SB County fighting 'underground economy'



March 22, 2015 12:03 AM


The very name — "underground economy" — speaks to how difficult it is to police and yet, even as a statewide report recently revealed the depth of California's failure to fight illicit activities, Santa Barbara County is tackling the problem.


Since launching a program two years ago, the District Attorney's Office claims, local prosecutions targeting the underground economy have tripled.


"It's hard thing to catch people at," said Assistant District Attorney Gordon Auchincloss, referring to the plethora of fraudulent activities that make up the underground economy.


"But what we've crafted is a program that works in our county," he said. "We are getting the numbers and we are getting some recognition for how we've really aggressively gone after this problem."


Earlier this month, the Milton Marks Little Hoover Commission on California State Government Organization and Economy released its first report in 30 years on California's underground economy.


The report details how $170 billion in off-the-books activity had permeated the Golden State's economy, leeching some $10 billion in taxes annually from state coffers and threatening the competitiveness and livelihoods of businesses and workers who play by the rules.


The report noted that, "sadly," California's underground economy has ballooned since the last report in 1985 as state leaders neglected the problem.

What makes Santa Barbara different?


In large part, it just comes down to getting the word out.


"We've really focused on outreach, talking to unions, contractor associations, anybody who will listen or has employees who could be impacted," Mr. Auchincloss said. "Our best referrals from people within industry."

Deputy District Attorney Gary Gemberling, lead attorney in the worker's compensation fraud unit, told the News-Press his office conducted 55 outreach presentations in that first year, targeting large employers, employee groups, unions, trade associations, chambers of commerce and others.


The impact, he said, was enormous.


"As a direct result of our efforts prosecution of workers' compensation fraud by our office increased 300 percent," Mr. Gemberling said. "As a result of convictions, our office collected actual restitution of approximately $67,000 and obtained restitution orders totaling over $117,000."


Mr. Gemberling noted the dozens of cases the District Attorney's Office has in the court system or under investigation, including the fruits of a multi-agency sting operation in November.


"Twenty-one suspects were contacted and cited for various violations including contracting without a license and failure to have workers' compensation insurance," Mr. Gemberling said.


All 21 were hit with criminal complaints, he said, and so far 13 have pleaded guilty and eight cases are open, with more than $30,000 in fines imposed.


Against the $170 billion-scope of California's underground economy — comprisnig such diverse and hard-to-track activities as payroll fraud, tax evasion, embezzlement and insurance fraud — a few hundred thousand dollars may not seem like much, but Little Hoover Commission Chairman Pedro Nava, a Santa Barbara resident, said those little bits add up.


The Santa Barbara County District Attorney's Office is providing an example of what one district attorney can do, Mr. Nava told the News-Press.


The $273,000 in special grant monies Santa Barbara receives to prosecute workers compensation fraud, Mr. Nava noted, is an excellent example of the "targeted" work that needs to occur at the local level to reverse the underground economy's growth.

Santa Barbara also receives collaborative aid from the California Department of Insurance.


For District Attorney Joyce Dudley, the battle against the underground economy is of particular importance because it's one of the least-publicized but most-devastating criminal realms.


Ms. Dudley said she became aware of the problem during her campaign for district attorney in 2010, and quickly realized how important underground economy issues are.


"For years as deputy district attorney I had prosecuted child abuse, rape, murder," she recalled. "Everybody gets upset about those cases, but those cases don't personally touch most of the people in Santa Barbara County.

"The crimes most people do encounter are crimes like identity theft. They're not the glamorous, headline-making cases, but they are what impacts people."


Economic crimes can hurt in a way very similar to violent crimes.


"I remember talking to people who'd been victims of identity theft, or elder financial abuse, and seeing the same look in their eyes as kids who had been molested or women who'd been raped," Ms. Dudley said. "There was the same deadness in their eyes."


There's also a personal side to Ms. Dudley's fight for a fair, aboveboard economy.


"My father was a small businessman in New York City and I remember him paying off crooked police and getting shaken down by the Mafia," Ms. Dudley said. "I saw what it was like for a small businessman who wanted to play by the rules."


Ms. Dudley said her role is to uphold those rules as best shecan to prevent employers from taking advantage of workers, to empower honest businesses against crooked competitors, and to protect as many people as she can from eye-deadening abuse.


"I feel that the community has really been waiting for this," Ms. Dudley said. "Lots of people knew there was a problem, and law enforcement and the community was waiting for their DA's office to do something about it."


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