Seattle couple pleads guilty in storm-damage insurance scheme

The owners of a Seattle construction company have pleaded guilty to attempted theft for an insurance-billing scheme based on inflated storm-cleanup bills.

James and Cheryl-Lin Philo pleaded guilty March 25th in King County Superior Court to two counts of second-degree attempted theft. In addition, their company, Philo Construction Co., of Seattle, is guilty of one count of first-degree theft.

An investigation by Insurance Commissioner's Mike Kreidler's anti-fraud unit found dozens of cases of apparent fraudulent billing by the company.

Here's what happened: In December 2006, a major windstorm swept across Washington, knocking down trees and causing substantial damage to a numerous homes. The Philos hired subcontractors to remove many of those trees from customers’ homes.


In March 2007, a former employee contacted our office, saying that Philo was submitting inflated invoices to insurers. Other workers provided information as well.

An investigation by the agency’s Special Investigations Unit, working with more than 15 insurance companies, found that the Philos had been asking their subcontractors for two invoices for each job. The Philos paid the subcontractors the smaller amount, and then submitted the larger invoice to their customers’ insurance companies for reimbursement.

The markup averaged close to 30 percent, plus another 20 percent that insurers allow for profit and overhead. For example, a $2,150 bill from a tree service company was reported to the insurer as a $2,795 job. Once profit, overhead and sales tax were added, the Philos were paid a total of $3,649.

The Philos also created a fictitious company, Pro Line Construction Resources, to act as a subcontractor when they needed to support a particularly high estimate.

The Philos were each assessed a $500 victim penalty assessment. They'll also pay restitution totalling $19,849.15, and $220 in court costs.