Filed 8/6/13 P. v. Petronella CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

THE PEOPLE,

 Plaintiff and Appellant,

v.

MICHAEL VINCENT PETRONELLA,

 Defendant and Appellant.

 G044628

 (Super. Ct. No. 09CF1067)

 ORDER MODIFYING OPINION

 AND DENYING PETITION FOR 

 REHEARING; NO CHANGE IN 

 JUDGMENT

It is ordered that the opinion filed herein on July 17, 2013, be modified as 

follows: 

On page 24, in the second full paragraph, beginning “The first issue is,” 

delete the second and third sentences and accompanying case citations. 
2

There is no change in the judgment. The petition for rehearing is DENIED. 

RYLAARSDAM, ACTING P. J.

WE CONCUR:

BEDSWORTH, J.

THOMPSON, J.
Filed 7/17/13 P. v. Petronella CA4/3 (unmodified version)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

THE PEOPLE,

 Plaintiff and Appellant,

v.

MICHAEL VINCENT PETRONELLA,

 Defendant and Appellant.

 G044628

 (Super. Ct. No. 09CF1067)

 O P I N I O N

Appeals from a judgment of the Superior Court of Orange County, Richard 

M. King, Judge. Affirmed in part and reversed in part.

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, 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.
2

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‟ 
3

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 
4

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 
5

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.) “„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 
6

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.) 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.) 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.) 

As previously noted, Insurance Code section 11880, subdivision (a) makes 

it a felony 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 Attorney General‟s 

brief demonstrates the trial evidence established the following material facts: (1) “A 

comparison of the payroll reports [defendant] submitted to SCIF . . . and SCIF audit 

reports . . . with the . . . forms [defendant] submitted to the EDD . . . establish that for 

each policy year [defendant] misreported his payroll” by amounts exceeding $2 million; 

(2) defendant knew his businesses‟ “payroll was material to setting the premium” due 

SCIF for his workers‟ compensation insurance; and (3) defendant “knowingly made false 

statements concerning his payroll with the intent to reduce the cost of his workers‟ 

compensation insurance.” 

Defendant correctly asserts Insurance Code section 11880, subdivision (a)

creates a specific intent crime. But he is wrong in claiming it requires the prosecution to 

establish the correct premium or cost of insurance to support a conviction under the 

statute. The statute only requires the prosecution to show defendant knowingly made a 

false oral or written statement to SCIF material to determining the premium, rate, or cost 
7

of his insurance with the intent of reducing that figure. The prosecution presented 

evidence that, from 2000 to 2008, defendant knowingly and repeatedly underreported the 

payroll for his companies to reduce the premium he owed for workers‟ compensation 

insurance. 

To a large extent, defendant‟s brief attempts to reargue the facts, asserting 

he had no intention of deceiving SCIF and blaming his convictions on what he describes 

as SCIF‟s incompetent claims administration. The fact that defendant wanted to remain 

competitive in the roofing industry did not justify his actions. “The best of motives

provides no defense.” (People v. Thomas (1988) 206 Cal.App.3d 689, 697; see also 1 

Witkin & Epstein, Cal. Criminal Law (4th ed. 2012) Defenses, § 281, p. 771.) Neither 

does SCIF‟s allegedly poor handling of defendant‟s policies or its purported failure to 

adequately audit them constitute valid defenses. A victim‟s contributory negligence is 

not a defense to a crime. (People v. Marlin (2004) 124 Cal.App.4th 559, 569; People v. 

Schmies (1996) 44 Cal.App.4th 38, 46.) 

We conclude the evidence supports the jury‟s guilty verdicts. 

b. Equal Protection

Next, defendant contends his felony convictions for violating Insurance 

Code section 11880, subdivision (a), violated his constitutional right to equal protection. 

In support of this argument he cites Labor Code section 3700.5, subdivision (a). It 

provides, “[t]he failure to secure the payment of compensation as required by this article 

by one who knew, or because of his or her knowledge or experience should be reasonably 

expected to have known, of the obligation to secure the payment of compensation” 

constitutes “a misdemeanor . . . .” Describing his actions as “knowingly partially 

under[]report[ing] payroll to [SCIF],” defendant argues he is similarly situated to an 

employer “who knowingly completely under[]reports his payroll[] by not securing 
8

required workers‟ compensation coverage . . . .” (Italics omitted.) Thus, he claims the 

difference in punishment is unjustified. Not so. 

Initially, the Attorney General correctly notes defendant waived the issue 

by failing to raise it in the trial court. (People v. Pecci (1999) 72 Cal.App.4th 1500, 1503 

[claim that the defendant‟s ineligibility for probation violated equal protection waived by 

not objecting on that ground in trial court].) But even on the merits his argument is 

unpersuasive. 

To succeed on an equal protection claim a defendant must show “„“the state 

has adopted a classification that affects two or more similarly situated groups in an 

unequal manner[]”‟” and “establish that there is no rational relationship to a legitimate 

state purpose for the state‟s having made a distinction between the two similarly situated 

groups.” (People v. Cavallaro (2009) 178 Cal.App.4th 103, 110, fn. omitted.) Defendant 

cannot satisfy the claim‟s first requirement, two groups “„similarly situated for purposes 

of the law challenged.‟ [Citation.]” (Cooley v. Superior Court (2002) 29 Cal.4th 228, 

253.) The gravamen of Insurance Code section 11880, subdivision (a) is knowingly 

concealing a fact material to determine “premium, rate, or cost of the insurance” by one 

who has a workers‟ compensation insurance policy issued or administered by SCIF. 

Labor Code section 3700.5, subdivision (a) punishes one who merely should have known 

of his or her obligation to secure workers‟ compensation insurance and failed to obtain 

coverage. The latter statute does not involve any element of concealment or the 

calculation of a policy‟s cost. Thus, one convicted of violating the former statute is not 

similarly situated to one who is convicted of violating the latter statute. 

People v. Cortez (1985) 166 Cal.App.3d 994 presents an analogous 

circumstance. A defendant convicted of transporting heroin argued it was “„a violation of 

equal protection to punish‟” more seriously one whose “„possession of heroin for 

personal use . . . was not “stationary,”‟” than “one who possesses heroin for personal use, 

but is not in motion when arrested . . . .” (Id. at p. 999.) The appellate court rejected this 
9

claim, noting “„“„The Constitution does not require things which are different in fact or 

opinion to be treated in law as though they were the same.‟ [Citations.]”‟” (Id. at 

pp. 999-1000.) The same is true here. Defendant‟s repeated fraudulent underreporting of 

his payroll so as to reduce the workers‟ compensation premium owed to SCIF is not the 

same as merely failing to obtain workers‟ compensation insurance at all. 

c. Statute of Limitations

Defendant‟s prosecution commenced on April 29, 2009. Counts 2 through 

20 charged defendant with violating Insurance Code section 11880, subdivision (a) 

between September 2000 and September 2005. First, defendant claims the evidence fails 

to support the jury‟s finding that, as to counts 2 through 20, the prosecution commenced 

this action within the applicable statute of limitations. In the alternative, he challenges 

the trial court‟s denial of his pretrial request to review SCIF‟s pre-2006 internal e-mail 

communications, arguing this ruling violated his constitutional rights to confrontation and 

due process. 

