Attorneys and Cappers Charged in Workers’ Compensation Scheme

California has taken many steps in recent years to help curtail workers’ compensation fraud.  On June 5, 2017, charges were filed against 16 people in an enormous workers’ compensation insurance referral scheme.  California law prohibits individuals or businesses from getting clients (a practice also referred to as “capping”) for attorneys or law offices.  The law also prohibits attorneys from paying cappers for client referrals, and also prohibits copy service companies from offering any consideration to attorneys in exchange for business referrals.  The penal code also prohibits conspiring to illegally referring or paying for clients as well as hiding capping from an insurance company in order to obtain benefits.  The Orange County District Attorney’s Office investigated this case for three years before bringing these charges.

In this case, Carlos Arguello III is accused of forming an “advertising” company in 2005 and securing illegal referral contracts with up to forty other workers’ compensation and personal injury attorneys.  Mr. Aguello is also accused of creating contracts that specified a monthly fee to be paid by these other attorneys in exchange for delivering a specified number of clients each month.  These “advertising” contracts targeted the Hispanic community.  The contracts also required these attorneys to use other companies he owned together with Edgar Gonzalez, which included copy companies.  Several others are accused of capping for Mr. Arguello and Mr. Gonzalez, and distributed flyers and business cards to predominantly Hispanic neighborhoods.  Once a potential client called and showed interest, a capper would be dispatched to the client’s home to have him or her sign important documents, including a retainer agreement, without ever meeting with an attorney.  The documents would then be sent to the subscribing attorney, without any input from that attorney.  The attorneys involved in the scheme are accused of allowing cappers to order, prepare, and submit documents on their behalf without any oversight.  Medical providers are also under investigation for paying for patients recruited by cappers, as well as prescribing medication and medical equipment from companies chosen by the cappers.

The charges include multiple felony counts of conspiring to refer clients for compensation, referring patients/clients with reckless disregard for commission of fraud, and insurance fraud.  The sentencing enhancements involved include aggravated white collar crime over $500,000 and loss of over $1.3 million.  Ten attorneys and six cappers have been charged.  Mr. Arguello faces a maximum of 29 years and eight months in prison, while Mr. Gonzalez faces a possible 20 years and eight months in prison.

Workers’ compensation fraud is a serious problem, and the State is combating it every day.  If you have questions about workers’ compensation and your business, contact me today at (714) 516-8188 to discuss them.

Technology and Fraud Defense

In recent years, the state of California has devoted a lot of manpower and legislation to combatting workers’ compensation fraud.  This type of fraud costs the tax payers millions of dollars, and it is important to root it out whenever possible.  Employers should also be vigilant in their attempts to recognize, report, and combat fraud.  With the advancement of technology and the pervasive presence of social media in most Americans’ lives, these can be used by employers as an effective tool to help spot and prove workers’ compensation fraud.

Wearable technology has become very popular and many people choose to use these in their personal lives.  Fitbits and other step counters provide the wearers not only with information about steps taken, but some of the more advanced models also provide information about calories burned, heart rate, and sleep patterns.  This information is in turn typically reported and stored in an app on the user’s smart phone.  If an employee is reporting an inability to walk or perform vigorous physical activity, obtaining the history recorded by the employee’s fitness tracker during discovery could be an excellent way to demonstrate that he or she is not actually as injured as he or she claims.

Social media can also provide important insight.  People often tend to “over share” on their profiles, discussing work outs, medical appointments, and vacations.  All of this information can be compiled through discovery and used to show that while an employee may be claiming to be unable to walk comfortably, he or she “checked-in” at a 5K the weekend before.

In addition to worker fraud, provider fraud can also be better detected using technology.  Using data analytics, insurance firms and law enforcement can detect certain red flags such as “cookie cutter” treatments being prescribed for every patient, a high incidence of drug prescriptions, and treatment regimens that are not consistent with the type or severity of a worker’s injury.  A worker may not be aware at all of this sort of fraud, and without using technology to obtain a better overall understanding of a provider’s patterns of treatment, this type of fraud would be much more difficult to detect.

