Transcript Cover Page with DA Logo - Southern California Fraud

Fundamentals of
Investigating and Prosecuting
Workers Compensation Fraud
Gregory Totten
District Attorney
By
Ernesto Acosta ([email protected])
805.981.5856
Senior Deputy District Attorney
Workers Compensation
Fraud
In California, workers
compensation fraud is
the biggest, single cost
driver for employers—
bar none.
How Did We Get Into
This Mess?
The WC System – The
Original Goal

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
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No tort liability for the employer
No-fault benefits to injured workers
Good for businesses and good for
employees
Prompt delivery of benefits
Safer work environments
Workers Compensation
The Reality




Employees, doctors, lawyers abuse the
system
Claims are sometimes mishandled by the
insurer
System vulnerable to fraud
Increases the cost of doing business for
legitimate businesses
When is Workers
Compensation Triggered?


Employer-Employee Relationship
Injury is work related: arising out of
employment (AOE) or in the course of
employment (COE) (see, LC 3351)
Process After Injury Occurs

Injured employee notifies employer

Employee and employer fill out “DWC-1”
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Employer notifies insurance with “Employer Report
of Occupational Injury”
Process after Injury Occurs

Doctor’s First Report of Injury
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Claimant’s description of injury
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Work Status
Process When Fraud Suspected

Suspected Fraud Claim (SFC)

Demand Letter Labor Code Sec. 1877.3(a)

DCR (Documented Case Referral): “Substantiated
fraud case”

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Clearly describe all the facts showing lie and
materiality of the lie
Don’t summarily conclude that there is fraud
Insurance Code Section
1871.4(a)(1)

It is a crime to make any knowingly
false material statement or
material representation for the
purpose of obtaining
compensation.
Elements
Lie
Materiality
Knowledge
Applicant
fraud
Intent to
Obtain Benefits
Statute of
Limitations
Venue
Materiality
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
People v. Gillard (1997) 57 Cal.App.4th 136.
Important and relevant to a reasonable
insurer’s investigation.
A misrepresentation is material, if it can influence
a determination, even though it does not.
A misrepresentation is material only if it could
effect the outcome of the claim.
Translation: Could lie impact
what Insurance company pays out?

Temporary Total Disability (TTD)
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Permanent Partial Disability (PPD)
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Permanent Total Disability (PTD)
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Medical Costs
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Vocational Rehabilitation
Temporary Total Disability
(TTD)
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Doctor says claimant can’t return to work.
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Weekly or bi-weekly untaxed checks.

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Get TTD checks until determined Permanent and
Stationary (P&S).
P&S=Maximum Medical Improvement (MMI)
Permanent Disability Rating

Either:

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Permanently Totally Disabled: 100%
disability and get medical and payments for life.
Permanently Partially Disabled: Anything
less than 100% disability.
Bottom Line: Big potential payout=incentive
to exaggerate injury.
False Statement
Working while
receiving TTD
LIE
Lie about
Abilities
Prior Injury
Non-Work
Injury
Working while Receiving
TTD
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Simply working while receiving TTD benefits is NOT A
CRIME-----WITHOUT additional proof that:

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Second job involves doing the same type of work +
Lie.
It’s different work, but D is making money + Lies
about work (reduces TTD).
But we use a disclaimer on
TTD Checks!!!!!!!
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IC § 1871.8---Notice to injured workers-----An
insurer or self-insured employer may provide the following notice to
an injured worker on or with a check for temporary disability
benefits:
“Warning: Acceptance of employment with a different
employer that requires the performance of
activities that you have stated that you cannot
perform because of the injury for which you are
receiving temporary disability benefits could
constitute fraud and could result in criminal prosecution.
If convicted, you could lose your rights to workers’
compensation benefits and face imprisonment for up to
five years and a fine of up to fifty thousand ($50,000) or
double the amount of the fraud, whichever is greater.”
Under-Reporting Abilities

Extreme exaggeration.

