A retired San Jose Police officer with a side security business pleaded no contest to $1.13 million in insurance fraud, $18 million in money laundering to cover it up, tax evasion, and worker exploitation.

Robert Foster, 48, of Morgan Hill, pleaded no contest on Jan. 14 to a series of felony fraud charges and will be sentenced to three years in county jail and two years of mandatory supervision. Foster will repay $1.13 million to Everest National Insurance and the Employment Development Department.

“Exploitation takes a massive toll on workers," said District Attorney Jeff Rosen. "Our office does not tolerate the victimization of workers and will prosecute those responsible - no matter who they are.”

According to a press release from the district attorney, Foster owns Atlas Private Security (now Genesis Private Security) with his wife, Mikaila Foster, 46, who also pleaded no contest to a variety of related fraud charges. She will be sentenced to one year in county jail and five years of probation.

The investigation found that the Fosters illegally reduced their insurance premiums and taxes by reporting false and inaccurate payroll, underreporting headcount, paying employees "off the books" and underreporting employee injuries.

In addition, the Fosters failed to pay employees overtime and dissuaded those employees from accurately reporting on-the-job injuries and wage-theft violations.

The former officer owned the business without the knowledge of the San Jose Police Department, according to Rosen’s statement.

Robert Foster is to  be sentenced on Feb. 25. Mikaila Foster is to be sentenced April 29..

The six-month investigation was spearheaded by the Santa Clara County District Attorney’s Office Bureau of Investigation in close collaboration with the California Department of Insurance, Employment Development Department, Department of Justice, and the Department of Labor.

The Fosters illegally reduced their insurance premiums and taxes by reporting false and inaccurate payroll, underreporting headcount, paying employees off-the-books, and underreporting employee injuries. The Fosters failed to pay employees overtime and dissuaded those employees from accurately reporting on-the-job injuries and wage-theft violations.

In one instance, an “off-the-books” security guard suffered severe injuries during a crash while driving an Atlas security vehicle, said the press release. Robert Foster responded to the guard’s $1 million medical bill by telling the insurance company that the guard was not an Atlas employee. Investigators found records showing that the guard was driving an Atlas vehicle and wearing an Atlas uniform at the time of the collision.

The probe also uncovered that the Fosters allegedly hid millions of dollars of payroll through a complex subcontractor masking scheme. Employees were paid by a different security company, which had no knowledge of the employees’ hours, wages, or schedules.  Instead, the other company simply moved money from the Fosters’ firm to the employees so that the Fosters could avoid paying their fair share of taxes, workers’ compensation insurance, and overtime wages.

Bay City News contributed to this report.