(1) Timeliness

The statute of limitations for defendant‟s crimes was four years “after 

discovery of the commission of the offense . . . .” (Pen. Code, §§ 801.5, 803, subd. (c).) 

In applying the discovery requirement, “[L]ack of actual knowledge is not required to 

bring the „discovery‟ provision . . . into play. The crucial determination is whether law 

enforcement authorities or the victim had actual notice of circumstances sufficient to 

make them suspicious of fraud thereby leading them to make inquiries which might have 

revealed the fraud.” (People v. Zamora (1976) 18 Cal.3d 538, 571-572, italics omitted.) 

“However, discovery of a loss by the victim alone is insufficient to trigger the running of 

the limitations period: „Literally, . . . discovery of a loss, without discovery of a criminal

agency, is not enough.‟ [Citation.]” (People v. Soni (2005) 134 Cal.App.4th 1510, 1518; 
10

see also People v. Lopez (1997) 52 Cal.App.4th 233, 246, fn. 4.) “The question is 

whether there is sufficient knowledge that a crime has been committed.” (People v. 

Crossman (1989) 210 Cal.App.3d 476, 481.) 

The issues of when SCIF actually learned of defendant‟s fraud and whether, 

through the exercise of reasonable diligence, it could have discovered the fraud earlier, 

presented questions for the jury to decide. (People v. Swinney (1975) 46 Cal.App.3d 332, 

345, disapproved on another point in People v. Zamora, supra, 18 Cal.3d at pp. 564-565, 

fn. 26.) “When an issue involving the statute of limitations has been tried, we review the 

record to determine whether substantial evidence supports the findings of the trier of fact. 

[Citations.]” (People v. Castillo (2008) 168 Cal.App.4th 364, 369.) 

Migdalia Martin, an investigator with SCIF‟s special investigations unit 

testified the insurer has “an online fraud investigation management system.” If “an 

employee within the company finds . . . unusual activity . . . they are mandated to report 

that activity to the special investigations unit.” Reports from persons outside SCIF are 

also placed into this system. She checked the department‟s system and found the first tip 

received concerning defendant‟s businesses was from the claims adjuster handling the 

Morales case in September 2006. 

Again, defendant‟s assertions primarily amount to rearguing the facts. 

Martin testified discrepancies, referred to as “„red flags‟” “should be” reported to her 

department. But she stated “a red flag doesn‟t mean that there is fraud.” Defendant also 

cites to evidence indicating a dramatic increase in Petronella Roofing‟s experience 

modification and an SCIF underwriter‟s comment agreeing this constituted “a huge red 

flag.” What he ignores is the underwriter‟s further response that he “would want to know 

what‟s going on” and “see what we can do to stop these losses.” Thus, the underwriter‟s 

focus was on improving the insured‟s safety record, not investigating the possibility of 

fraud. 
11

Defendant also refers to the reports prepared by several auditors going back 

to the policy‟s first annual review that indicated discrepancies in his payroll records. The 

testimony suggests these witnesses relied on their supervisors to determine whether 

discrepancies were serious enough to contact SCIF‟s special investigations unit. Two 

auditors, Alma Alexander and Gina King testified it was up to their supervisors to follow 

up on red flags. Alexander claimed her supervisor never questioned her about the audits. 

Another auditor, William Rainey, testified his supervisor was required to review audit 

reports submitted by him. Rainey claimed that if a supervisor found mistakes in the 

audit, it would have been returned to him, but he did not recall being questioned about 

any of the audits. 

Thus, while defendant notes there was some evidence SCIF agents noticed 

incorrect reporting by him, he fails to establish SCIF reasonably should have suspected 

he was underreporting his payroll before September 2006. We conclude the evidence 

supports the jury‟s finding the prosecution timely charged defendant with the counts predating October 2005. 

(2) Pretrial Discovery

Before trial, the defense served a subpoena on SCIF that, in part, sought all 

internal e-mails concerning defendant‟s insurance policies sent between September 2000 

and August 2009. SCIF gave the defense a compact disk, but it did not contain any pre2006 e-mails. SCIF claimed that, except for two 2007 e-mails listed on its privilege log 

as non-core attorney work product, all of the earlier e-mails were covered by the 

attorney-client and attorney work product privileges. The defense sought an in camera 

review of the validity of SCIF‟s privilege claims, arguing a failure to do so would violate 

defendant‟s constitutional rights. The court allowed discovery of the two non-core 

attorney work product e-mails, but otherwise sustained SCIF‟s privilege claim without 

conducting an in camera review. 
12

Defendant now contends the trial court‟s ruling violated his constitutional 

rights to confrontation and due process. The Attorney General disagrees. We conclude 

the trial court properly ruled on this issue. 

As noted, SCIF asserted the attorney-client privilege to all but the two emails listed on its privilege log the court found subject to discovery. Confidential 

communications between an attorney and a client are protected by the attorney-client 

privilege. (Evid. Code, §§ 952, 954.) Evidence Code section 915, subdivision (a) bars 

“disclosure of information claimed to be privileged . . . in order to rule on the claim of 

privilege . . . .” 

The case law also supports the trial court‟s ruling. In People v. Hammon

(1997) 15 Cal.4th 1117, the Supreme Court held the trial court properly quashed a 

subpoena duces tecum the defendant served on psychotherapists treating the alleged 

victim without first conducting an in camera review of the material. “[R]eject[ing the] 

defendant‟s claim that pretrial access to such information was necessary to vindicate his 

federal constitutional rights to confront and cross-examine the complaining witness at 

trial or to receive a fair trial” (id. at p. 1119), Hammon held “the trial court was not 

required, at the pretrial stage of the proceedings, to review or grant discovery of 

privileged information in the hands of third party psychotherapy providers” (ibid.). 

In so ruling, Hammon disapproved prior case law, including People v. 

