WCDefenseCA

This week, the California Labor Commissioner announced the launch of the Criminal Investigation Unit which will “investigate employers who perpetrate wage theft and other criminal activities against workers.”

Detecting lawbreakers and bringing them to justice is a worthy pursuit, of course, but aren’t there already law enforcement agencies who perform this very work?  And isn’t the nature of this sort of crime easily reported by workers?

These resources should instead be used to detect and prosecute frauds who fake injuries or impairments, and the “medical” facilities enabling them, billing for procedures never performed and over-billing for those actually done.

At present, it seems that employers must bear all the costs of investigating fraud, not only detecting it but also gather sufficient evidence to prove the fraud beyond a reasonable doubt, before local law enforcement will take over.

Certainly, this new unit will accomplish some good, but so long as its focus is the hunt of employers for real or imagined infractions, it will also serve as a vehicle for disgruntled employees to harass their employers with false reports and expensive litigation.  Hopefully, the maiden voyage of this unit will not signal a chill in the water for California’s employers.

California owes some of its prosperity to Man’s never-ending search for gold.  The process of mining gold, from a complex company operation to one gritty solo prospector, reminds many Californians of our own collection and adopted heritage.

So what separates Stephen Eugene Harder of Woodland from these brave gold hunters who pierced the Earth with their gaze and their mining equipment?  Well, Curly the Gold Miner probably never filed a workers’ compensation claim, and also didn’t claim disability in between swings of his pickaxe.

Harder was arrested after footage was obtained of his engaging in, among other things, gold mining activities.  Before any confusion ensues and a possible libel action arises, Mr. Harder was NOT caught in an effort to marry a wealthy, significantly older, spouse in the hopes of a profitable divorce.  This is the old-fashioned type of gold-digging that includes retrieving precious metals from the Earth.

The Yolo County District Attorney’s Office scored a conviction of five counts of workers’ compensation fraud.  Sentencing is scheduled for March 23.

While WCDefenseCA thanks Mr. Harder for keeping California’s gold-mining heritage alive, a much bigger (and considerably less sarcastic) salute goes to Yolo County District Attorney’s Office.

On Tuesday, your blogger expressed sympathy in reporting the town of Isleton, California, which lost its police department because it could not afford workers’ compensation insurance.  Today, that same blogger reports with outrage the stories coming out of Bell, California.

Bell, California, made news some time ago when it was discovered that its city officials were looting the public treasury, voting for high salaries for themselves at the expense of the city’s tax payers.  The city became even more (in)famous after being mentioned by this (someday will be) widely-read blog.

As the L.A. Times reports, “[m]ore than half of the disability retirements awarded to police officers under former Bell City Administrator Robert Rizzo – including those given to three police chiefs – should not have been granted, and workers’ compensation settlements for 13 officers were ‘exceedingly large.’”

Bell, which is self-insured for workers’ compensation, pays the extra awards out of its own withering pockets.

Bureaucracy allows these cases to fall through the cracks, and local governments such as cities and counties must be especially careful to make sure undeserved workers’ compensation awards are not handed out as a bonus or going-away present to law enforcement officers.

But the same rule applies to private self-insured employers and insurance companies as well – it not uncommon for employees to attempt to pad their retirement accounts with un-taxable workers’ compensation pay-outs on the way out the door.

When the citizens of Isleton ask why they can not have a police department, perhaps the citizens of Bell can provide them with an answer.

No one likes a double-dipper, as your humble blogger’s oft-referenced show clearly pointed out.  Workers’ compensation, in particular, suffers double-dippers not at all!  A Redlands man is being charged with just that – not soiling the salsa or contaminating the punch, but working while receiving disability benefits.

Andres Gonzalez, according to InstantRiverside.com, is being charged with collecting disability benefits after (allegedly) sustaining an injury while working for a small business, while, at the same time, working as a self-employed gardener.  It appears that Mr. Gonzalez may have “misrepresented his abilities to work and to perform certain tasks.”

Mr. Gonzalez was arrested and is out on $50,000 bail.  The arraignment is scheduled for March 1.

As your ever-justice-thirsty blogger has remarked in the past, these fraud cases are a lose-lose for the law-abiding citizenry.  By the time of the arrest, a fraudster will have already spent his or her money, or, in the alternative, use that money to fund his or her criminal defense.  In either case, that employers, insurers, and law enforcement budgets will never see that money restored.  Usually, a substantial portion of jail time is given away in exchange for a tiny portion of the money in restitution.

