax, 15 felony counts of willful failure to pay tax, seven felony counts of taking and receiving a portion of a worker’s wage on public work, six felony counts of recording false and forged instruments, and three felony counts of filing false tax returns. He also faces sentencing enhancement allegations for loss exceeding $100,000 and property damage over $200,000 and a prior strike conviction for criminal threats in 1999. If convicted on all counts, he faces a maximum sentence of 48 years in state prison. The defendant is being held on $500,000 bail and must prove the money is from a legal and legitimate source before posting bond. Reza is scheduled to be arraigned tomorrow, May 23, 2012, at 9:00 a.m. in Department C-5, Central Justice Center, Santa Ana.
Mohammedi is accused of owning and operating Southland Construction in the Counties of Orange, Los Angeles, Riverside, and San Bernardino. For the case in Orange County, he is accused of the following:
Between December 2008 and February 2012, Mohammedi is accused of entering into public works construction contracts with the Cities of Brea, Fullerton, Orange, Laguna Woods, County of Orange, the Saddleback Valley Unified School District, and the Orange County Transit Authority. The defendant is accused of hiring mostly undocumented Hispanic workers and threatening to call authorities if they reported his scheme.
Mohammedi is accused of coaching his workers on what to say if a public works inspector asked them questions regarding their wages. He is accused of systematically submitting fraudulent Certified Payroll Reports falsely stating that he was paying his workers the correct wage of $42 to $53 an hour for each project. Instead, the defendant is accused of paying his employees $13 an hour. The defendant is accused of handing out payroll checks with the correct wage amount to have proof of payment. Mohammedi is accused of then requiring his employees to return a majority of their pay to him after they cashed their checks, either in cash, by instructing them to use their “excess” wages to pay for project materials, or supply another worker’s pay in cash. Using this scheme, the defendant is accused of embezzling over $350,000 in employee wages from his public works contracts for his own use.
Between 2008 and May 2012, Mohammedi is accused of failing to accurately report employee wages and filing two false and fraudulent reports of employee wages with the Employment Development Department (EDD). The defendant is accused of failing to provide his employees with W-2 forms until 2009, and then falsely reporting their wages at the correct wage rate while paying them significantly less. Mohammedi is accused of filing false income tax reports with the Franchise Tax Board (FTB) to hide the theft. He is accused of taking tax deductions for wages he did not pay to his employees.
California Labor Law requires an employer to pay its workers correct wages for public works jobs, file payroll reports every quarter with the EDD, and pay overall employee contributions and applicable taxes to EDD.
The Orange County District Attorney’s Office investigated this case in cooperation with the Center for Contract Compliance, Contractors State License Board (CSLB), Department of Industrial Relations – Division of Labor Standard Enforcement, EDD, and FTB.
"The Center for Contract Compliance Investigators develop cases from worker complaints, perform audits and notify affected agencies of their findings. The CCC provides the ground work and those leads that become the cases for agency enforcement,” stated Executive Director James Reed.
"As Labor Commissioner, I am charged with ensuring that California labor laws are enforced in every workplace in the state,” said California Labor Commissioner Julie Su. “As a result of our investigation of Southland Construction, my office issued a Civil Wage and Penalty Assessment of over $100,000 and referred the case to the Orange County District Attorney for criminal prosecution. The results of this case and our partnership with the OCDA demonstrate that we take these violations seriously and will crack down on employers who cheat their workers and pose a threat to legitimate employers in the state. I intend to work with District Attorneys across the state to ensure public works funds are used properly and workers are paid prevailing wages as required by law."
“This is another example of successful collaboration between CSLB and its local and state partners,” said CSLB Registrar Steve Sands. “CSLB also is investigating Mr. Mohammedi for Labor Code violations on another public works project which, if substantiated, may cause his license to be revoked.”
Deputy District Attorney Shaddi Kamiabipour of the Insurance Fraud Unit is prosecuting this case.