Reber (1986) 177 Cal.App.3d 523, that had authorized pretrial in camera review of 

material claimed to be privileged and disclosure of the material if the court found a 

criminal defendant‟s confrontation right outweighed the asserted privilege. Hammon

noted those cases relied on a United States Supreme Court decision involving a criminal 

defendant‟s trial rights (Davis v. Alaska (1974) 415 U.S. 308 [94 S.Ct. 1105, 39 L.Ed.2d 

347]), and that in a subsequent case (Pennsylvania v. Ritchie (1987) 480 U.S. 39 [107 

S.Ct. 989, 94 L.Ed.2d 40]), “no majority consensus emerged concerning the proper 

application of the confrontation clause of the Sixth Amendment to the pretrial discovery 
13

issue . . . .” (People v. Hammon, supra, 15 Cal.4th at p. 1126.) Thus, Hammon

concluded “[w]e do not . . . see an adequate justification for taking such a long step in a 

direction the United States Supreme Court has not gone.” (Id. at p. 1127.) 

The Supreme Court confronted the attorney-client privilege in People v. 

Gurule (2002) 28 Cal.4th 557. Garrison, the defendant‟s accomplice, entered into a plea 

deal that required him to testify for the prosecution. Due to concerns about Garrison‟s 

mental stability the court ordered him examined by several psychiatrists. Before trial, the 

defendant sought discovery of the psychiatrists‟ records. Garrison‟s attorney objected. 

Noting that he had retained two of the psychiatrists before the court ordered them to 

examine Garrison, counsel claimed the reports were confidential under both the 

psychotherapist-patient and attorney-client privileges. The trial court concluded some of 

the court-ordered examinations were discoverable, conducted an in camera review of 

these materials, and ordered the records disclosed to the defense. As to all of the other 

records, the trial court found them covered by the attorney-client privilege and thus not 

subject to review. 

Rejecting the defendant‟s claim, “denying him full access to 

Garrison‟s psychiatric records” violated his federal constitutional rights, the Supreme 

Court affirmed. (People v. Gurule, supra, 28 Cal.4th at p. 591.) First, “[u]nder 

Hammon . . . psychiatric material is generally undiscoverable prior to trial. Defendant, 

then, received more discovery than he was legally entitled to . . . .” (Id. at p. 592.) 

Second, as for the materials found to be covered by the attorney-client privilege, Gurule

held the trial court properly declined to conduct an in camera review to determine their 

materiality. (Id. at p. 593.) “„The attorney-client privilege is one of the oldest recognized 

privileges for confidential communications‟ [citation] and is „one which our judicial 

system has carefully safeguarded with only a few specific exceptions‟ [citation]. We 

have held that a criminal defendant‟s right to due process does not entitle him to invade 

the attorney-client privilege of another. [Citation.] To the extent defendant claims his 
14

right to confrontation or due process entitles him to gain access to the confidential 

communications between Garrison, his attorney, and his defense experts, he is thus 

mistaken.” (Id. at p. 594.) 

The same result applies in this case. Defendant seeks to distinguish the 

foregoing cases by arguing he was seeking information relevant to the statute of 

limitations issue, not to impeach the prosecution‟s witnesses. But neither Hammon nor 

Gurule limited its holding to pretrial discovery concerning witness impeachment. 

Defendant cites People v. Mincey (1992) 2 Cal.4th 408 and Vela v. 

Superior Court (1989) 208 Cal.App.3d 141 in support of his argument. Mincey involved 

the trial court‟s restriction of defense counsel‟s questioning of a witness concerning her 

state of mind that occurred during trial, not pretrial discovery of what her attorney told 

her. (People v. Mincey, supra, 2 Cal.4th at pp. 462-463.) Vela held a city could not use 

the attorney-client privilege to bar criminal defendants from seeking pretrial discovery of 

“statements made by its police officers to an investigating team organized by the city‟s 

police department to gather and preserve evidence for use by the city attorney in the 

defense of a possible future civil action.” (Vela v. Superior Court, supra, 208 

Cal.App.3d at p. 144.) But Vela was decided before the Supreme Court‟s decision in 

Hammon and relied on both Davis v. Alaska, supra, 415 U.S. 308 and People v. Reber, 

supra, 177 Cal.App.3d 523 to reach its conclusion. As noted, both the United States and 

California Supreme Courts have recognized Davis is inapplicable to pretrial discovery 

claims and Reber is no longer the law. Thus, defendant was not entitled to have the court 

conduct an in camera review of SCIF‟s e-mails claimed to be covered by the attorneyclient privilege or to obtain disclosure of them. 

Furthermore, defendant was allowed to fully question SCIF employees 

about the scope of their audits of his business. In addition, he questioned SCIF‟s 

investigator about when the investigations unit received reports about defendant‟s 

possible fraudulent activity. As mentioned, she testified the first report appeared in the 
15

September 2006 e-mail from the claims adjuster handling the Morales file. Thus, we 

conclude the trial court did not err in denying defendant‟s pretrial request to review 

SCIF‟s e-mails covered by the attorney-client and attorney work product privileges. 

2. Penal Code section 186.11

Penal Code section 186.11, “known as the aggravated white collar crime 

enhancement” (Pen. Code, § 186.11, subd. (a)(1)), imposes increased punishment on 

“[a]ny person who commits two or more related felonies, a material element of which is 

fraud or embezzlement, which involve a pattern of related felony conduct” (ibid.), 

including where “the pattern of related felony conduct involves the taking of, or results in 

the loss by another person or entity of, more than five hundred thousand dollars 

($500,000) . . . . (Pen. Code, § 186.11, subd. (a)(2)). At the close of the prosecution‟s 

case, the defense made a motion for acquittal under Penal Code section 1118.1 on this 

enhancement allegation. The court denied the motion and the jury returned a true finding 

on it. 

Defendant now challenges the sufficiency of the evidence supporting the 

finding on two grounds. First, he argues “there was no competent calculation of [the] 

proper premium payable, and that calculation was beyond the jurors‟ capabilities.” 

Second, defendant claims since he “was convicted of 33 counts of violating Insurance 

Code section 11880[, subdivision (a)],” he “was not convicted of two or more „related 

felonies,‟ within the meaning of . . . Penal Code section 186.11 . . . .” Both contentions 

lack merit. 

“The standard applied by the trial court under [Penal Code] section 1118.1 

in ruling on a motion for judgment of acquittal is the same as the standard applied by an 

appellate court in reviewing the sufficiency of the evidence to support a conviction. 

