Premium Fraud and AA Buffet

Fraud in the workers’ compensation system comes in many forms. It can come from employees, medical providers, and even employers. All types of fraud have a detrimental impact not only on those directly impacted by the case but also on the entire system at large. Fraud costs tax payers millions of dollars and can drive insurance premiums for workers’ compensation even higher. As a result, California takes steps to crack down on fraud, including from employers. Workers’ compensation fraud involving employers can mean that the employer is lying about the nature or number of its workers or about the nature of the work performed. In a March 2017 case, an employer pled guilty to charges arising out of workers’ compensation fraud.

The defendant, Chang Tai Lin, was the owner of AA Buffet. In May 2015, the fraud unit began an investigation into the defendant’s business after receiving a tip from the district attorney. The fraud unit began conducting surveillance, obtaining documents from the police department, health department, insurance companies, and other state agencies. In March 2016, a search warrant was executed not only on the AA Buffet but also at the defendant’s home. As a result of the investigation, it was discovered that from April 2010 through April 2016, the defendant had been underreporting the number of employees working at AA Buffet as well as falsely reporting payroll wages, as he actually paid many of his employees in cash. It was also discovered that the defendant had been committing tax evasion from October 2010 through April 2016 because he failed to accurately report employee wages or payroll taxes to the Employment Development Department. After the investigation, the defendant pled guilty to two counts of making a material misrepresentation in order to obtain a workers’ compensation insurance premium as well as one count of willfully failing to file payroll tax returns with intent to evade tax. Employers are required to accurately report the number of employees to their workers’ compensation insurance company. Failure to accurately disclose the workers or the type of work performed by the company can clearly result in harsh penalties, including both fines and jail time, for offending business owners. It is essential that employers understand and live up to their disclosure obligations to their insurance carriers.

Understanding your insurance obligations is essential to making sure you and your business are not running afoul of the law. Call me today at (714) 516-8188 if you wish to  discuss your business’s obligations.

Fraud and People v. Snow

The State of California has taken many steps in recent years and legislative sessions to lessen the amount of fraud perpetrated in the workers’ compensation system. During the fiscal year of 2015-2016, the California Fraud Division reported over 5,300 cases of suspected workers’ compensation fraud and made 249 arrests. Although the vast majority of employees who sustain a work-related injury have valid claims, there are some unfortunate cases when the employee is defrauding his or her employee. When this happens, employees may face criminal prosecution under a variety of legal theories.

In People v. Snow, the employee faced a number of repercussions for her fraudulent behavior. In that case, the defendant worked at Trader Joe’s stocking shelves, gathering shopping carts from the parking lot, customer service, and other similar tasks. The defendant made a claim for workers’ compensation claiming that her wrist hurt and she had sustained injury from repetitive action required in performing her job duties. The defendant’s claim was approved for three months of disability benefits. After the defendant returned to work, she claimed on her first day back to have injured her back while bringing three shopping carts in from the parking lot. Although she was later cleared to return to work, she did not do so, and instead sought treatment from a new doctor, claiming she had pain while doing household tasks such as laundry, dishes, and driving – claims she repeated during a deposition. The supervisory claims adjustor determined the second claim required further investigation and hired a private investigator. The investigator observed her at the beach, lifting a paddleboard from the roof of her SUV and carrying it and the paddle approximately 150 feet to the beach. After paddleboarding for approximately 45 minutes, the defendant returned to shore and carried the paddleboard and paddle back to the SUV and strapped the on the roof herself. Nevertheless, the defendant persisted in telling her doctors she could not lift things over her shoulder or stand for prolonged periods of time, which she repeated during depositions. Ultimately, the defendant was charged with perjury after the video of the defendant at the beach completely undermined her claim of disability. Thereafter, the defendant was charged not only with insurance fraud but also with perjury based on statements made at depositions concerning her second workers’ compensation claim. She was ultimately convicted of two counts of perjury as well as three counts of making false or fraudulent statements to obtain workers’ compensation benefits. Although the defendant then appealed her conviction claiming that this violated her right against double jeopardy as the convictions were based on the same incidents, the court disagreed and affirmed her convictions.

Workers’ compensation fraud is a serious problem and you should take all steps to protect your business. Contact me today at (714) 516-8188 if you wish to discuss fraud and protect your  business.

Psychiatrist Fraud in Workers’ Compensation Cases

The workers’ compensation system is designed to cover a large variety of work-related injuries. These injuries could range in type from a broken finger to repetitive stress injury to psychiatric injury. Unfortunately, some types of injuries are more likely to be a source of a fraudulent claim or unnecessary treatment, such as soft tissue injuries. Psychiatric injuries can also be a source of fraud, both in the case of the injured worker and the psychiatrist.

One red flag for fraud on the part of the psychiatrist is a very short amount of time spent with the patient. A real psychiatric assessment should take no less than a couple of hours. A quick “in and out” could be a red flag that the psychiatrist is simply trying to move the patients through without providing actual care or careful diagnoses

Another red flag could be a lack of using common and accepted diagnostic tools. For example, there are widely used and accepted tests to look for malingering. A psychiatrist in a workers’ compensation case should be on the look-out for malingering, and a failure to attempt or recognize this type of fraudulent behavior on the part of the patient could be a sign of fraudulent behavior on the part of the psychiatrist.

