May 21, 2025 | JacobiJournal.com — San Jose insurance fraud investigations have led to the sentencing of a local security company owner after a multi-year premium evasion scheme. The California Department of Insurance (CDI) announced on May 19, 2025, that investigators uncovered a large-scale insurance fraud operation involving Raul Chavez, 40, the owner of Tactical Operations Protective Services. Chavez was found guilty of felony premium fraud for underreporting more than $3.4 million in payroll, a tactic used to avoid paying workers’ compensation insurance premiums legally owed to the State Compensation Insurance Fund.
Six-Year Scheme to Evade Insurance Payments
From 2017 to 2023, Chavez systematically underreported his company’s payroll. He falsely claimed to the State Compensation Insurance Fund (State Fund) that he had no employees for five consecutive years. In the 2022–2023 policy year, he reported only $40,000 in payroll related to one injured employee, even though his business continued to operate in Santa Clara County.
However, a detailed audit by the Department of Insurance revealed that Chavez had concealed $3,431,903 in payroll, resulting in $205,565 in unpaid workers’ compensation premiums.
“Hiding true payroll amounts to reduce workers’ comp premiums puts workers at risk and gives offending companies an unfair advantage over law-abiding companies in that they can bid lower for jobs.”
— Alan Barcelona, President, California Statewide Law Enforcement Association (CSLEA)
Legal Consequences and Restitution
Chavez accepted responsibility and pleaded guilty to felony insurance fraud. The court sentenced him to:
- 180 days in county jail, served through electronic monitoring
- Two years of formal probation
- $225,168 in restitution to the State Fund, which he has already paid
These penalties reflect the severity of his actions and the financial damage caused to the insurance system.
How San Jose Insurance Fraud Was Uncovered Through Payroll Audit
The investigation began in September 2023, when State Fund filed a fraud referral. They reported that Chavez failed to disclose a workplace injury from June 2022. Although he transported the injured employee to an emergency room, he did not report the incident to State Fund, as required by law.
The referral also alleged long-term payroll underreporting. CDI investigators confirmed that Chavez failed to report accurate payroll for multiple employees over six years, intentionally violating workers’ compensation requirements.
Prosecutors Pursue Justice
The Santa Clara County District Attorney’s Office prosecuted the case. Their efforts, in coordination with CDI’s audit and investigation, led to Chavez being held accountable for his fraudulent conduct. His actions not only violated insurance fraud laws but also jeopardized worker safety and disrupted fair business competition in the security services industry.
The National Insurance Crime Bureau (NICB) also reported on the case, highlighting its significance in combating worker compensation insurance fraud statewide.
FAQs: About San Jose Insurance Fraud
What was the San Jose insurance fraud scheme involving Raul Chavez?
The San Jose insurance fraud case involved Raul Chavez, who underreported more than $3.4 million in payroll between 2017 and 2023. This allowed him to avoid paying over $200,000 in workers’ compensation premiums, violating California insurance laws.
How was the San Jose insurance fraud discovered?
The fraud was discovered when the State Compensation Insurance Fund filed a referral in 2023 after Chavez failed to report a workplace injury. A follow-up audit by the California Department of Insurance confirmed years of underreported payroll.
What are the consequences of committing San Jose insurance fraud?
Raul Chavez pleaded guilty to felony insurance fraud. He was sentenced to 180 days in jail (via electronic monitoring), two years of probation, and ordered to pay over $225,000 in restitution—highlighting the severe legal and financial penalties for insurance fraud in California.
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