Investigators announced that Jay Neal Wright, 52, a former Bay Area businessman and owner of Highland Framers of Northern California Inc., was formally sentenced in Alameda County Superior Court to three years in state prison and ordered to pay $3.1 million in restitution following his conviction on two felony counts of premium fraud and one felony count of employment tax evasion.
His son, Jay Neal Wright II, 31, was sentenced to five years felony probation and ordered to pay $300,000 in restitution for conviction on two counts of Grand Theft. These sentences follow “No Contest” pleas entered by the two men on March 7, 2005.
On June 16, 2003, Wright and Wright II, were indicted by the Alameda County Criminal Grand Jury on multiple felony counts of workers’ compensation insurance premium fraud and employment tax evasion following a lengthy investigation led by the California Department of Insurance (CDI) Fraud Division and the Alameda County District Attorney’s Office, which prosecuted the case.
The investigation was assisted by the California Employment Development Department (EDD), the California Franchise Tax Board (FTB), and the Arizona Department of Insurance. Others assisting the investigation were personnel from the State Compensation Insurance Fund (SCIF) and the Golden Eagle Insurance Company.
Early in the investigation, during 2001, investigators indicated that an attorney who had worked for Highland Framers of Northern California Inc., Timothy Miller, 46, of Riverside, California, pleaded guilty to one felony count of premium fraud and was sentenced to serve five years probation, pay $50,000 in restitution to carriers, and relinquish his license to practice law. He further agreed to testify for the State in the case against Wright, Sr. and Wright, II.
According to investigators, the case was first brought to light by SCIF, which submitted a suspected fraud referral to the CDI Fraud Division. The referral alleged that several policies SCIF had underwritten and subsequently suffered large losses on during the early to mid-1990’s all seemed to be closely related to the Wrights and to Highland Framers of Northern California Inc., even though the policies had been applied for under apparently unrelated company names and ownership.
The subsequent investigation by CDI revealed that Jay Neal Wright and his son, Wright, II, headed a large residential framing company, Highland Framers of Northern California Inc., with a multi-million dollar payroll doing business primarily in and around Alameda and Contra Costa Counties throughout much of the 1990’s.
In late 1993, the Wrights represented to insurers and State employment tax authorities that they had divested themselves of their carpentry labor force, and instead were using outside sub-contractors for their labor. However, a close examination of the alleged sub-contractor companies used after 1993 revealed that at least two, including Valley Framing of California Inc. and Highland Valley Framers Inc., were merely shell corporations that operated under the direct control, both financially and operationally, of Highland Framers of Northern California, Inc., and the Wrights.
It is believed by investigators that the shell corporations, which were created with the assistance of former attorney Timothy Miller, were intentionally made to appear unrelated to Highland Framers of Northern California Inc. in order to evade their liabilities for workers’ comp insurance premiums and State employment taxes.
Total restitution ordered to be paid between the two men is broken down as $1,183,000 to SCIF, $917,000 to Golden Eagle Insurance Company, and $1,000,000 to the EDD.
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