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Six-Year Scheme Uncovered by California Department of Insurance
SAN JOSE, Calif. — Raul Chavez, owner of a San Jose-based security company, has been sentenced following a lengthy investigation that uncovered a multimillion-dollar workers’ compensation fraud scheme. Chavez, 40, who operated Tactical Operations Protective Services, pleaded guilty to felony premium fraud and was sentenced on May 19, 2025.
According to the California Department of Insurance (CDI), Chavez intentionally underreported payroll for over six years to evade paying workers’ compensation insurance premiums. This type of fraud not only places employees at risk but also undermines fair competition in the industry.
Fraud Uncovered After Injury Incident
The investigation began in September 2023, when the State Compensation Insurance Fund (State Fund) submitted a suspected fraud referral to CDI. The referral was prompted by Chavez’s failure to report a worker injury that occurred in June 2022, despite personally transporting the injured employee to the hospital.
The incident led to a deeper audit of Chavez’s insurance records. Investigators found that from 2017 to 2022, Chavez falsely claimed he had no employees and no payroll. Even in the 2022–2023 policy year—following the reported injury—he only acknowledged $40,000 in payroll related to the injured worker.
In reality, Chavez had concealed over $3.4 million in payroll from 2017 through 2023. The underreporting led to an estimated $205,565 in unpaid workers’ compensation insurance premiums owed to the State Fund.
Sentencing and Restitution
Chavez accepted a plea deal and was sentenced to:
- 180 days in county jail (served through electronic monitoring)
- Two years of formal probation
- Restitution payment of $225,168 to the State Fund, which he has fully paid
The case was prosecuted by the Santa Clara County District Attorney’s Office, with CDI leading the investigation and audit.
Impact on Workers and the Industry
California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona emphasized the broader implications of this type of fraud:
“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.”
When businesses manipulate payroll data to cut costs on insurance, it endangers worker protections and undermines the integrity of the labor market. Employees may be left without adequate insurance coverage in case of injury, while honest employers face a skewed bidding landscape.
About Tactical Operations Protective Services
Chavez’s company, Tactical Operations Protective Services, provided staffing, patrol, and security guard services in Santa Clara County. The firm operated as a limited liability company and appeared to be in good standing until the fraud investigation revealed the concealed payroll.
While Chavez has met the court’s financial obligations, the case serves as a warning to employers who may consider similar schemes. CDI has reiterated its commitment to identifying and prosecuting workers’ compensation fraud to ensure workplace safety and fair business practices.
