P. v. Petronella CA4/3
218 Cal. App. 4th 945
Cal. Ct. App.2013Background
- Michael Petronella owned Petronella Roofing, Western Cleanoff, and related entities and maintained a workers’ compensation policy with the State Compensation Insurance Fund (SCIF) from 2000–2009. He submitted monthly payroll reports to SCIF and certified their accuracy; SCIF audited annually and compared those reports to EDD quarterly wage reports.
- SCIF audits and an internal tip (Sept. 2006) revealed substantial discrepancies: an accountant found defendant underreported payroll by over $29 million from 2000–2008; a SCIF investigator flagged the first external tip in Sept. 2006.
- Petronella waived Miranda rights and admitted to underreporting payroll on SCIF reports to keep premiums down, stating EDD reports were accurate and audits were largely estimates.
- A jury convicted Petronella on 33 counts of violating Ins. Code §11880(a) (knowingly making false statements material to premium determination to reduce premiums) and found a Penal Code §186.11(a)(2) white-collar enhancement for a pattern of fraud resulting in losses over $500,000. He was sentenced to 10 years and ordered to pay $500,000 restitution to SCIF.
- On appeal the Court of Appeal affirmed convictions, rejected challenges based on insufficiency, equal protection, statute-of-limitations, discovery (attorney-client privilege for SCIF e-mails), mistake-of-fact, and Penal Code §654, but reversed and remanded the restitution award as an abuse of discretion.
Issues
| Issue | People’s Argument | Petronella’s Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for Ins. Code §11880(a) convictions | Evidence (EDD reports, audits, admissions) established repeated, knowing underreporting of payroll to reduce premiums | He lacked intent to defraud; SCIF misadministered audits; reports were estimates | Affirmed: substantial evidence supports convictions |
| Equal protection (felony vs misdemeanor statutory scheme) | State may treat concealment of payroll to reduce premiums differently than mere failure to secure coverage | Disparate treatment violates equal protection because both involve failing to report payroll/coverage | Affirmed: statutes target different conduct; rational basis exists |
| Statute of limitations and pre-2006 SCIF e-mails discovery | Timely prosecution because SCIF’s investigative tip first appeared Sept. 2006; SCIF privileged e-mails properly withheld | Prosecution untimely on counts 2–20; nondisclosure of pre-2006 e-mails violated due process/confrontation | Affirmed: jury reasonably found discovery in 2006; trial court properly denied in camera review of privileged SCIF e-mails |
| Restitution amount (Pen. Code §1202.4) | SCIF’s evidence (Hogan letters, final audit) established large premium shortfall; trial court should use rational method to determine loss | Trial court rejected People’s calculations as speculative; awarded $500,000 (arbitrary) instead | Reversed as abuse of discretion: court relied on irrelevant factors, failed to apply a rational method; remand for new restitution hearing |
Key Cases Cited
- People v. Abilez, 41 Cal.4th 472 (discussing substantial-evidence review in criminal cases)
- People v. Zamora, 18 Cal.3d 538 (statute-of-limitations discovery rule for fraud prosecutions)
- People v. Hammon, 15 Cal.4th 1117 (limits on pretrial discovery of privileged third-party materials)
- People v. Gurule, 28 Cal.4th 557 (attorney-client privilege and no required in camera review pretrial)
- People v. Giordano, 42 Cal.4th 644 (restitution standard: court must use a rational method and make record to justify amount)