People v. Petronella

• Decision Date: 23 October 2013
• Docket Number: G044628
• Citation: 160 Cal.Rptr.3d 144,218 Cal.App.4th 945
• Court: California Court of Appeals Court of Appeals
• Parties: The PEOPLE, Plaintiff and Appellant, v. Michael Vincent PETRONELLA, Defendant and Appellant.

218 Cal.App.4th 945

160 Cal.Rptr.3d 144

The PEOPLE, Plaintiff and Appellant,

v.Michael Vincent PETRONELLA, Defendant and Appellant.

G044628

Court of Appeal,

Fourth District, Division 3, California.

Filed July 17, 2013

As Modified on Denial of Rehearing August 6, 2013

As Modified on Denial of Rehearing August 19, 2013

Review Denied October 23, 2013

See 2 Witkin & Epstein, Cal. Criminal Law (4th ed. 2012) Crimes Against Public Peace and Welfare, § 416.

Appeals from a judgment of the Superior Court of Orange County, Richard M. King, Judge. Affirmed in part and reversed in part. (Super. Ct. No. 09CF1067)

Kamala D. Harris, Attorney General, Dane R. Gillette, Chief Assistant Attorney General, Julie L. Garland, Assistant Attorney General, Melissa Mandel and A. Natasha Cortina, Deputy Attorneys General, for Plaintiff and Appellant.

Allison H. Ting, Santa Monica, under appointment by the Court of Appeal, for Defendant and Appellant.

Judith D. Sapper, Deputy Chief Counsel, Betty R. Quarles, Assistant Chief Counsel, and Anthony E. Romo, Staff Counsel, for State Compensation Insurance Fund as Amicus Curiae.

OPINION

RYLAARSDAM, ACTING P.J.

A jury found defendant Michael Vincent Petronella guilty of 33 counts of violating Insurance Code section 11880, subdivision (a). That statute makes it a crime for anyone to knowingly make a “false or fraudulent statement ... of any fact material to the determination of the premium, rate, or cost of any policy of workers' compensation insurance issued or administered by the State Compensation Insurance Fund for the purpose of reducing the premium, rate, or cost of the insurance.” The jury also found defendant's crimes constituted a pattern of related fraudulent felony conduct involving a loss exceeding $500,000. (Pen.Code, § 186.11, subd. (a)(2).) The superior court sentenced defendant to 10 years in state prison. It also and ordered him to pay $500,000 in restitution under Penal Code section 1202.4. Defendant appeals from the judgment raising numerous evidentiary, instructional, and sentencing issues. Both defendant and the People appeal from the trial court's restitution award. We reverse the trial court's restitution order, but otherwise affirm the judgment.

FACTS AND PROCEDURAL BACKGROUND

Defendant owned several businesses, including The Reroofing Specialists, Inc., doing business as Petronella Roofing (Petronella Roofing), Western Cleanoff, Inc. (Western), and Petronella Corporation. In September 2000, he obtained a policy of workers' compensation insurance from the State Compensation Insurance Fund (SCIF) covering Petronella Roofing and Western. Except for a one-month lapse, which resulted in a change in the policy number, SCIF automatically renewed defendant's policy every year until 2009.

SCIF is a quasi-governmental entity that provides workers' compensation insurance. It is funded from the premiums paid by insureds. Premiums are determined using a formula that includes: (1) A business's gross payroll for each job classification employed by it; (2) a rating established by a regulatory agency named The Workers' Compensation Insurance Rating Bureau (WCIRB) that reflects the expected loss claims for each job classification; and (3) a rating, called an experience modification, which compares the insured's record of employee injury claims to the injury claims of the particular industry as a whole.

Defendant was required to make monthly premium payments, calculating the amount due by completing a payroll report. The report required him to identify each job classification and its gross payroll, multiply the payroll by that classification's rating, divide the product by 100, and, if an experience modification was specified, multiply the quotient by it. Defendant also had to sign each report certifying the information provided “accurately reflects the total wages, salaries, and other compensation paid to all employees ... during the period.”

SCIF annually conducted audits after each policy period ended. During the audits a SCIF agent met with defendant and, on one or two occasions, his wife. In addition to other matters, the agent verified the accuracy of the monthly payroll reports SCIF received by comparing them with copies of quarterly employee wage reports defendant claimed he had filed with the California Employment Development Department (EDD) and the Internal Revenue Service. During a January 2005 audit, defendant informed the SCIF's agent that Western had been inactive since the third quarter of 2001. Endorsements were issued removing Western from coverage under the policy.