[Citation.]” (People v. Whisenhunt (2008) 44 Cal.4th 174, 200.) “Review of the denial 

of a section 1118.1 motion made at the close of a prosecutor‟s case-in-chief focuses on 
16

the state of the evidence as it stood at that point. [Citation.]” (People v. Houston (2012) 

54 Cal.4th 1186, 1215; see also People v. Roldan (2011) 197 Cal.App.4th 920, 924.) 

The prosecution‟s evidence included testimony concerning the process used 

by an insured to calculate its premium on a payroll report as well as copies of defendant‟s 

payroll reports. In addition, the People introduced copies of the quarterly wage and 

withholding reports defendant submitted to the EDD. As the trial court concluded “it 

may take [some] work [by] the jurors, but there is evidence [of] the amount of loss . . . of 

premiums” and consequently “there [are] facts to support a true finding.” We agree with 

this conclusion. 

As for defendant‟s second argument, he claims “„related felonies‟ can only 

be different felonies; they cannot be the same [felony].” This argument ignores the 

definitions of the phrases “a pattern of related felony conduct” and “two or more related 

felonies” appearing in Penal Code section 186.11, subdivision (a)(1). The first phrase 

“means engaging in at least two felonies that have the same or similar purpose, result, 

principals, victims, or methods of commission, or are otherwise interrelated by 

distinguishing characteristics, and that are not isolated events.” (Ibid.) The latter phrase 

is defined as “felonies committed against two or more separate victims, or against the 

same victim on two or more separate occasions.” (Ibid.; see also People v. Mozes (2011) 

192 Cal.App.4th 1124, 1129 [applying statute where the defendant pleaded guilty to 17 

counts of theft by false pretenses].) Under these definitions, defendant‟s multiple 

convictions for violating Insurance Code section 11880, subdivision (a) satisfied the 

enhancement‟s statutory requirements. 

Thus, we reject defendant‟s attack on the jury‟s true finding under Penal 

Code section 186.11, subdivision (a)(2). 
17

3. Mistake of Fact

Next, defendant claims the trial court had a duty to instruct the jury sua 

sponte on mistake of fact as a defense and its failure to do so prejudiced him. He argues 

his statements to the investigators indicated “[h]e believed he was paying proper 

premiums, avoiding inflated out of „whack‟ premiums.” Consequently, defendant argues 

he “lacked factual knowledge of what the proper premiums should have been” and 

“therefore, he lacked the intent to reduce them.” This argument lacks merit. 

Penal Code section 26 declares, “All persons are capable of committing 

crimes except those belonging to the following classes: [¶] . . . [¶] Three -- Persons who 

committed the act or made the omission charged under an ignorance or mistake of fact, 

which disproves any criminal intent.” As the Attorney General argues, the case law 

defeats his reliance on a trial court‟s duty to instruct sua sponte on mistake as a defense. 

In People v. Anderson (2011) 51 Cal.4th 989, the Supreme Court affirmed a 

felony murder conviction with a true finding the killing occurred during the course of a 

robbery, rejecting a claim the trial court erred by failing to instruct on accident as a 

defense where, in the process of stealing the victim‟s car, the defendant ran over her. 

“That the law recognizes a defense of accident does not, however, establish that trial 

courts have a duty to instruct on accident sua sponte. „In criminal cases, even in the 

absence of a request, a trial court must instruct on general principles of law relevant to 

the issues raised by the evidence and necessary for the jury‟s understanding of the case.‟ 

[Citation.] That duty extends to „“instructions on the defendant‟s theory of the case, 

including instructions „as to defenses “„that the defendant is relying on . . . , or if there is 

substantial evidence supportive of such a defense and the defense is not inconsistent with 

the defendant‟s theory of the case.‟”‟”‟ [Citation.]” But “„“when a defendant presents 

evidence to attempt to negate or rebut the prosecution‟s proof of an element of the 

offense, a defendant is not presenting a special defense invoking sua sponte instructional 

duties. While a court may well have a duty to give a „pinpoint‟ instruction relating such 
18

evidence to the elements of the offense and to the jury‟s duty to acquit if the evidence 

produces a reasonable doubt, such „pinpoint‟ instructions are not required to be given sua 

sponte and must be given only upon request.”‟” (Id. at pp. 996-997.) 

People v. Lawson (2013) 215 Cal.App.4th 108 recently applied Anderson’s

holding to a claim the trial court erred in failing to, sua sponte, instruct on mistake of fact. 

First, Lawson noted “[t]he mistake-of-fact defense operates to negate the requisite 

criminal intent or mens rea element of the crime, . . . specifically when the defendant 

holds a mistaken belief in a fact or set of circumstances which, if existent or true, would 

render the defendant‟s otherwise criminal conduct lawful. [Citations.]” (Id. at p. 111.) 

The court then held “[l]ike the defense of accident, an instruction on the defense of 

mistake of fact would have served only to negate the mental state element of the crime. 

Thus, at least as asserted here, the defense of mistake of fact was not a true affirmative 

defense.” (Id. at p. p. 118.) 

As in the foregoing cases, defendant did not request a “pinpoint” instruction 

on whether he mistakenly believed he was paying the proper premiums. Furthermore, it 

is doubtful such an instruction would result in a different verdict. Defendant 

acknowledged the information he provided to SCIF on the payroll reports and during the 

annual audits was not accurate and that he was aware of the inaccuracies. Assuming 

defendant was correct in complaining about SCIF‟s handling of workers‟ compensation 

claims and in calculating his company‟s experience modification rate, it would not 

authorize his falsely representing the size of payroll simply to “clean it up by balancing 

out some of the employees into another company . . . .” Consequently, even if a mistake 

of fact theory was consistent with the defense theory of the case, the evidence failed to 

support giving an instruction on it. 
19

4. Penal Code section 654

The prosecution charged defendant with violating Insurance Code 

section 11880, subdivision (a) based on the false payroll reports he submitted to SCIF for 

each quarter that he filed an accurate employee wage report with EDD. In sentencing 

defendant on the 33 counts where the jury returned guilty verdicts, the trial court selected 

count 2 as the principal term, imposed the three-year midterm plus a consecutive threeyear term for the white collar crime enhancement under Penal Code section 186.11, 

subdivision (a)(2), and consecutive one-year terms on counts 7, 12, 16, and 20. On the 

remaining counts, the trial court imposed concurrent three-year terms. 

Arguing he “was not charged with making false statements to EDD,” but 

“with making false statements to SCIF,” which “audited him on an annual basis,” 

defendant argues “[t]he record . . . reflects, at most, five separate courses of conduct” and 

the concurrent counts on the remaining charges violated Penal Code section 654. Again, 

we find his argument unpersuasive. 