Fraud is a very serious problem in workers’ compensation, and employers should take steps to make sure that fraud is not occurring in their cases.  Call us today at (714) 516-8188 and let us help you make a plan to deal with fraud and talk about how to identify it and defend against it.

AB 1244

The workers’ compensation system is instrumental for both employees and employers.  For employees, it creates a no-fault system wherein an employee may receive compensation for a work-related injury without having to prove that the injury is the fault of the employer.  For employers it creates a system wherein the employer is protected from most tort claims.  The system is crucial to the way our employer-employee relationship and law functions.  Unfortunately, there are some that seek to exploit the system for their own financial gains.  The state of California has made many efforts in recent years to combat growing fraud that exists in the workers’ compensation system.  One of these efforts may be seen in Assembly Bill 1244.

On January 1, 2017, AB 1244 went into effect.  Under AB 1244, the administrative director would be required to immediately suspend certain physicians or medical providers from participating in the workers’ compensation system under certain circumstances.  Providers who have been indicted for a felony or misdemeanor involving fraud or abuse of the workers’ compensation system, the Medi-Cal program, or Medicare shall be suspended from participating in the workers’ compensation system.  These medical providers or physicians would also not be allowed to file liens for any treatment provided to the injured workers.  The California Department of Health Care Services also maintains a “Medi-Cal Suspended and Ineligible Provider List” which contains doctors, nurses, pharmacies, chiropractors, and medical equipment vendors who are not permitted to participate in the workers’ compensation system due to a previous fraud conviction. 

Other providers who are not currently suspended also need to be aware of the suspended providers list.  Certain actions taken by providers who are not currently suspended could lead to that provider also landing on the list.  Actions such as a pharmacy filling a prescription and then billing for the medication if prescribed by a suspended physician, providers billing for treatment prescribed by a suspended physician, or a clinic employment and submitting claims for treatment rendered by a suspended physician could all end up with a suspension for the previously not-suspended provider.

The law is constantly changing, and it is essential that your business is up-to-date on the latest developments. Call me today at (714) 516-8188 for an appointment to discuss your business’s future and the way it may be impacted by the new laws

Hotel Cleaning Firm Charged with Workers’ Compensation Fraud

There have been many recent attempts and moves by California lawmakers to crack down on workers’ compensation fraud. Harsher penalties, new investigatory bodies, and restrictions on who may participate in the workers’ compensation medical system are all examples of recent and important steps that legislators have taken to reduce fraud and its attendant burden on the California legal system and tax payers. Fraud can come in many forms, including failure to report all of the employees to insurance carriers. In 2015, a case occurred which really highlights the fact that addressing fraud is an essential goal for California lawmakers.

In this case, a married couple, the Kwons, owned a business called Good Neighbor Services. The business had offices in San Francisco, Santa Barbara, Los Angeles, Orange County, San Diego, as well as in Nevada and Georgia. The company was engaged in providing cleaning services to big-name hotels, such as the Ritz, Omni, Marriott, and Sheraton. However, the Kwons were not following the requirements of California workers’ compensation law. They were accused of concealing the existence of at least 800 employees. The purpose of this law was not only to avoid paying payroll taxes, but also to avoid carrying workers’ compensation insurance for all these people. They were further accused of threatening to fire any employee who was injured on the job. The grand jury ultimately indicted both of them, and they faced up to thirty one years in prison if convicted of all of the charges.

At the end of December 2015, the husband of the team pleaded guilty to seven felonies. These included insurance premium fraud, tax fraud, as well as involvement in a scheme that was constructed to avoid paying premiums and employment taxes. He stipulated to serving an eight year prison sentence, and also to paying restitution in excess of five million dollars.

In December 2016, Ms. Kwon also pleaded guilty. She pleaded guilty to two counts of premium fraud and two counts of employment tax fraud. Her prison sentence was four years and eight months. She also had to pay restitution in excess of five million dollars. This restitution went to both insurance carriers and the Employment Development Department.


