John and Camille Applegate, former spouses who remained business partners in Hallmark Roofing, were sentenced today in San Mateo County Superior Court to five years probation and eight months of county jail for their roles in insurance fraud and workers' compensation fraud schemes.
The eight-month jail sentence for each defendant will be served split between the county work furlough program and house arrest.
In addition, each defendant must continue to pay restitution to the State Compensation Insurance Fund and Employment Development Department.
for failing to report employee wages and not paying workers' compensation premiums from 2007-2011. On July 31, they pleaded nolo contendre (no contest) to the eight felony counts.
A forensic audit by the state Department of Insurance determined the Applegates did not pay hundreds of thousands of dollars in insurance premiums, allowing their company to make lower bids on projects than their competitors.
The couple also failed to file tax returns in both 2010 and 2011, according to the district attorney’s office.
Superior Court Judge Mark Forcum implemented a lighter sentence than the seven years imprisonment originally requested by the district attorney's office. Before imposing the sentences, Forcum listened to both Applegates' attorneys' accounts of their community service and good deeds the couple had done over the years for friends.
Charles J. Smith, attorney for John Applegate asked for the court's leniency on the sentencing, suggesting electronic monitoring or the sheriff's work program in lieu of jail time.
"Mr. and Mrs. Applegate continue to operate their business and the only chance the two of them have to pay restitution and the taxes owed would be to keep running their business."
Smith noted that neither defendant used the money for personal expenses or items, but to try and keep their business afloat.
Camille Applegate's attorney Michael P. Devoy told the judge that although his client was not the dominant figure in the scheme, she sold her house to make restitution payments.
"Because of the Applegate's background and desire to make restitution, we are asking for the court to consider something other than county jail," said Devoy.
A file, which was not available at Tuesday's hearing, contained letters of support of the Applegates and Judge Forcum referred to it while considering the sentencing.
"The losses in this case are significant, but the community support and the good things you have done over the years for the community plus your lack of a prior record offsets the magnitude of this," Forcum told the Applegates.
Forcum noted that the Applegates did not personally profit from the scheme, yet the loss to employees and the effects on business competition was significant.
Deputy district attorney Sharon Henry reminded Forcum of the impact the fraud had on the employees of Hallmark Roofing, in addition to the money lost to the state.
"One important fact is that the Applegates were deceiving their employees as well, said Henry.
"They withheld money from employees' paychecks, leaving the employees thinking their money was going to paying taxes," Henry added.
After hearing from both defense attorneys, the deputy district attorney and John and Camille Applegate, Forcum sentenced each defendant to five years probation and eight months in San Mateo County Jail. The jail sentence will be broken down into 120 days in the work furlough program and 120 days under house arrest.
Under the terms of probation, the couple must abstain alcohol and drugs, submit to chemical testing, search and seizure, and counseling.
In addition, they must pay restitution in the amount of $629,391.10 to the State Compensation Insurance Fund and $146,236.08 to the Employment Development Department (they have made $200,000 restitution so far).
The Applegates are to begin their sentences on January 19.