Penal Code section 654, subdivision (a) declares, “[a]n act or omission that 

is punishable in different ways by different provisions of law shall be punished under the 

provision that provides for the longest potential term of imprisonment, but in no case 

shall the act or omission be punished under more than one provision.” This statute 

“limit[s] punishment for multiple convictions arising out of either an act or omission or a 

course of conduct deemed to be indivisible in time, in those instances wherein the 

accused entertained a principal objective to which other objectives, if any, were merely 

incidental.” (People v. Beamon (1973) 8 Cal.3d 625, 639, fn. omitted.) But “„a course of 

conduct divisible in time, although directed to one objective, may give rise to multiple 

violations and punishment.‟ [Citation.] „This is particularly so where the offenses are 

temporally separated in such a way as to afford the defendant opportunity to reflect and 

to renew his or her intent before committing the next one, thereby aggravating the 
20

violation of public security or policy already undertaken.‟” (People v. Kurtenbach (2012) 

204 Cal.App.4th 1264, 1289 [applying exception to arson and insurance fraud].) 

“The defendant‟s intent and objective present factual questions for the trial 

court, and its findings will be upheld if supported by substantial evidence. [Citation.] 

„We review the court‟s determination of [a defendant‟s] “separate intents” for sufficient 

evidence in a light most favorable to the judgment, and presume in support of the court‟s 

conclusion the existence of every fact the trier of fact could reasonably deduce from the 

evidence. [Citation.]‟ [Citation.]” (People v. Andra (2007) 156 Cal.App.4th 638, 640-

641.) Here, the evidence supports a conclusion defendant provided false monthly payroll 

reports and forged EDD documents to SCIF agents during annual policy reviews over an 

extended period of time and, before submitting these documents, had the opportunity to 

reflect on his conduct. Thus, the record supports a conclusion the trial court‟s sentence 

did not violate the prohibition on multiple punishment. 

5. The Restitution Award

a. Introduction

As noted, the trial court awarded SCIF victim restitution of $500,000. Both 

parties challenge the correctness of this ruling. They agree the amount of the restitution 

order was arbitrary and it should be reversed, but disagree as to the reasons why and what 

should happen upon remand. 

Defendant repeats his arguments that (1) the evidence fails to support the 

jury‟s finding on the Penal Code section 186.11 enhancement, and (2) the losses incurred 

resulted from SCIF‟s allegedly incompetent claims handling. Thus, he contends the 

prosecution “failed to sustain [its] burden of proof” and seeks a reversal of the restitution 

award “on the ground[] of insufficient evidence.” In his reply brief defendant for the first 

time argues the People‟s appeal should be dismissed because it lacked a valid statutory 

basis for taking an appeal. Citing the court‟s “refusal to find SCIF‟s statements of loss 
21

sufficient to establish a prima facie case and its insistence that the People perform 

essentially a forensic audit of [defendant‟s] records . . . in order to substantiate [its] loss,” 

the Attorney General complains the trial court “improperly placed a higher burden on the 

People than required” by the victim restitution statute. 

We conclude the People can appeal from the restitution order and, based on 

the appellate record, the trial court abused its discretion by relying on irrelevant factors 

and without considering all of the evidence presented to it to order $500,000 in restitution 

to SCIF. 

b. Background

At the sentencing and restitution hearing, the trial court received briefs and 

documents, including declarations and letters presented by the parties and SCIF, plus 

defendant‟s testimony. 

The prosecution‟s evidence included a letter from a SCIF senior vicepresident providing a general review of workers‟ compensation insurance. It also 

introduced premium statements based on a final audit of defendant‟s business. (Display 

Bills.) 

In addition, the prosecution introduced two letters from Randy Hogan, an 

underwriting manager with SCIF, summarizing the financial impact of defendant‟s fraud. 

Hogan‟s letters contained two separate calculations of defendant‟s underpayment of 

premiums. First, “[b]ased on the payroll figures reported to the State of California (i.e., 

EDD quarterly employee wage reports) and the job duties provided by [defendant‟s] 

office managers,” Hogan concluded “the total premium owed for the coverage provided 

by [SCIF]” for the 2000 to 2008 policies was a little over $37 million. During this period 

defendant paid approximately $1.75 million in premiums, leaving a difference between 

the amount paid and what should have been paid of over $35.2 million. Hogan‟s second 

calculation, described as a “hypothetical „best case‟ model,” was based on an assumption 
22

defendant “had reported the actual payroll and such would have [been] available to the 

WCIRB for use in the calculation of the [experience modifications].” Under this 

approach Hogan concluded “the total premium owed for the coverage provided by [SCIF] 

would have been” about $13.4 million which, after deducting the premiums defendant 

paid, left “an amount due of” approximately $11.6 million. The court accepted the 

prosecution‟s additional request to consider the trial exhibits, particularly the EDD 

quarterly wage and withholding reports for Petronella Roofing and Western, for the 

purpose of determining restitution. 

The prosecution also argued the court should apply an approach based on 

the Uniform Statistical Rating Plan (USRP) in determining the amount of unpaid 

premiums. The USRP provides that if an employer fails to maintain accurate records of 

its employee payroll, an insurer may use the highest possible rating for each job 

classification in calculating the premium owed. 

The defense introduced two declarations from Dr. Arthur J. Levine, an 

attorney and author, concerning workers‟ compensation insurance premium issues. In his 

first declaration, Levine stated he had reviewed numerous documents and concluded, 

“[h]ad the proper payroll and classifications been reported” by defendant the WCIRB‟s 

experience modification ratios would have resulted in a drastic reduction in the actual 

premium owed. He claimed a calculation using the “amended experience modifications 

alone would reduce the amount of SCIF‟s premium over the period 2000-2008 by twothirds.” However, since “rating regulations do not permit the WCIRB to use estimated 

payrolls for experience modification calculations,” it was necessary for “SCIF [to] 

conduct a physical payroll audit of [defendant‟s] records for each applicable year” and, 

“[u]ntil then, . . . the amount that [defendant] owes to SCIF cannot be accurately 

determined.” Levine‟s second declaration repeated much of what appeared in the first. 

But he supplemented it with opinions derived from an interview with defendant. Levine 

“conclude[d] that there are many other material (or potentially material) facts that, if 
23

determined to be true, would very substantially further reduce the total amount of [the] 

premium[s].” 

Defendant testified SCIF insisted all of his employees be classified as 

roofers regardless of the nature of their work simply because he operated a roofing 

business. Thus, defendant claimed he segregated his employees, placing the roofers 

under Petronella Roofing covered under SCIF‟s policies, and the remaining employees 

under Western which he self-insured. In 2001, defendant added Western to SCIF‟s 

policy after it agreed to allowed him to use two additional employee classifications. But 

four months later SCIF eliminated the new classifications. Defendant claimed he then 

terminated SCIF‟s coverage of Western and again personally assumed the risk, insisting 

he “paid every claim.” According to defendant, he later contracted with an employment 

leasing business to cover Western‟s employees. 