Workers’ compensation fraud is a serious crime and carries justifiably heavy penalties. If you are an employer and have questions about your obligations under California law, call me today at (714) 516-8188. We can discuss your business and your future.

Potential Employer Penalties for Fraud

California law requires that all employers (with a few exceptions) maintain workers’ compensation insurance.  The purpose is to make sure that any employee who sustains a work-related injury will be fairly compensated.  In recent years, the California legislature has recognized that fraud in the workers’ compensation system is an enormous problem, and is costing tax-payers and voters dearly.  Penalties for fraud for both employees and employers can be severe.  It is important to understand what penalties an employer could face if he or she is found to have committed fraud in the workers’ compensation system.

First, it is important to understand that fraud is a criminal act.  Fraud in this context is a person that receives, accepts, offers, or delivers benefits he or she is not entitled to may be guilty of fraud.  These benefits may be in several forms, including commissions, refunds, preferential treatment, discounts, or other profit.  The penalty could be a fine of up to $10,000 and incarceration for up to a year.  These fines and jail sentences may all stack up, resulting in fines that can easily run into the six figures.  Moreover, some employers convicted of certain types of fraud, such as insurance premium fraud, could find their information publically published on the California Department of Insurance website.

Fraud can include several different acts for an employer.  These could include making false representations to the workers’ compensation insurance company, done with the intention of obtaining cheaper insurance coverage.  It could also include presenting false information with the intention of denying benefits to an employee with a work-related injury.  A third way it could occur would be to knowingly aid someone in engaging in fraud.  An example of that could be sending referrals to a medical provider the employer knows will be engaging in some sort of medical provider fraud.  Other common examples of employer fraud would be misreporting payroll or underreporting the number of employees.

Anyone who believes that fraud is occurring must report this suspicion to the DWC.  The reporting individual is not liable for defamation or slander suits, as long as the report is made with a good faith belief that fraud is actually occurring, and acts without malice.  The purpose of this is to make sure that fraud does not go unreported simply because the reporter is concerned about potential civil liability in the form of a lawsuit.

Workers’ compensation fraud can result in serious and sometimes ruinous consequences.  If you have questions about fraud and workers’ compensation, contact us today at (714) 252-7078 to discuss your business and how to protect it.

Cracking Down on Workers’ Compensation Fraud

Fraud in the workers’ compensation is increasingly becoming a major concern for both employers and law makers alike.  Recent measures have been taken to crack down on fraud in the workers’ compensation market, especially from the perspective of fraudulent services provided by the medical providers.  California has a $24 billion dollar workers’ compensation system, and this proves too great a temptation to unethical doctors and those looking to profit off of other people’s injuries.

One particularly notorious case involved Michael Drobot, a former hospital executive.  He was the subject of a half a billion dollar kickback structure that involved doctors, health care executives, and a lawyer.  The scheme involved receiving kickbacks for sending patients to surgery and to receive unnecessary tests and medication.  Drobot eventually pled guilty to criminal charges involving bribery, including bribing a state lawmaker to keep open a loophole that would allow medical providers to continue charging insurance companies very high rates for particular spinal hardware.  These and other examples of fraud reaching all the way up to the California state government has prompted action in the state legislature.

One measure is aimed at helping to clear court dockets from the overwhelming amount of liens filed against workers’ compensation claims.  Between 2011 and 2015, over $600 million dollars in liens were filed against such claims.  SB 1160 adds requirements to the filing and pursuing of these liens to make sure the liens are legitimate, and also that if the person filing the lien is charged with certain crimes, the collection of the lien is stayed until the criminal proceeding is over.  Beginning January 1, 2017, those filing liens were required to also file an accompanying affidavit swearing that he or she was eligible to file the lien.

Another measure is AB 1244.  This would require that any medical provider involved in the workers’ compensation field is suspended from participation if he or she is convicted of fraud.  The hope is that this law will exclude those medical providers and doctors who have participated in fraudulent schemes in the past from continuing to perpetrate the crimes on injured workers.