Finally, employers should be on the look-out for the type of assessments and also that a differential diagnosis actually demonstrates a disability. Although a diagnosis of psychiatric injury absolutely can result in temporary or permanent disability, this is not always the case. Employers need to be vigilant for a situation wherein a worker has a psychiatric injury diagnosis that may be long term but still is very high functioning.

California has been cracking down on fraud and taking steps to end fraud both on the part of workers and medical providers. In a recent case, a psychiatrist named Jason Hui-Tek Yang was suspended from participating in the workers’ compensation system after he was convicted for involvement in an insurance fraud conspiracy. The conspiracy involved referring patients for unnecessary treatment in order to bill the workers’ compensation system. It was determined that Yang had over 2,000 active liens worth over $13,000,000.

Fraud in the workers’ compensation system can come in many forms. If you have questions about how to protect your business, call me today at (714) 516-8188. We can discuss your business and what we need to do to make sure you are protected.

Protecting Your Business From Malingerers

Workers’ compensation fraud is a very real problem in California.  Fraud on the part of providers, employees, and even employers costs the taxpayers of the state of California millions of dollars each year.  The legislature has taken bold steps in recent years to help with the issue of fraud, and district attorneys are becoming more aggressive in their efforts to prosecute fraudulent claims.  As a business owner, you should not only be aware of the laws surrounding workers’ compensation fraud, but also know some red flags for fraud and be on the look-out.  One type of abuse of the workers’ compensation system can be seen in malingering.  Malingering in this context means that an employee is either exaggerating or completely faking an injury in order to obtain or extend workers’ compensation benefits.  As you can imagine, this can result in large costs to your business by requiring your business to pay out benefits for a fake or exaggerated work-related injury.

 

One way to protect your business against malingering is to conduct careful written discovery.  Through discovery requests, you can obtain a copy of your employee’s medical documents involved in the treatment of his or her claimed work-related injury.  You will want to carefully review this documentation, sometimes with the assistance of a health care professional, in order to determine if the type of injury matches up with the medical probability that the injury would be as severe as is claimed by the injured employee.  If you see that the employee is changing medical providers with a high degree of frequency, this is often a red flag for malingering, as malingerers will tend to change doctors once a doctor starts to catch on that the injury is not as severe as the employee claims.  The employee wants to avoid a doctor putting in a medical report that he or she believes the employee is not being truthful or is exaggerating.

 

Keeping a watch on social media and other social aspects of an employee’s off duty activities can also provide important clues.  You will want to keep an eye out to see if the employee’s claimed disability is in conformity with the activities he or she engages in while not at work.  For example, if your employee is claiming a knee injury but is still running marathons on the weekend, it is an indication that he or she may be malingering.  If your employee has not yet returned to work, if he or she is difficult to reach, it is another sign.  If he or she is truly injured, he or she will probably be often at home and easy to find by phone.

 

If you have questions about your business and how to protect it from malingerers and other forms of workers’ compensation fraud, call me today at (714) 516-8188.  I am experienced in helping my clients protect their businesses against these issues.

Questioning An Employee’s Medical Documentation

The vast majority of employees who file claims in the workers’ compensation system have a legitimate work-related injury and are entitled to compensation for that injury under the provisions of California law.  Even though the majority of claims are completely valid and compensable, employers should still be wary, as workers’ compensation fraud is a real problem, as can be seen by the recent efforts by the legislature, law enforcement, and district attorneys to legislate and prosecute fraud.  Employers should understand some common areas of fraud and how an employee’s medical documentation may relate to these areas in order to help protect the businesses from these risks.

Medical documentation of the injury is naturally an essential place for an employer to start.  An employer should carefully review the medical documentation surrounding the diagnosis and treatment of the injury to ensure it is consistent with the account provided to the employer at the time of injury.  Inconsistencies do not automatically mean the injury is fraudulent, but it is a definite red flag.  Once the medical provider determines the type of disability and the percentage of disability, if applicable, an employer should seriously consider requesting an “independent medical review.”  An independent medical review is a specific process within the workers’ compensation system which allows for a doctor who is not the same doctor who diagnoses and treats the employee to review the records and make an independent determination as to the type of disability and other pertinent medical issues.

An employer should also be on the look-out for pre-existing injuries mentioned in medical documentation.  Note that an employee may not be forthcoming with a physician treating him or her in the context of workers’ compensation about any pre-existing injuries.  For example, if an employee has sustained a knee injury during work, he may not tell the treating doctor about the knee injury he sustained two years ago while playing football.  Due to this possibility, an employer should always conduct discovery to inquire after previous medical records.  An employer should carefully review the medical records received during the discovery process to determine if there are pre-existing conditions that should be apportioned, thereby reducing the workers’ compensation award accordingly.

 

If you have questions about medical records in a workers’ compensation case, contact us today at (714) 516-8188We will discuss your case and what you need to look for to protect your business from fraud. 

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.

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