Defendant asserted SCIF failed to adequately instruct him on its policy 

requirements. He further claimed the SCIF policies contained erroneous experience 

modification ratings. In part, this resulted from SCIF either “overreserv[ing]” claims or 

“le[aving] [them] open too long.” No one with SCIF ever discussed the matter with him. 

He insisted SCIF‟s remedy for improper payroll reporting was rescission, not criminal 

prosecution. Defendant also believed SCIF‟s right to recover for lost premiums between 

2000 and 2004 was barred by the statute of limitations. He asserted Morales‟s claim was 

a mistake caused by SCIF‟s failure to “ask the right questions.” Finally, defendant 

introduced a chart of his own calculations on the amount of premiums he owed under the 

second policy covering 2004 to 2009, claiming SCIF “profited” from what he paid it. 

In ruling on the victim restitution issue, the court agreed “the loss of 

premiums is a proper basis for restitution.” But it rejected Hogan‟s calculations, 

describing them as “not credible.” “[W]ith respect to the first calculation, . . . it‟s the 

highest [experience modification factor]. If the court were to impose that, there would 
24

be . . . in the court‟s opinion . . . error because . . . restitution cannot be punitive” and “in

excess of what the actual loss is.” The court rejected Hogan‟s second calculation, noting 

it was based on hypothetical experience modifications. “The calculation has to be based 

on what the actual loss was, and . . . it doesn‟t have to be exact, but it can‟t be based on 

speculation. . . . [T]here . . . isn‟t any basis . . . as to how [Hogan] came up with the 

calculations.” 

The court concluded, “From the record that I have before me, I cannot 

conclude what was owed, except for the jury finding [on the enhancement that the loss 

exceeded $500,000.]” It gave the following reasons for this decision: “One, the 

calculation problems and the credibility rejection of . . . Hogan‟s . . . opinions”; “[T]wo, 

the . . . fact that sometime in 2006, . . . the [policy]. . . should have [been 

cancelled]. . . . [¶] Number three, . . . I do feel that SCIF also can pursue this issue of 

restitution in a civil court . . . . Four, . . . when we get to sentencing, the court is going to 

be imposing a substantial fine . . . . [¶] But finally, as I indicated, it‟s time to move 

on. . . .” 

c. Analysis

(1) People’s Right to Appeal

The first issue is defendant‟s claim the People‟s appeal must be dismissed 

because the appeal is not authorized by statute. Generally, we ignore arguments raised 

for the first time in a party‟s reply brief. (Reichardt v. Hoffman (1997) 52 

Cal.App.4th 754, 764.) But since, as defendant notes “[t]he People have no right of 

appeal except as provided by statute” (People v. Douglas (1999) 20 Cal.4th 85, 89), 

which raises a jurisdictional issue, we shall consider his claim. 

The rulings from which the People may appeal are contained in Penal Code 

section 1238. The Attorney General cites Penal Code section 1238, subdivision (a)(5), 
25

allowing an appeal from “[a]n order made after judgment, affecting the substantial rights 

of the people,” as the basis for the appeal in this case. 

We conclude the People may maintain this appeal. In People v. Hamilton

(2003) 114 Cal.App.4th 932, the prosecution appealed from an order at a probation 

revocation hearing where the trial court ruled insurance payments a victim received from 

insurers could be used to offset the defendant‟s victim restitution obligation. The Court 

of Appeal held the People could appeal under Penal Code section 1238, subdivision 

(a)(5). (People v. Hamilton, supra, 114 Cal.App.4th at p. 938.) 

In Hamilton, the order modifying defendant‟s victim restitution was entered 

after the defendant had been sentenced. Here, the restitution order was made during a 

combined hearing on sentencing and restitution. However, in People v. Akins (2005) 128 

Cal.App.4th 1376, the court followed Hamilton and allowed the People to appeal a 

restitution order even though it was entered at the sentencing hearing. (Id. at p. 1381, fn. 

3.) 

While “the primary purpose of mandatory restitution . . . is reimbursement 

for the economic loss and disruption caused to a crime victim by the defendant‟s criminal 

conduct” (People v. Runyan (2012) 54 Cal.4th 849, 865), “the requirement that a 

convicted criminal defendant pay restitution for the losses caused by his crime has aims 

beyond strict compensation that include deterrence and rehabilitation” (ibid.). 

Consequently, “[r]estitution hearings held pursuant to [Penal Code] section 1202.4 are 

sentencing hearings and are thus hearings which are a significant part of a criminal 

prosecution.” (People v. Dehle (2008) 166 Cal.App.4th 1380, 1386.) In Dehle, the court 

reversed a restitution order where the victim‟s private counsel conducted the restitution 

hearing without a prosecutor being present. Noting that, “„[i]n California, all criminal 

prosecutions are conducted in the name of the People of the State of California and by 

their authority‟” (id. at p. 1386), and that “„[t]he district attorney of each county is the 

public prosecutor, vested with the power to conduct on behalf of the People all 
26

prosecutions for public offenses‟” (id. at p. 1387), Dehle held “[t]he trial court abused its 

discretion when it allowed the restitution hearing to go forward without the presence of 

the people” (id. at p. 1390). 

Given the importance of the prosecution‟s presence at victim restitution 

hearings conducted under Penal Code section 1202.4 and the state‟s interest in ensuring 

the constitutional right to victim restitution be properly enforced (Cal. Const., art. I, § 28, 

subd. (b)(13)), we conclude the People have a right to appeal the trial court‟s restitution 

order in this case. 

(2) The Restitution Order

Penal Code section 1202.4, subdivision (f) declares “in every case in which 

a victim has suffered economic loss as a result of the defendant‟s conduct, the court shall 

require that the defendant make restitution to the victim or victims in an amount 

established by court order, based on the amount of loss claimed by the victim or victims 

or any other showing to the court. . . . The court shall order full restitution unless it finds 

compelling and extraordinary reasons for not doing so and states them on the record.” In 

addition, “[a] defendant‟s inability to pay shall not be considered a compelling and 

extraordinary reason not to impose a restitution order, nor shall inability to pay be a 

consideration in determining the amount of a restitution order.” (Pen. Code, § 1202.4, 

subd. (g).) 