Fraud in the workers’ compensation system is a serious problem, and legislators are taking steps to crack down on fraudulent activities.  If you have questions about workers’ compensation fraud or how the new laws may impact your business, contact me today at (714) 252-7078 for an appointment.

Typical Ways Fraud Occurs in Workers’ Compensation Claims

Workers’ compensation is a good and necessary system to provide an important safety net to workers who have sustained a work-related injury. Unfortunately, it can also provide a potential target for dishonest people trying to “work the system.”  There are some typical ways that scammers will try to perpetrate fraud, and you and your business need to be alert.

The most common type of scam will be a fake claim of injury. This will work in a number of ways. One way is for a worker to allege that previously sustained injury is actually a work-related injury.  This may also come in the form of a worker sustaining an injury off the job but then claiming the injury happened on the job. Examining old medical records during the case can give clues to whether a worker has previously received treatment for his or her injuries, and the importance of this step cannot be understated. Dishonest workers may also straight out fake an injury. Some injuries are easier to fake than others, such as back and neck muscle injuries. Because these injuries are more difficult to disprove than, say, a broken bone, it is easier for a dishonest person to fake an injury. For this reason, expert testimony may become a key element of your case to defend your business from false claims. Malingering is another type of common fraud. This means when a worker who may have received a valid work-related injury, pretends to be disabled despite actually being healed and able to return to work.

Unfortunately, other participants in the workers’ compensation system may also be part of the fraud. Dishonest doctors or clinics will sometimes try to pad their bill. This typically comes in two forms: inflated injuries or non-existent injuries. A dishonest medical provider may exaggerate the seriousness of an injury and bill for extra, unnecessary procedures in order to receive additional payments from insurance companies.

Dishonest business owners will also sometimes commit fraud by illegally reducing the amount of insurance premiums they owe. They will do this by falsely classifying jobs as safer than they are or lying about the number of employees they have. This affects all insurance premiums, even for honest business owners, as the cost of fraud is passed on to other insurance clients in the form of higher premiums.

If you believe that fraud may be involved in your workers’ compensation case, call me today at (714) 516-8188. We can talk about your case and examine the risks and possibility for fraud.

Fraud and the Fraud Assessment Commission

Fraud in workers’ compensation cases can come in many forms. It can come from workers faking injuries, malingering, falsely reporting the source or severity of an injury, or a variety of other systems. In addition, employers or even medical providers may be involved in perpetrating fraud. In recognition of how damaging fraud can be to both employers and employees, as well as the state at large, California created the Workers’ Compensation Fraud Program in 1991. The legislation also created the Fraud Assessment Commission.

The Fraud Assessment Commission was created to help apportion funding. Its purpose is to allocate funds to fraud prosecutors across the state of California. Members of the FAC are appointed by the governor of California. The members serve for four years, or until the governor decides to appoint a replacement. Currently the FAC is made up of seven members. Four represent self-insurers, insured employers, and workers’ compensation insurers. Two represent organized labor. The final member is the President of the State Compensation Insurance Fund, who is granted permanent membership. The FAC meets 3-4 times a year in Sacramento. The FAC is also responsible for creating methods of funding so that prosecution of fraud can continue. Insurers are required to report potential fraud to the proper authorities, and insurance fraud is a felony in California.

The funding for the Workers’ Compensation Fraud Program that is ultimately apportioned by the FAC comes from California employers. During 2014-15, the fraud division found and reported almost 6,000 cases of suspected fraud, and 240 arrests were made with 197 cases referred to prosecutors. The potential loss came to the total of $277,032,462.

District Attorneys also have a Workers’ Compensation Program. In 2014-15, they were responsible for 740 arrests, and prosecuted over 1,400 cases, resulting in over 700 convictions. Over $32,000,000 was ordered in restitution. The total amount of chargeable fraud was almost $650,000,000. Unfortunately this represents only a small amount of the fraud that actually occurs. As should be clear from this brief explanation and these statistics, investigation into fraud is essential to helping to protect the working people of California from further financial damage.

