Owners of Waterdrops Express Car Wash allegedly underreported payroll by millions to lower their insurance premiums by hundreds of thousands of dollars
TULARE COUNTY — Owners of a chain of car washes with locations in Tulare County are facing up to five years in prison for allegedly underreporting their payroll to underpay their insurance premiums.
On Sept. 29, Behzad Bandari, 64, of Pacific Palisades, and Sam Siam, 67, of Thousand Oaks, were arraigned in a Tulare County Superior Court where they each faced nine counts of felony insurance fraud after they allegedly underreported more than $3.6 million in employee payroll as a part of a scheme to fraudulently reduce their company’s workers’ compensation insurance premium by $369,210.
“Workers’ compensation fraud can lead to higher insurance premiums for employers who follow the rules and may ultimately hurt workers who are legitimately injured on the job,” Insurance Commissioner Ricardo Lara said. “The California Department of Insurance is committed to rooting out fraud and protecting consumers. I am proud of the work our staff does to bring alleged perpetrators to justice.”
Bandari was the CFO of Waterdrops Express Car Wash and Siam was the company’s CEO. They were identified as shareholders and managing partners in a chain of car washes operated from their corporate office in Woodland Hills, Calif. The car wash locations spanned across three counties, Tulare, Kings, and Ventura, and were organized under multiple corporate entities. Bandari is also a certified public accountant and managed the taxes on behalf of the various corporations and LLCs, doing business as Waterdrops Express Car Wash. Bandari and Siam are scheduled to appear in court again on Dec. 12, 2021. The Tulare County District Attorney’s Office is prosecuting this case. Felony insurance fraud carries a sentence of up to five years in prison.
On March 25, 2020, the California Department of Insurance began an investigation after receiving a tip from an insurance company about potential fraud. The tip alleged Bandari and Siam manipulated employee payroll records to reduce the premium amounts owed to their insurance company, thereby committing insurance fraud.
Department detectives uncovered Bandari and Siam underreported employee payroll to two separate insurance companies. The underreporting occurred when Bandari and Siam provided false payroll records during routine audits with the insurance companies for policy years 2014 through 2016.
A discrepancy of more than $3.6 million was discovered when detectives compared employee payroll records submitted to the insurance companies, against the employee wages reported to the Employment Development Department during the same policy years. By underreporting the payroll to their insurance companies, Waterdrops Express Car Wash avoided paying $369,210 in premiums owed to the two insurance companies.
Under state law, employers are required to maintain workers’ compensation insurance to cover their employees in the event of an accidental on-the-job injury. To ensure proper coverage, employers are required to accurately report the number of employees, job classifications, and the amount of payroll expended. One of the common ways in which employers avoid paying higher insurance premiums is to underreport a business’s payroll by providing false payroll reports to their insurance company.
Based on estimates by the National Insurance Crime Bureau (NICB), workers’ compensation fraud is more than $30 billion annually in the United States. In California, it’s estimated workers’ compensation fraud may cost the state between $1 billion to $3 billion per year.