No California case appears to have held the willful underpayment of 

insurance premiums constitutes an economic loss under Penal Code section 1202.4. But 

since “the statute uses the language „including, but not limited to‟ the[] enumerated 

losses, a trial court may compensate a victim for any economic loss which is proved to be 

the direct result of the defendant‟s criminal behavior, even if not specifically enumerated 

in the statute.” (People v. Keichler (2005) 129 Cal.App.4th 1039, 1046.) In United 

States v. Simpson (6th Cir. 2008) 538 F.3d 459, the court held “unpaid [workers‟ 
27

compensation] premiums fall squarely within the definition of „loss‟” under federal 

sentencing guidelines. (Id. at p. 462.) Further, defendant does not challenge the trial 

court‟s conclusion SCIF‟s loss of premiums is a recoverable economic loss in this case. 

The People had the burden of proving, by a preponderance of the evidence, 

the amount of SCIF‟s economic loss. (People v. Giordano (2007) 42 Cal.4th 644, 664; 

People v. Baker (2005) 126 Cal.App.4th 463, 469.) On appeal, “we review the trial 

court‟s restitution order for abuse of discretion. [Citations.] The abuse of discretion 

standard is „deferential,‟ but it „is not empty.‟ [Citation.] „[I]t asks in substance whether 

the ruling in question “falls outside the bounds of reason” under the applicable law and 

the relevant facts [citations].‟ [Citation.] Under this standard, while a trial court has 

broad discretion to choose a method for calculating the amount of restitution, it must 

employ a method that is rationally designed to determine the . . . victim‟s economic loss. 

To facilitate appellate review of the trial court‟s restitution order, the trial court must take 

care to make a record of the restitution hearing, analyze the evidence presented, and make 

a clear statement of the calculation method used and how that method justifies the 

amount ordered.” (People v. Giordano, supra, 42 Cal.4th at pp. 663-664.) “The order 

must be affirmed if there is a factual and rational basis for the amount. [Citation.]” 

(People v. Akins, supra, 128 Cal.App.4th at p. 1382.) 

As for defendant‟s insufficiency of the evidence claim, we have previously 

rejected it. During the sentencing and restitution hearing, even the trial judge 

acknowledged he “massively underreported his payroll.” Thus, we find defendant‟s 

ground for reversing the restitution order lacks merit. 

However, a review of the trial court‟s reasons for awarding SCIF $500,000 

in restitution clearly indicates it abused its discretion in reaching this decision. At trial, a 

certified public accountant, called by the prosecution, testified his comparison of the false 

documents defendant presented to SCIF‟s agents during audits and the accurate quarterly 

EDD reports indicated defendant underreported his payroll by over $29 million. The jury 
28

returned a finding, based on proof beyond a reasonable doubt, that defendant “engaged in 

a pattern of related fraudulent . . . conduct involving the loss of more than $500,000 

during the commission of the offenses” upon which he was found guilty. (Italics added.) 

The court‟s conclusion, based on the preponderance of the evidence standard, that the 

total sum of restitution owed SCIF for defendant‟s underpayment of premiums was only 

$500,000 strongly suggests it reached an arbitrary result. 

Further, none of the reasons cited by the court support the award. The 

court‟s belief “it‟s time to move on,” is not relevant to a determination of the amount of 

restitution to be awarded. Penal Code “[s]ection 1202.4, subdivision (f) provides that, „If 

the amount of loss cannot be ascertained at the time of sentencing, the restitution order 

shall include a provision that the amount shall be determined at the direction of the 

court.‟ Under a reading of the plain language of section 1202.4, if the court cannot 

determine the amount of restitution at the time of sentencing, there is no limitation upon 

when the court must next set a restitution hearing . . . .” (People v. Bufford (2007) 146 

Cal.App.4th 966, 971.) The court could have imposed sentence on defendant and 

continued the restitution hearing if it felt additional evidence was needed to determine the 

amount of SCIF‟s economic loss. 

The third and fourth reasons expressed are also contrary to the applicable 

law as well as irrelevant in determining the amount of restitution. As for SCIF‟s right to 

seek recovery in a civil action, “[w]hether the victim also holds a contractual remedy 

against the defendant is irrelevant for the purposes of determining the defendant‟s 

restitution obligation.” (People v. Busser (2010) 186 Cal.App.4th 1503, 1511; see also 

Q-Soft, Inc. v. Superior Court (2007) 157 Cal.App.4th 441, 447 [“crime victim‟s 

theoretical right to pursue civil remedy against wrongdoer should not be allowed to 

substitute for . . . „constitutional “right to restitution”‟”].) Nor was the imposition of a 

substantial fine pertinent to the award of victim restitution. Penal Code section 1202.4, 

subdivision (a)(3) distinguishes between restitution fines and victim restitution. “The 
29

enactment of discrete subdivisions for the payment of a fine . . . and the payment of 

restitution directly to the victim . . . readily manifests a legislative intent to segregate and 

distinguish a „penalty assessment‟ from „victim restitution.‟” (People v. Boudames

(2006) 146 Cal.App.4th 45, 51 [agreeing “victim restitution is different from and does not 

encompass any statutory monetary penalties to which a defendant may be subject”].) 

Next, the court apparently concluded SCIF contributed to the amount of its 

loss of premiums by failing to cancel defendant‟s policy in 2006 when it first discovered 

the possibility defendant was intentionally underreporting his payroll. In People v. 

Brunette (2011) 194 Cal.App.4th 268 (Brunette), the trial court awarded victim restitution 

to an agency that arranged care for the defendant‟s dogs after he was convicted of animal 

cruelty and neglect even though the agency had previously failed to respond to reports the 

defendant was failing to provide proper animal care. The appellate court rejected the 

defendant‟s request the award be apportioned on the basis of comparative fault principles, 

in part finding, the “[d]efendant‟s lack of care for his dogs . . . in wanton disregard for 

their lives . . . is close enough to the criminal equivalent of an intentional tort to bar 

invoking comparative fault principles.” (Id. at p. 283.) 

In so ruling, Brunette distinguished People v. Millard (2009) 175 

Cal.App.4th 7, which held comparative fault applied to a victim restitution award in a 

felony drunk driving case because that offense required only proof of criminal 

negligence. (Id. at p. 41.) But civil cases have recognized comparative fault principles 

do not apply in cases involving intentional torts. (Thomas v. Duggins Construction Co.

(2006) 139 Cal.App.4th 1105, 1112-1113; Heiner v. Kmart Corp. (2000) 84 

Cal.App.4th 335, 349.) And even Millard acknowledged “„a party who commits 

intentional misconduct should not be entitled to escape responsibility for damages based 

upon the negligence of the victim . . . . [Citations.]‟” (People v. Millard, supra, 175 

Cal.App.4th at p. 38.) This case involves convictions for intentional fraud. Thus, 
30

whether SCIF should have acted sooner to reduce its losses is not a relevant factor in 

determining its right to or the amount of restitution. 