Surveillance is key.
Surveillance Timing
“BRACKETING”

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Good day vs. Bad day
Time has passed since lie: “miracle
recovery”
Transcript, p. 100
Transcript, p. 102
Lies About Prior Injury
“Apportionment”

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Doctor is mandated to approximate
percentage of permanent disability caused
by other injuries to same body part.
LC 4663
Apportionment
% Caused by
Prior Injury
Injury
(permanent disability)
+
% Caused by
New Injury
ApportionmentThings to Consider
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Materiality: The lie must be about a prior
injury (work-related or not) to the same
body part or region.
Prior injury should not be minor.
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Prior MRI’s of body part.
Lengthy chiropractic or medical treatment of
body part.
Prior WC claim for same body part.
Apportionment (con’t)
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Conclusive presumption that any prior
permanent disability exists at the time of
the subsequent injury-i.e., a lie about this
kind of prior injury is material.
LC 4663 & 4664
Apportionment (con’t)
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Did claimant lie about a prior injury or
simply forget about it?

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How much time passed between prior injury
and the lie?
Was prior injury significant enough that jury will
believe the claimant has not forgotten?
Non-Work Injury

Injury was really not caused in the course
of employment (example: claimant injured
during soccer game).
False Statement-Where?

Deposition: Obtain and read entire transcript.
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Doctors’ reports: Read through all reports.
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Recorded statements made to SIU investigators
(example-School district).
Statements to claims’ adjusters
Patient Questionnaires-always obtain, hidden
gems.
Deposition Issues
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Unsophisticated claimant-apparent lie, but other
questions are answered wrong too.
“I can’t do anything.” But later talks about
gardening, mowing the lawn etc…
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Look at entire context of deposition.
Take note of evasive answers or “explanations” that
may indicate defense at trial.
Deposition Issues
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Q: “Have you ‘worked’ since your injury?”
A: “No.”
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What does “worked” mean. Worked at job where
injured? Or worked doing anything else?
If deposition attorney did not ask a follow-up question
to clear the issue, you may be out of luck.
Translation issues. This is a big-time defense.
Elements
Lie
Materiality
Knowledge
Applicant
fraud
Intent to
Obtain Benefits
Statute of
Limitations
Venue
Specific Intent to
Obtain Benefits

Defendant acted with purpose to obtain or
deny benefits.

Defendant necessarily acts with criminal
intent if she presented information she:

1) knows to be false; and
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2) with the intent that insurance company rely on it.
*People v. Dieguez (2001) 89 Cal.App.4th at 266
Statute of Limitations

Felony: 4 years from date of discovery (P.C.
801.5 and 803).

“Date of Discovery” = Once the victim or law
enforcement has knowledge of facts sufficient
to make a reasonably prudent person suspicious
of fraud, thus putting them on inquiry. (People
v. Zamora (1976) 19 Cal.3d 538 and People v.
Kronemyer (1987) 189 Cal.App.3d 314,330).
Statute of Limitations
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If alleged acts occur over four years from date of
complaint, must file Zamora allegation.
Must allege:
 (1) the date on which the offense was “discovered;”
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(2) how and by whom the offense was “discovered;”
(3) lack of knowledge, both actual or constructive, prior
to the date of “discovery;” and
(4) the reason why the offense was not “discovered”
earlier.
Venue
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Don’t waste time if the case is not venued
in your county.
Send to county with venue.
A WORD (OR TWO) ABOUT
VENUE
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Venue: Venue generally refers to the place,
or vicinage, where a case may be heard.
Take a moment to think
about it.
A WORD (OR TWO) ABOUT
VENUE

