3/23/2007 - Local company involved in alleged insurance scheme

The operators of Palm Springs-based Penca Capital who had been developers on the Twentynine Palms Turtle Rock residential development appeared before a Riverside Superior Court judge Thursday in connection with an alleged $6 million scheme to defraud the state and several workers-compensation insurance providers.

Carter Lee Pendergrass, 56, his son Joshua, 25, and their business associates, Timothy Cassidy and his wife, Karen, both 51, are each facing dozens of counts of insurance fraud, money laundering and filing false income tax statements, according to court documents.

They appeared in court and their legal counsel asked for and was granted a continuance until Wednesday.

The elder Pendergrass was scheduled for a felony settlement conference, along with Timothy Cassidy, while Joshua Pendergrass and Karen Cassidy were each scheduled for arraignments Thursday.

They were all arrested two weeks ago after investigators completed a yearlong investigation into their operation, according to Riverside County District Attorney's Office spokeswoman Ingrid Wyatt.

She said the alleged scheme began in 2001 and revolved around the Banning construction company owned by Carter Pendergrass and Phil Cassidy.

According to Riverside County Deputy District Attorney Paul Fick, the company, variously known as TF Ventures and All Service, Inc., would deliberately misreport wages paid to its workers to avoid paying the full amounts due in state payroll taxes and workers comp insurance premiums.

Fick explained that insurance premiums for highly compensated trades workers are lower, based on the belief that a higher-paid worker has more experience and is less likely to get hurt on the job. He said the suspects learned how to illegally exploit that belief.

"They would report a worker who earned $11 an hour for a 40-hour work week as working only 20 hours, but at $22 per hour," Fick said. "That way, they saved more than half of the workers' comp insurance cost for that worker."

According to the district attorney's office, the four suspects also laundered money through a "dummy company" called McCollum Wood Products. The company was supposed to be for procurement but actually served as a conduit for paying employees under the table, or paying the defendants' household bills, according to Fick.
Members of the four-person group also operated Penca Capital in downtown Palm Springs and were principals in Turtle Rock LLC, a firm that was selling new homes in the Turtle Rock development in Twentynine Palms.

According to prosecutors, Turtle Rock has been placed into receivership so people who have placed orders for homes can deal with the company separately as the case proceeds.

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