Business owner charged in $2.5M worker’s comp fraud

Department of Insurance investigation reveals Zachary Navo allegedly underreported wages at private security and insurance businesses to reduce worker’s comp insurance premiums

VISALIA — A Visalia business owner allegedly underreported wages by $2.5 million between two companies over a three-year period in order to pay lower insurance premiums.

Zachary Navo, 38, of Visalia, was arraigned Sept. 9 on five felony counts of insurance fraud after a Department of Insurance investigation revealed he allegedly underreported wages in an attempt to fraudulently reduce workers’ compensation premium payments, resulting in a loss of over $135,000 to his insurance companies.

In December 2017, State Compensation Insurance Fund (SCIF) issued Navo a workers’ compensation insurance policy for his private security business, Element Security Solutions, Inc. (ESSI). The company is headquartered in Visalia, 218 N. Conyer St. #C, and has locations in Fresno, Bakersfield and Los Angeles. In June 2018, Navo completed a payroll report indicating he had $80,500 in payroll for the first six months of the policy period. Navo failed to submit subsequent payroll information and failed to comply with an end-of-policy audit.

During the investigation, a review of Employment Development Department (EDD) records for the 12-month policy period revealed $2,098,394 in payroll was reported to EDD for ESSI, which revealed an underreporting of approximately $2 million in payroll to SCIF. The underreporting resulted in a $134,761 loss in premium owed to SCIF.

Investigators also discovered that Navo is a licensed insurance agent and owns a secondary entity, Navo Financial, Inc., an insurance and financial solutions business, in which Navo reported $504,302 in payroll from 2016 to 2019. However, EDD records for the period of 2016 to 2019, found Navo reported $1,047,482 in payroll to EDD for Navo Financial, Inc., demonstrating an underreporting of $543,180 in payroll and resulting in a $1,164 loss to a different insurance company.

Under state law, employers are required to maintain workers’ compensation insurance to protect their employees in the event of an accidental on-the-job injury. To ensure proper coverage, employers must accurately report the number of employees, job classifications, and the amount of payroll expended. One of the common ways in which employers avoid paying insurance premiums is to underreport a business’s payroll by providing false payroll reports to their insurance company.

This case is being prosecuted by the Tulare County District Attorney’s Office.

Navo is former Marine who ran combat missions in the Middle East from 2001-2004 and protected high profile and top-secret diplomats in Southeast Asia and West Africa, according to the company’s website. After his military career, Navo worked as a financial advisor for seven years and still owns Navo Financial, Inc., an insurance and financial solutions business. Moss started ESSI in 2016 as a specialized training and consulting firm for security and risk management in California. His staff include both former and active law enforcement with hands-on police academy training experience. ESSI provides security monitoring and patrols for corporate, living communities, industrial and warehouse and commercial space clients.

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