Penal Code §781 provides that:
When a public offense is committed in part in one
jurisdictional territory and in part in another, or
the acts or effects thereof constituting or requisite
to the consummation of the offense occur in two
or more jurisdictional territories, the jurisdiction of
such offense is in any competent court within
either jurisdictional territory.
Simply Stated
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Applicant fraud equals:
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A lie;
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That matters; and
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With the intent to get benefits
THE RED FLAGS OF FRAUD
► Prior
claims history
► No health insurance
► Problems with
employer
► Impending lay off
► Recent hire
► Unwitnessed injury
► Delay in reporting
► Delay in treatment
complaints vs.
objective findings
► Missed appointments
► Refusal to participate in
treatment
► Frequently changes
doctors
► Inconsistent information
provided to doctors
► Symptoms increase over
time with no new injury
► Subjective
THE RED FLAGS OF FRAUD
►
Employee gives
questionable
description of
accident.
►
Injury reported on
Monday.
►
Co-workers say claim
is false.
►
Employee continues to
work other job .
► Employee
has financial
or other personal
problems.
► Employee
has a history
of prior claims.
► Employee
has a
preexisting condition.
Other Applicable Crimes
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Perjury: P.C. 118(a) – a Felony (2-3-4)
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Lies and knows it is a lie.
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Lie must be material.
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Taken under oath (must be legal basis requiring
document, including deposition transcript, to
be signed under penalty of perjury).
Perjury (con’t)
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People v. Post (2001) 92 Cal.App.4th
467
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Must be signed for perjury.
If not signed, you can charge
attempted perjury. This is hard to
prove, however.
Penal Code Section 550(a) & (b)
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Knowingly present a false claim for the payment
of a loss or injury including any payment of a
loss or injury under insurance [P.C. 550(a)(1)].
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Judge can’t 17(b), (2-3-5; $50,000 or double the
fraud)
Conceal or knowingly omit facts that may affect
claim benefits [P.C. 550(b)(3)].
AME/QME Reports
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When disputes arise over treating doctor’s:
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Opinions
Issues of Permanent Disability
Future Medical Care
Claimants are sent to an Agreed upon
Medical Examiner (AME) or if can’t agree,
then a Qualified Medical Examiner (QME).
Starting Criminal Investigation
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Send a demand letter to obtain
all records from the insurer.
Read through entire claims file, tabbing
key evidence.
Generate a time line with case summary.
Starting Investigation (con’t)
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Create binder with Material Evidence
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Overview with timeline.
All medical reports in chronological order with key
evidence tabbed (read all medical records).
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Claims adjuster notes with key evidence tabbed.
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Deposition with key evidence tabbed.
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Interview Reports
Develop Investigative Plan
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Discuss key evidentiary issues with
investigator/DDA
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Prepare a plan of attack
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Prepare search/arrest warrant
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STAY IN TOUCH WITH YOUR
INVESTIGATOR!
Reasons for Rejecting
Fraud Referral
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1. Claimant is malingering but makes no
statement.

