Former Murrieta-Based Contractor Sentenced for Fraud

A local contractor who once had offices in Murrieta was sentenced to seven years in prison Friday for defrauding the state to the tune of $3 million by not paying workers' compensation and unemployment insurance premiums on hundreds of employees.

Steven Morales, 65, of Wildomar was convicted Sept. 21 of three counts of workers' comp fraud and one count each of tax evasion and perjury in connection with a three-year scheme, in which he and his son intentionally concealed payroll information collected by the California Economic Development Department.

Morales could have faced a maximum of 17 years behind bars, but Riverside County Superior Court Judge Michael Donner imposed low- or mid-term sentences for each felony, owing to the defendant's lack of criminal history.

Morales will be eligible for parole in three years.

His son, Brian Todd Morales, 44, pleaded guilty in the same case nearly three years ago, and in April 2010, was sentenced to four years in prison.

According to the Riverside County District Attorney's Office, the EDD uncovered evidence in 2008 that the defendants were not paying workers' comp insurance on upwards of 400 employees at two firms run by the father and son—Shelby Development and Shelby Framing.

An investigation revealed that the defendants were under-reporting the number of individuals on their payroll—or weren't reporting any at all—in addition to not reporting workplace injuries, prosecutors said.

According to the D.A.'s office, the estimated loss to the State Compensation Insurance Fund was $1.7 million, along with a $1 million loss to the EDD, a $300,000 loss to Granite State Insurance and a $170,000 loss to the California Contractors' Network.