Hopefully, when fraudsters file claims in the future, past fraud convictions can be used to shut them out.

As always, I wish the San Bernardino County District Attorney’s Office good hunting in catching these folks and pulling the ticks out of the sides of employers and insurers.

Will Mr. Gonzalez’s employer still see an increase in its workers’ compensation insurance premiums, if the injury turns out to be a fraud?  Does anyone know?  Just curios:  gregory@grinberglawoffice.com.

The world of California Workers’ Compensation can seem like a rollercoaster ride sometimes.  The ups and downs, the twists and spins, and the feeling of gratitude when you get out alive.  For some applicants, however, the relationship between rollercoasters and workers’ compensation is a different one.

April Metzinger of La Puente, pled guilty to charges of insurance fraud after private investigators hired by her employer recorded video of her riding rollercoasters at Disneyland, among other activities that would be at odds with her workers’ compensation claims and deposition testimony.

Metzinger was arrested, and, as part of her plea deal, paid $5,000 in restitution, served two days in jail (credited from before the plea deal), and fined $100.

Meanwhile, the school district that was her employer no doubt already paid more than $5,000 on this claim, let alone its administration and investigation.  The people of Los Angeles County probably paid more than $5,000 in the arrest, detention, and prosecution of this case alone.

Given the fact that this fraudster was a teacher, the lesson learned by her students is not one on which your modest blogger dares to set a price tag.

I understand the difficulty in prosecuting these cases – video is sometimes not enough, and the District Attorney probably has bigger problems to deal with.  But unless we step up punishment of such cases, and, more importantly, recovery for the employers and insurers, the disincentives of workers’ comp fraud a too little to do the job.

Dear readers, please, don’t let me be misunderstood – by no means is your determined and fearless blogger suggesting that the lack of recovery in fraud cases justifies turning a blind eye or allowing frauds such as Ms. Metzinger to go unpunished.  But I am suggesting that the sad fact of life is that loss due to fraud, whether the cost of deterrence or the damage of attrition, is a cost that is not going away and must be factored into employer budgets.  Ultimately, this higher cost finds its way to grocery bills and price tags, and all the fair citizens of California end up paying the price.

A recent article from the Los Angeles Times makes the futile effort of communicating hope to legitimate businesses still in California regarding the government’s intentions towards illegal activity.

“State officials” are apparently promising to crack down on employers who pay their employees in cash to avoid “payroll taxes, workers’ compensation insurance and other government mandates.”  Christine Baker, Acting (at least until the California State Senate approves her appointment) Director of the Department of Industrial Relations (you can watch the two-hour long hearing here), testified that her department is using software to try to catch cheats.

The article has quotes from legitimate businessmen, who naturally and reasonably complain of the lack of a level playing field – they compete with businesses who avoid many of the costs that should equally fall on all industry participants, and then those illegal practices are reflected in lower costs than those offered by honest businesses.

Despite being your loyal blogger and a workers’ compensation defense attorney, I still enjoy my rights as a citizen, so I ask this question of our government – do you not see the writing on the wall?

We have employer after employer leaving the state, and then employer after employer going underground (to the tune of $7 billion lost annually in tax revenue).  Does that not tell you that employers are overburdened with payroll taxes, government mandates, and especially workers’ compensation costs?

Workers’ compensation simply costs too much – it costs too much to fight the frivolous claims made by many applicants and their attorneys, it costs too much to deal with prescription-heavy and scruple free medical lien-claimants, it costs too much to appeal the applicant-friendly and law-hostile rulings made by many of the Workers’ Compensation Judges, and it costs too much to pay the hyper-generous benefits applicants enjoy in this state.

Of course law-breaking should be prevented and deterred, but must the law make law-breaking so lucrative for employers?

There is a solution to this underground economy, and it doesn’t have to be driving business out of California.  The legislature needs to understand the burdens they pile onto the employers in California and fix this before it is too late.

The case of City of Redondo Beach v. Workers’ Compensation Appeals Board is not a recent one, but when it was brought to the attention of your humble blogger, the Law and Order music started to play and a post was deemed absolutely necessary.

Applicant Gene Tomatani apparently has three exciting accomplishments in his life (no doubt there are others as well).  The first is to serve as President of the Police Officers Association; the second is to embezzle money from the association; and the third is to file a workers’ compensation claim.

