Gilroy
– Following an investigation into workers’ compensation and
payroll tax fraud, authorities Friday arrested four people
associated with a construction firm that worked on Antonio Del
Buono Elementary five years ago.
By Lori Stuenkel
Gilroy – Following an investigation into workers’ compensation and payroll tax fraud, authorities Friday arrested four people associated with a construction firm that worked on Antonio Del Buono Elementary five years ago.
Two other suspects were still being sought Monday afternoon, according to a state Department of Insurance investigator.
The suspects are suspected of underreporting $5 million in payroll for their Saratoga firm Castle Rock Industries, which also operated as Sequoia Construction company.
They reportedly distorted their payroll between July 2000 and November 2004 to avoid paying about $2.3 million in insurance premiums.
The suspected fraud allowed Castle Rock to outbid competitors on several public works projects, including Antonio Del Buono. Castle Rock apparently paid employees in cash, and paid doctors directly for treatment when workers were injured to avoid workers comp costs, investigators said.
Gilroy Unified School District did not suffer any financial harm from the firm’s fraud, but the general contractor for Del Buono was left scrambling to finish the framing the firm was hired to do, said Charlie Van Meter, GUSD director of facilities planning and construction.
“(General contractor H.A. Ekelin) would normally do all their wood framing, but they had a bunch of their own projects going on, so they hired Sequoia Construction,” Van Meter said. “The work they did was OK. The problem was, about halfway through the framing, they said, ‘We ran out of money,’ and they walked off the job.”
The company had completed about $600,000 of what might have been a $1 million project, he said. GUSD was paying for work completed, so no funds were lost, but H.A. Ekelin then had to complete the project.
Among the four arrested Friday morning were three of the firm’s owners – Gigi Peebles, 40, of Saratoga; her brother, Peter Morin, 42, of San Jose; and Kevin Stimson Killeen, 44, of South Lake Tahoe – and an alleged payroll processor for the company.
The owners, including Wade Ellis Peebles, 55, who is not yet in custody, will be charged with multiple felony counts of workers’ compensation insurance fraud and payroll tax fraud.
