SAN DIEGO -- A dozen workers with a large roofing company based in Escondido pleaded not guilty Thursday to what District Attorney Bonnie Dumanis called the largest insurance premium fraud in county history, and one of the largest in state history.

Paul Frederick Mayer and David Gordon Archer, owners of Mayer Roofing, were charged with allegedly scamming a state workers' compensation program out of nearly $4.5 million.

Mayer, whose company works in new home construction all over Southern California, declined comment after his arraignment Thursday afternoon in a downtown San Diego courtroom.

His attorney, Howard Frank, said his client was "ready to proceed with the case."

"We are looking forward to responding to the charges in the courtroom," Frank said after the brief hearing.

Archer's attorney, Michael Attanasio, said his client "looks forward to his day in court."

The two owners and 10 of their staffers at the company are accused of creating false records that enabled them to pay $4.45 million less in workers' compensation insurance premiums than required by law. The alleged fraud took place between 2001 and 2003.

The company owners and high-level executives and managers are accused of reporting to their insurance company that almost all of the company's 450 workers were managers or high-level employees, as opposed to rank-and-file roofers who face daily on-the-job dangers.

Managers are less likely to be hurt on the job than roofers, making their workers' compensation premiums far lower, said Deputy District Attorney Ernie Marugg, who is prosecuting the case.

On Thursday, Marugg told the judge that the accused owners were "spearheading a conspiracy to violate workers' compensation laws."

District Attorney Dumanis likened the scam to a car owner telling his insurance company that he drives a 20-year-old clunker when he really drives a brand new car, a lie created for the purpose of getting lower insurance premiums.

The 12 defendants are each charged with one count of conspiracy and three counts of insurance fraud. Each faces up to 17 years in prison if convicted.

Each must be formally arrested by March 19 and will be immediately released on their own recognizance, Superior Court Judge Jeffrey Fraser ordered Thursday.

Mayer, 52, and Archer, 62, live in Escondido. The other roofing company employees who face charges include James Arthur Wiese, 53; Robert Gomez Del Real, 51; Armando Jasso, 52; and Laura Elena Caballero, 36; all of whom are Escondido residents.

Others include Robert Osuna, 38, of Fallbrook; Judy Kay Toledo, 50, of Vista; Mark Daniel McMahon, 46, of Newhall; Richard Glen Hart, 48, of Hemet; Martin Jeffrey Stout, 45, of Riverside and Blake Carlos Harrison, 45, of Temecula.

Marugg said the fraud charges would not affect any company workers injured on the job, including a man who fell off a roof at a construction site in San Diego County and is now a quadriplegic.

But the alleged fraud allowed Mayer Roofing to underbid competitors, cheating other companies out of fair shots at getting roofing contracts with new-home builders. Most of Mayer's business is in the area of new home construction, Marugg said.

Donna Gallagher, a program manager with the State Insurance Compensation Fund, the government agency that insured Mayer's company, said that the ability to underbid competitors and win jobs was probably the point behind the alleged fraud.

"This is just speculation, but my guess is that would be their whole purpose in doing this," Gallagher said.

Marugg said investigators were tipped off to the alleged fraud after an audit by the State Insurance Compensation Fund showed that the majority of workers in a typical roofing company were rank-and-file construction workers, not managers.

The prosecutor said that the roofing company's offices were raided on Dec. 8, 2004. There have been 15 search warrants served in all, he said.

Investigators seized 45 computers and pored over 187 boxes of paperwork taken as evidence.

The grand jury handed up its indictment against the defendants on Feb. 9, some 14 months after investigators first searched the company's offices.

Marugg said the company, which has been headquartered in Escondido since Mayer and Archer founded it in 1993, remains in operation.

Mayer Roofing, according to the company Web site, has offices in Riverside and San Fernando Valley, and also serves the communities of Ventura, Lancaster and Bakersfield.

Frank, Mayer's attorney, also said the company remains in operation "and will continue" to do so. The company principals are still running the business, he said.

The accused workers include many high-level company officers. Among them is Wiese, who was promoted to company president last summer to run the day-to-day operations.

According to the company's July 2005 newsletter, Mayer Roofing was tapped to install roofing tile for a makeover of a Redlands home for the television program "Extreme Makeover Home Edition." The 12 defendants are due back in court for a status conference April 6.

Contact staff writer Teri Figueroa at (760) 631-6624 or tfigueroa@nctimes.com.