Capo Fraudsters Ordered to Pay $5.4 Million

A San Juan Capistrano couple was ordered this week to pay $5.4 million in restitution after pleading guilty to more than 90 counts of insurance fraud.

James Joseph Klinger, 64, and Dorothy Louise Klinger, 64, however, will dodge a five-year state prison sentence if they successfully complete 10 years of probation.

According to prosecutor Debbie Jackson, the Klingers have already paid back $500,000.

"There’s a lot of extenuating circumstances in this case" that affected the sentencing, said Jackson, who declined to provide specifics. 

The husband and wife co-owned two local businesses, Modern Tree Service Inc. and Jamo’s Gardening. 

Prosecutors say they found the Klingers were using revenue from Modern Tree Services to pay almost all of Jamo's Gardening expenses, including payroll, after a 2009 audit by the State Compensation Insurance Fund.

"The defendants fraudulently classified Jamo's Gardening as a landscape gardening business instead of a tree-trimming business, allowing them to insure tree-trimmers as gardeners to substantially lower the insurance premiums," a District Attorney spokeswoman said in a statement.

According to the D.A., the Klingers committed $2 million in fraud, totaling $3.4 million including penalties and interest.

On Monday, they pleaded guilty:

• 29 counts of misrepresenting facts to State Compensation Insurance Fund
• 28 counts of failing to file a return with intent to evade tax
• 28 counts of willful failure to pay taxes
• Five felony counts of misrepresenting facts to a workers' compensation insurance company
• Sentencing enhancements for loss over $100,000 and taking involving more than $500,000.

Joseph Klinger was convicted of an additional 11 felony counts each of filing false tax returns and willful failure to file or make fraudulent tax returns. Dorothy Klinger was convicted of an additional seven felony counts each of filing false tax returns and willful failure to file or make fraudulent tax returns.