Company to Repay Millions in Work Comp Fraud Case

A Chatsworth, California flooring installation company pleaded no contest Monday to one count of insurance fraud and agreed to repay $6.3 million in workers’ comp premiums in a fraud case filed by the District Attorney’s office two years ago.

Cover-All Inc., which installs carpeting and flooring as a subcontractor for businesses such as Home Depot, entered the plea before Los Angeles Superior Court Judge David Horwitz, said Deputy District Attorney Michael O’Gara with the Healthcare Fraud Division.

As part of the plea agreement, Cover-All’s owner and president, Gad (Gadi) Leshem, 61, agreed to personally repay the $6.3 million to the State Compensation Insurance Fund, O’Gara said.

Following the no contest plea by the corporation, conspiracy and four counts each of insurance fraud were dismissed against Leshem; the company’s vice president, Zeev Golan; and his wife Irit Golan, who served as corporate secretary and payroll supervisor.

The three were charged with conspiring to underreport the true amount of the company’s payroll by more than $31.8 million. By allegedly misrepresenting their total payroll, they were able to reduce their workers’ comp premiums by more than $6.3 million between September 2001 to April of 2006.

O’Gara said the company had underreported payroll to the State Compensation Insurance Fund since the inception of its policy in September 2001. An investigation was initiated by the State Compensation Insurance Fund’s Special Investigation Unit.

Initially, investigators estimated the loss to the state at more than $10 million. After charges were filed in October 2006, audits put the total loss at $6.3 million.