In September 2006, an SCIF claims adjuster received a telephone call from Petronella Roofing's secretary, reporting an employee named Morales was still receiving workers' compensation benefits although he had returned to work. The adjuster asked the secretary to provide documentation. She received a copy of Morales's pay stub, reflecting he worked for Western. Noticing that Western had been reported to be dormant and removed from coverage under the policy, but was still listed as an active entity on the Secretary of State's Web site, the adjuster reported the discrepancy to SCIF's special investigations unit.

The special investigations unit conducted an internal review and referred the matter to the Orange County District Attorney's Office. In April 2009, defendant was arrested and his house searched.

Investigators advised defendant of his Miranda rights (Miranda v. Arizona (1966) 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 ). He waived them and agreed to speak with the officers. Defendant said he handled “day-to-day operations,” including “the payrolls.” He acknowledged sending the monthly payroll reports to SCIF, and when asked if these reports were accurate, admitted they were not, claiming, “they're mostly a[n] estimated payroll.” Defendant also admitted underreporting his payroll during annual audits, explaining “our [experience] modification rate was so out of whack that it ... was prohibitive to ... pay the premiums that were requested by SCIF.” He stated the payroll reports actually filed with EDD were correct.

An SCIF claims manager compiled a list of 42 persons who filed workers' compensation claims under Petronella Roofing's policy whose payroll had not been reported to SCIF. A certified public accountant compared the payroll reports and audit documents defendant provided SCIF with the quarterly employee wage reports actually received by EDD. The accountant prepared a report reflecting the difference between the quarterly payroll defendant reported to EDD and the payroll reports he submitted to SCIF from the fourth quarter of 2000 to the fourth quarter of 2008. Over that 8–year span, the difference in payroll reported to EDD and that reported to SCIF exceeded $29 million.

The prosecution charged defendant with one count of grand theft, 36 counts of violating Insurance Code section 11880, subdivision (a), plus numerous tax evasion crimes. The information also alleged an enhancement under Penal Code section 186.11, subdivision (a). During trial, the court dismissed the grand theft charge at the prosecution's request and granted defendant's motion for acquittal on the bulk of the tax evasion charges. The jury found defendant guilty of 33 counts of violating Insurance Code section 11880, subdivision (a), but acquitted him on three other similar counts and the remaining tax evasion charges. As to counts 2 through 20, the jury returned true findings the prosecution of these charges began within four years of when the crime reasonably should have been discovered. Finally, the jury also found defendant engaged in a pattern of related fraudulent felony conduct resulting in over $500,000 in losses.

DISCUSSION

1. Insurance Code Section 11880, subdivision (a)

Defendant attacks his convictions for violating Insurance Code section 11880, subdivision (a) on several grounds. First, he challenges the sufficiency of the evidence supporting the jury's guilty verdicts. Second, citing Labor Code section 3700.5, subdivision (a), which makes “failure to secure the payment of [workers'] compensation [insurance] ... a misdemeanor,” defendant argues his felony convictions under Insurance Code section 11880, subdivision (a) violate his constitutional right to equal protection. Third, he claims the evidence fails to support the jury's finding the prosecution filed on counts 2 through 20, within the applicable statute of limitations. Finally, in a related argument he asserts the trial court violated his constitutional rights when it denied a pretrial discovery motion for pre–2006 internal e-mails based on SCIF's assertion of the attorney-client privilege.

a. Insufficiency of the Evidence

Insufficiency of the evidence claims are reviewed under the “clear and well settled” substantial evidence standard of review. (People v. Abilez (2007) 41 Cal.4th 472, 504, 61 Cal.Rptr.3d 526, 161 P.3d 58.) “ ‘The proper test for determining a claim of insufficiency of evidence in a criminal case is whether, on the entire record, a rational trier of fact could find the defendant guilty beyond a reasonable doubt. [Citations.] On appeal, we must view the evidence in the light most favorable to the People and must presume in support of the judgment the existence of every fact the trier could reasonably deduce from the evidence. [Citation.]’ ” (People v. Perez (2010) 50 Cal.4th 222, 229, 112 Cal.Rptr.3d 310, 234 P.3d 557.) Further, “ ‘ “ ‘[c]ircumstantial evidence may be sufficient to connect a defendant with the crime and to prove his guilt beyond a reasonable doubt.’ ” ' [Citation.]” (People v. Abilez, supra, 41 Cal.4th at p. 504, 61 Cal.Rptr.3d 526, 161 P.3d 58.) Thus, “[i]f the circumstances reasonably justify the trier of fact's findings, reversal of the judgment is not warranted simply because the circumstances might also reasonably be reconciled with a contrary finding.” (People v. Lindberg (2008) 45 Cal.4th 1, 27, 82 Cal.Rptr.3d...