I have extensive experience dealing with cases involving fraud. If you believe your business is being faced with a workers’ compensation claim that may be fraudulent, contact me today at (714) 516-8188 to talk about your options.

Data Analytics and Workers’ Compensation

Worker’s compensation and its attendant insurance system is complicated, with many factors going into insurance premiums as well as underwriting. Data analytics is a system that is used by some workers’ compensation insurance companies to further their goals of speeding the conclusion of claims, reducing fraud, and accurately projecting risk from certain industries or businesses. “Data analytics” is simply the process of compiling and examining certain sets of data in order to draw conclusions out of that information and data.

An insurance underwriter’s job is to help reduce the risk to their employers. Because medical costs are on the rise, the underwriters must now develop more effective methods to improve their risk selections. If an underwriter’s only source of information is from the insurance agent and from the business purchasing insurance, risk reduction will be a difficult task. Data analytics can help the underwriter more accurately gauge the risk from a particular business by pulling together such data as how long the business has been around, credit scores, financial stability, OSHA violations, and safety reports.

Data analytics will also provide the opportunity for “predictive modeling,” which is a process that allows an underwriter to test the probability of a particular outcome. An underwriter can look at a business’s past and identify particular trends and patterns. Looking at a business’s pattern of violations and fines can help with this. For example, if a business is fined for a violation, the business may decide that it is cheaper to just pay the fine repeatedly instead of actually fixing the problem. Looking at this pattern of infractions can help predict a future of work-related injuries.

Medical provider fraud is also a target of data analytics, as well as recent legislation. Some computer programs have been developed to help identify and stop fraud. One area where fraud is often seen in these cases is for a provider to bill for additional services that were never provided to an injured worker. Through data analytics, it is possible to project how long a course of treatment should reasonably be taking, such as procedure time or types of procedures, and then identify where a provider may be fraudulently overbilling.

Data analytics and projecting costs and risks can impact your business’s workers’ compensation insurance. Call me today at (714) 516-8188 and let me help your business and its workers’ compensation claims process.

Social Media and Workers’ Compensation Claims

Social media connects many people all across the world. Across the globe, there are nearly 2 billion monthly active Facebook users, with 300 million photos being uploaded each day. With such an enormous base, Facebook and other social media platforms such as Twitter, Instagram, or Flickr, can be incredibly useful tools when discussing workers’ compensation fraud.

Using social media for surveillance in workers’ compensation claims is a common and valuable strategy for detecting fraud. If you have a employee claiming a work-related injury that you believe may be fraudulent, it is certainly worth the time to take a look at their social media accounts.

If your employee is claiming a debilitating injury, you should be on the look out for activities that are inconsistent with their claimed injury. Look for vigorous exercise, intense yard work, or contact sports. In one case in 2014, an employee who was claiming to have a work-related injury posted bowling scores to his social media accounts. Further investigation revealed video surveillance of the employee bowling. This evidence was in direct contradiction of his testimony that he was not able to bowl since his injury. Ultimately the investigation revealed a number of other misrepresentations he had made to his doctors and his activity level. He was eventually charged with insurance fraud, and had to pay back his workers’ compensation benefits.

Regular “check ins” at the gym can be good evidence. Be cautious, however, as some injuries will require physical therapy, so indications that your employee is exercising does not automatically mean the claim is fraudulent. If you believe you have found evidence of fraud, you should turn over this evidence to your lawyer. He or she will know how to handle the fraud. Do not immediately confront your employee yourself, just allow your attorney to handle the situation.

Social media posts can be used as evidence at trial, so they should be saved if they may show evidence of fraud. Taking screen shots and saving these is a fast and easy way to preserve the evidence. Do not assume that the posts will be there at a later time, as the employee could delete the post at any time. It is better to create and maintain your own copy.

If you believe you may be a victim of fraud, contact me today at (714) 516-8188. We can review your case and your evidence and discuss your best next steps.

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