2. Violating a doctor’s limitations is not
sufficient-----claimant must LIE about it.
Reasons to Reject (continued)
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3. Dueling doctor opinions, even when
there is a lie by the applicant. A jury is
likely to find that the lie is not MATERIAL,
since different doctors place different
weight on the statement.
4. Questions using words subject to
more than one interpretation at
deposition, i.e. “treatment” is not clear.
Reasons to Reject (continued)
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5. Ambivalent answers at deposition;
6. Lack of claimant answers
regarding claimant’s activities/capabilities
“SINCE THE INJURY”, especially by the
QME.
7. Language problems---Make sure this
is NOT an issue, either at deposition or
during a medical examination.
Interpreters will have to testify as to
accurate interpretation.
Reasons to Reject (continued)
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8. General “complaints” of pain are
insufficient evidence of malingering and/or
criminal fraud.
9. Failure to disclose information to some,
but not all doctors;
10. Applicant makes a non-material
misrepresentation of identity --Applicant’s lie about identity doesn’t meet
the Gillard standard of materiality.
EDUCATING THE COURT
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Preliminary hearing or trial brief
Witness list (for trial brief)
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Special Jury Instructions
1871.4 I.C. (NOT IN CALCRIM)
 Materiality-Gillard
 Specific Intent-Diegez
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Law which supports jury instructions.
In Limine Issues (for trial brief)
DON’T ALLOW
INVESTIGATIONS TO BECOME
STALE
TALK TO PROSECUTORS
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Call and discuss potential cases
Tell us what you have
Tell us what you think the case is all about
Ask us what evidence we need to have in
order to make a filing decision
WHAT WE DON’T
WANT TO SEE
REMEMBER
THIS IS A TEAM EFFORT
THE TEAM APPROACH
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Employers are the first line of defense
against WC fraud
Claims adjusters spot red flags
SIUs unearth key information and present
the case for prosecution
Defense attorneys fine tune evidence
We can best fight fraud by working
together
CONCLUSION
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Fighting WC is Important
Reduces the cost of doing business for
California employers so they don’t have to
move to another state
Benefits consumers
Benefits legitimate claimants
Restores faith in the system
Puts away the bad guys
Contact Information
Ernesto J. Acosta
Sr. Deputy District Attorney
Ventura County District Attorney’s Office
5720 Ralston Street – Suite 300
Ventura, CA 93003
805.662.1702
[email protected]
THE END
Next: Case Study
Fundamentals of Investigating
and Prosecuting Applicant
Fraud
CASE STUDY
PEOPLE v. NORMAN ANDERSON
Ventura County Superior Court
Case No: 2004022843
Meet Defendant
Norman Anderson
PEOPLE v. NORMAN ANDERSON
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Count One: August 1, 2002 – violation of
Insurance Code Sec. 1871.4(a)(1)
Count Two: June 2, 2002 - violation of
Insurance Code Sec. 1871.4(a)(1)
Count Three: December 18, 2002 –
violation of Insurance Code Sec. 1871.4(a)(1).
Count Four: February 2, 2003 – violation of
Insurance Code Sec. 1871.4(a)(1).
ANDERSON FLEES THE
JURISDICTION
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Complaint filed in Ventura Superior Court
on June 16, 2004
Arraignment set for July 2, 2004
Defendant is a “no-show” for his
arraignment
A search warrant is issued for Anderson’s
arrest
Where is Anderson?
SAILING….
OFF TO HAWAII
WHAT DID ANDERSON DO



?
LIED
ABOUT THE EXTENT AND NATURE
OF HIS INJURIES…
Oh what a tangled web we weave
when we first practice to deceive…
- Sir Walter Scott
WHAT WERE SOME OF
ANDERSON’S LIES?
1. He was limited to how much work he could do;
2. He could only work at “half speed;”
3. He had to be VERY careful when gripping tools
like a screwdriver or pliers; and
4. He could turn a screw driver only “real easy” - if
there was any stress he had to switch hands.
WHO SAID THAT ANDERSON
WAS LYING?
Ms. Emily Huynh, Claims Adjuster for Mutual
Signal
Dr. James T. London, M.D. defense exam doctor
Dr. Arthur Harris, M.D. the AME doctor
Ms. Joyce Gill, vocational rehab expert.
WHY DID ANDERSON’S
LIES MATTER?

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The lies related to a material fact.
The lies were knowingly made.
The lies were made for the purpose of
obtaining WC benefits.
ANDERSON’S LIES WERE
MATERIAL
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Ms. Huyhn – Ordered surveillance and then
after viewing tape began proceedings to deny
claim.
Dr. London – Viewed tape and stated applicant
could go back to do same work.
Dr. Brenner – Viewed tape and stated
applicant could go back to do same work.
Ms. Gill – Viewed tapes and determined
applicant could return to same job.
ANDERSON’S LIES WERE
KNOWINGLY MADE
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Anderson told insurance investigator ALL the
things that he couldn’t do
Anderson told doctors ALL the things that he
couldn’t do
Anderson told the deposition attorney ALL the
things that he couldn’t do
Anderson told the vocational rehabilitation
expert ALL the things he couldn’t do
BUT … Anderson knew he could do all
those things because we saw him doing
them on tape!
MR. ANDERSON LIES
WERE KNOWINGLY MADE
LIES WERE FOR THE PURPOSE OF
OBTAINING WC BENEFITS

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Defendant received
Over $35,000.00 in wages benefits
In a period of over 12 months