The last ground cited for the trial court‟s ruling was the purported lack of 

credibility of Hogan‟s calculations. As for the second calculation, utilizing a 

“hypothetical „best case‟ model,” we agree the trial court was well within its discretion in 

finding it speculative. “[T]he trier of fact is not required to believe the testimony of any 

witness, even if uncontradicted.” (Bookout v. State of California ex rel. Dept. of 

Transportation (2010) 186 Cal.App.4th 1478, 1487.) 

But the court rejected Hogan‟s first calculation for a different reason. The 

court cited only the fact Hogan employed the highest experience modification rating in 

calculating the unpaid premium, thereby raising the specter defendant “would be 

basically given a penalty assessment and . . . the loss of premiums would be in excess of 

what the actual loss is.” While administrative regulations may have required Hogan to 

apply that factor in calculating defendant‟s premiums, we recognize the court could 

deviate from the regulatory requirements in determining the amount of victim restitution. 

(People v. Akins, supra, 128 Cal.App.4th at p. 1387 [court exercising discretion to 

determine the amount of restitution “may do so according to any rational method that 

could reasonably be said to make the victim whole” and is not circumscribed by “state 

and federal regulations that require [an agency] to calculate the amount of overpayment 

according to a different method”]; see also People v. Hudson (2003) 113 

Cal.App.4th 924, 927-929.) But the court did not otherwise criticize Hogan‟s calculation 

method or the information he relied on to calculate SCIF‟s loss. Further, the court had 

other evidence it could have considered to ameliorate the possibility Hogan‟s calculation 

would result in a penalty. 

Levine‟s second declaration stated “that had [defendant] reported to SCIF, 

and SCIF then passed on to the WICRB all of the payroll that SCIF ultimately used in its 

„Display Bills,‟ the „experience modifications‟ applicable to [defendant‟s] insurance 
31

would have been dramatically lower” and “would have resulted in workers[‟] 

compensation insurance premiums of only about one-third the amount shown on the 

Display Bills.” The Display Bills prepared as part of the final audit determined 

defendant‟s total premium was approximately $34.2 million. Had the trial court applied 

Levine‟s approach concerning the experience modification factor, it could have reduced 

the $34.2 million sum by two-thirds to $11.14 million. Subtracting defendant‟s $1.75 

million premium payments would result in a substantially lower, but nonetheless 

significant loss to SCIF of approximately $9.65 million. 

In issuing its restitution order the court declared “what was not done is to 

take what we know was the truth, go back [to] whatever period of time there was, and for 

somebody to fill in and find out who those workers were, assign . . . whatever 

modification factor it was, and determine what the premium is.” But Penal Code 

“„“[s]ection 1202.4 does not, by its terms, require any particular kind of 

proof. . . .” “„This is so because a hearing to establish the amount of restitution does not 

require the formalities of other phases of a criminal prosecution.‟”‟” (People v. 

Lockwood (2013) 214 Cal.App.4th 91, 96.) 

Further, that is what Hogan attempted to do when performing his first 

calculation. His March 2010 letter gave the following explanation of the method used to 

perform the first calculation: “[T]he assignment of an employee‟s payroll to the correct 

classification depends on the duties of the employee. For payroll that was reported to 

[SCIF] and presented at the time of audit, the assignment is not in question. However, 

for the amounts not reported to [SCIF], those appearing only on EDD reports, the duties 

of the employees needed to be ascertained. While the Commissioner‟s regulations 

require an insurer to assign all unidentified payroll into the highest-rated applicable 

classification, in this case roofing, we have relied on interviews . . . of [defendant‟s] 

office managers. Although [SCIF] is unable to verify the employees‟ job duties 

provided, we are accepting the managers‟ statements as valid. Those employees 
32

identified as engaging solely in carpentry, painting, sheet metal, or office work have been 

reassigned to the proper classifications. To avoid the chance of all but the most 

unreasonable objections, every „benefit of the doubt‟ was given when making these 

assignments.” 

In addition, a more accurate calculation of the actual premiums owed by 

defendant was likely impossible. During the sentencing and restitution hearing, 

defendant testified he frequently was performing 40 to 50 jobs at a time, the work 

frequently involved construction work other than merely constructing or repairing roofs, 

and that he “interchange[d] . . . employees” between his companies on projects, 

“essentially . . . go[ing] from one trade to another trade . . . .” If true, it would be 

extremely difficult to go back through eight years of records and classify the work being 

performed by each employee during each reporting period. 

“The trial court is not required to order restitution equal to the exact amount 

of the loss, but it must employ a rational method that makes the victim reasonably 

whole.” (People v. Garcia (2011) 194 Cal.App.4th 612, 617.) In People v. Hudson, 

supra, 113 Cal.App.4th 924, the trial court refused to award any restitution to a welfare 

agency after it refused to recalculate the amount of reimbursement the defendant owed 

for being overpaid food stamps under a state regulation generally allowing the 

department to disregard a percentage of an applicant‟s income in determining his or her 

entitlement to this benefit. The Court of Appeal reversed. While agreeing the agency‟s 

“belief in the rectitude of [its] position . . . d[id] not entitle [it] to ignore” the trial court‟s 

order (Hudson at p. 929), the appellate court held the trial “court‟s decision bestowed a 

windfall upon the miscreant and failed to comply with the court‟s statutory obligation 

under [Penal Code] section 1202.4, subdivision (f).” (Ibid., fn. omitted.) 

Here, the trial court did award restitution to SCIF. But, by failing to 

consider all of the evidence presented to it concerning restitution and relying on 

irrelevant factors to pick a figure out of thin air that was less than what the jury found to 
33

have been SCIF‟s loss, the court clearly abused its discretion by not “employ[ing] a 

method that is rationally designed to determine the . . . victim‟s economic loss.” (People 

v. Giordano, supra, 42 Cal.4th at pp. 663-664.) Therefore, the victim restitution order 

must be reversed and the matter remanded for a new hearing. 

DISPOSITION

Appellant Michael Vincent Petronella‟s convictions for violating Insurance 

Code section 11880, subdivision (a), the jury‟s true finding on the white collar crime 

enhancement (Pen. Code, § 186.11, subd. (a)(2), and the sentence imposed by the 

superior court are affirmed. The victim restitution award is reversed and the matter 

remanded to the superior court for further proceedings. 

RYLAARSDAM, ACTING P. J.

WE CONCUR:

BEDSWORTH, J.

THOMPSON, J.