An Agreed Medical Evaluator found that applicant’s left ventricular hypertrophy and hypertension predated applicant’s criminal activity of embezzling over $72,000 from the Police Officers Association.  Therefore, as per the AME’s apportionment analysis, the injury is 2/3rd industrial.

At trial, the Workers’ Compensation Judge found that applicant had sustained an industrial injury, that he had an impairment rating of 52%, and that no apportionment was appropriate.  Now comes the interesting part – applicant was questioned regarding the extent of his criminal activity, and he plead the 5th Amendment.

The WCJ ruled that, as there were still other charges that could be brought against applicant, even though he had already plead guilty to one of them, applicant retained his right to not testify regarding the extent of his criminal activity.

Neither the Workers’ Compensation Appeals Board nor the Court of Appeal were inclined to disturb the ruling that so clearly rewarded the stress of embezzlement with workers’ compensation benefits.

Although it may seem naïve, perhaps the appropriate thing for the defense to do in this situation was to contact the district attorney’s office from the start of the case, and determine a joint course of action.  As a citizen, I would like to think that the activities of a cheating, lying, thieving police officer would be at the top of the DA’s list – public trust in law enforcement is a fragile creature, after all.  If the DA’s office is not going to pursue additional charges, there should be some affirmative statement to that effect which could be presented at the Board.

In any case be forewarned that, even in the murky world of California’s workers’ compensation law, the 5th Amendment right against self-incrimination appears to be alive and well.

Think back to all the lessons you learned when you had your own lemonade stand, and apply them to the following business model.  Step 1) defraud the State of California to the tune of $30 million; Step 2) get caught; Step 3) pay back a few million, give up $500,000 in jewels, plea to 10 years of probation; Step 4) Profit!

This is the approach taken by Devon Lynn Kile, who recently was convicted of running one of the larger California workers’ compensation fraud schemes, at least according to a few news sources, including ClaimsJournal and OCWeekly.

Kile, who, coincidentally, had previously applied to be one of the “Real Housewives of Orange County“, was convicted of 72 felony counts of variations of fraud, including the under-reporting of income and payroll.  As part of her plea deal, she will pay back $1.3 million to Employment Development Department, $1.5 million to the Franchise Tax Board, and some amount not yet determined to State Compensation Insurance Fund.

Kile was sentenced to ten years in prison, suspended for 10 years of probation.  If she is a model citizen, living off whatever remains of her ill-gotten goods, she will escape justice.

All-in-all, a profitable venture – your disappointed blogger applauds the Orange County District Attorney’s office for its investigation and prosecution of this case, but would have liked to see all the money returned before serving actual prison time was taken off the table.

Some time ago I blogged about Sim Hoffman & Company, accused of committing vast amounts of fraud by billing for services never rendered to applicants and other schemes.

It appears that although Justice is coming, it is riding the California High Speed rail and thus taking its sweet time.

The case has been continued again, this time delaying the arraignment until January 6, 2012, according to adjuster.com

There are plenty of defendants out there who still have active liens from Advanced Professional Imaging and Better Sleeping Medical Center who need some sort of decision from the criminal fraud aspect of this case before they can decided whether they should pay or not.

In any case, dear readers, hopefully when Justice does deal with this case, it will be to the benefit of the workers’ compensation defense community.

As always, when I know more, so will you.

Recently, the Contractors State License Board’s Statewide Investigative Fraud Team performed a two-day sting operation, in which agents posed as homeowners and solicited bids. According to the CSLB’s press release, the result was over 100 people caught violating the law in various ways, including not carrying workers’ compensation insurance for their employees.

On the surface, this might appear relatively harmless, but it isn’t. Even though the injured employee could go after his uninsured employer, there lies an additional danger to the home-owner. Part of the requirement of being a licensed contractor in the state is having workers’ compensation insurance for your employees. When the contractor is underinsured or has obtained workers’ compensation insurance through fraud, he stops being a licensed contractor.

So the nice gentleman you hired to put his crew to work fixing your house is, suddenly and without your knowledge, your employee. And his employees have become your employees too. Now, in the unfortunate event of one of the workers sustaining an injury on the job, YOU are the uninsured, on-the-hook employer.

In other words, this isn’t some government annoyance like the shaking down of an “unlicensed” lemonade stand. This type of insurance fraud carries very serious and direct consequences for ordinary consumers, one which can not be spread around as a cost of doing business.