Couple charged with $38 million insurance scheme

She wanted to become one of the "Real Housewives of Orange County."

But Orange County District Attorney Tony Rackauckas Thursday dubbed a scheme "The Real Insurance Fraud of Orange County" because a Laguna Hills woman and her husband are charged with committing a state record $38 million workers' compensation insurance fraud through roofing companies they owned in Costa Mesa and Cathedral City.

Michael Vincent Petronella, 50, and Devon Lynn Kile, 44, were arrested at their Laguna Hills mansion and charged with 106 felony counts including insurance fraud, grand theft and filing false tax returns.

A jury commissioner, Cheryl Leninger, set bail for Petronella and Kile at $3 million apiece and scheduled their arraignment for May 13.

Leninger appointed a public defender for Kile because she has no access to money since prosecutors seized all of the couple's business and personal assets at the time of their arrest.

Joe Angelo, an attorney for Petronella who has known the couple for a decade, said outside court that both defendants intend to plead not guilty and that both should be able to raise money for bail in the next day or two despite the loss of their assets.

"We'll come up with the money," he said. "They have nothing to hide."

According to Rackauckas, the couple is accused of skirting workers' compensation payments by under-reporting the number of employees working for their roofing companies and by discouraging their workers from filing claims. Instead of paying for their employees' insurance, taxes and other costs, Rackauckas said, the couple lived a life of luxury.

Investigators provided video of the couple's home, showing exotic cars in the driveway, a stone-lined swimming pool, closets stocked with boxes of designer shoes and wads of cash taken from a safe.

Among the luxury items seized by investigators at the couple's home:

• $500,000 in jewels, including Chopard and Rolex watches and a 10-carat diamond ring valued at $70,000.

•Gucci, Chanel, Burberry and other luxury-brand handbags and shoes.

•Two Ferraris, a Bentley and a Range Rover.

Investigators also found a copy of an application Kile filed to become a cast member on the "Real Housewives of Orange County" television show. A spokeswoman for the reality TV series did not return a call seeking comment.

"The 'Real Citizens of Orange County' are struggling to keep their houses, put food on the table and pay for necessities," Rackauckas said. "This husband and wife team was living a lavish lifestyle. How? By committing more than $38 million in premium insurance fraud and not paying their taxes."

Angelo said he was surprised that prosecutors depicted Petronella and Kile as high livers, noting that the couple has two children ages 11 and 14 and has lived quietly in Orange County for decades.

"They're not rich people," Angelo said. "They own a roofing company. It's a nice house, but not Newport Coast."

He also said it would seem out of character for Kile to apply for the Real Housewives.

"They're much simpler folks than that," Angelo said.

Kile and Petronella wore jail uniforms to their bail hearing, confined to a cage at the side of the courtroom, forced to confer with attorneys through a wire mesh. Kile sniffled several times, as if crying.

Among a display of the couple's jewels and handbags at a press conference, prosecutors also perched a copy of a 2001 article from Orange Coast magazine about the pair headlined "Office Romances." The article said Kile joined Petronella's company in 1992 when he was in "in the throes of financial difficulties."

"Michael sees how Devon has turned the company around and leaves the finances to her, while Devon is in awe of Michael's ability to create magnificent roofs," the article said.

State Insurance Commissioner Steve Poizner said the scheme created an unfair competitive business advantage for Petronella and Kyle while driving up insurance rates for legitimate businesses.

He noted that the state Workers Compensation Insurance Rating Bureau recently recommended a 24 percent average increase in workers' compensation premiums, citing rising costs of medical treatment and other services for injured workers.

"I want to keep rates as affordable as possible," said Poizner, who is also a Republican candidate for governor in 2010.