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.