In what has become a yearly tradition, here are the 2015 top 10 workers’ compensation fraud cases, provided by guest author and respected colleague Professor Leonard Jernigan, from The Jernigan Law Firm in North Carolina.

At the time of year when many state legislative bodies are pushing forward in their work representing citizens and talk of “workers’ compensation reform” continues, this blog post focuses on one of the many misconceptions in workers’ compensation. This misconception is that fraud is rampant, and somehow workers plan to hurt themselves or are intentional about it because they’re “in it for the money,” which seems to actually be fairly rare.

This also appears to have been an exceptional year for fraud, with the total in the blog post compiled as $849,500,000. Yes, that’s almost $850 million in workers’ compensation fraud, all of which was found in only five states, with California coming in first with six instances of fraud.

As you can see by both the quantity and dollar value, of his top 10 fraud cases, non-employee cases are dominant over worker fraud, and the dollar cost is quite large for the nine non-employee cases. In the seven years total that Professor Jernigan has compiled the lists, the larger economic fraud of non-workers involved in the workers’ compensation system is dominant in a 67-3 margin.

Based on this information, I would strongly encourage those who are pushing “reform” of the system to avoid limiting treatment access to workers and instead focus on cleaning up the other players, as a start.

Each of the examples affected real people and their loved ones. Fraud against workers tends to be on a much grander scale, and though it has been mentioned in previous blog posts, it is worth saying again that it’s the workers and taxpayers who are on the hook when it comes to situations that include overbilling, workers’ compensation scams, and employers not carrying workers’ compensation insurance. It can be tragic to workers and their loved ones if an employee gets hurt and the employer was cutting costs by not carrying workers’ compensation insurance. Without this safety net, when injured, workers often default to their personal health insurance (if they have any) or rely on the taxpayer-funded safety net, which shifts the cost burden from the businesses involved to the greater society of responsible taxpayers.

Legitimate business owners who pay for workers’ compensation, as required by law, are at a competitive disadvantage with those who cheat the system, and when people suffer a workplace disability and have no insurance local businesses that provide goods and services feel the pain along with health care providers who cannot get properly paid for their services. The cost of medical care and disability ends up being shifted to the taxpayer through Social Security, Medicare and Medicaid, and in states where compliance is not vigorously enforced or business are allowed to opt out of the workers’ compensation system, a culture of cheating and/or lack of transparency continues.

It is unfortunate that this article is necessary, but I appreciate the important work Mr. Jernigan does to compile these fraud cases each year. It makes for very interesting reading and reminds folks that fraud occurs on both sides of the workers’ compensation debate, though not nearly as much by workers’ as people think.

Here are the links to previous years’ posts, which were published in 2015, 2014, and 2013, so they include cases that were compiled regarding 2014, 2013, and 2012, with the post below being 2015’s edition.

• $97 Million In Fraud: 2012’s Top 10 Workers’ Compensation Fraud Cases 2012 TOTAL: $97,446,500
• $46 Million Stolen: 2013’s Top Ten Workers’ Compensation Fraud Cases 2013 TOTAL: $46,562,492
• 2014 Top Ten Workers’ Compensation Fraud Cases 2014 TOTAL: $75,326,000

I hope that you have a safe and productive 2016.

	Number	Value
Non-Employee Fraud Cases	9	$	848,000,000
Employee Fraud Cases	1	$	1,500,000
Total		$	849,500,000

The top six of our top ten fraud cases of 2015 are from California, a perennial offender. The other four cases are from New York, Washington, Utah, and Massachusetts. As we continue to discover each year, non-employee fraud cases dominated the list. This year’s dollar amounts were particularly large, with nearly $850 million in total frauds. The largest fraud was a $580 million kickback scheme out of southern California. Authorities have begun to enforce the law against companies who have misclassified their workers and we expect to see a continued increase in these enforcement actions, both against our traditional offenders and against some of the sharing economy companies who are now the subject of multiple lawsuits.

1. (California) Surgeons and Owner of Hospital Charged In $580M Kickback Scheme (11/26/15)

Five people have been criminally charged for their involvement in a medical kickback scheme that defrauded the California workers’ compensation system and insurance companies of $580 million over eight years. Two of the five charged were surgeons and one was a former owner of Pacific Hospital. The scheme benefited doctors and chiropractors who referred their patients to two Southern California hospitals for thousands of operations.

 

2. (California) FedEx Settles Misclassification Case For $228 Million (6/16/15) FedEx has agreed to pay $228 million to resolve claims by 2,300 FedEx Ground pickup and delivery drivers in California. FedEx was labeling drivers as independent contractors in order to avoid the costs of trucks, branded uniforms, scanners, fuel, maintenance of the trucks, insurance and much more. Drivers were also not paid for missed meals, rest periods, or overtime compensation.

 

3. (California) Spanish Translators Caught in $24 Million Workers’ Compensation Fraud Case (12/17/15) The owners of G&G Translation services and over 200 of their employees fraudulently billed $24.6 million in workers’ compensation cases for services never rendered.  For example, one bill was for $422,000 for translation services by a translator who was actually in prison at the time. G&G obtained a list of patients who needed translation services at medical facilities and used those names to submit bills to large self-insured employers.

 

4. (California) Sewing Subcontractors Charged With Running $11 Million Dollar Workers’ Comp Insurance Fraud Scheme (4/16/15)

Two CEOs of a sewing company were arrested on April 15, 2015 for conspiring with their CPA, Jae Kim, to underreport $78.5 million in payroll to multiple insurers. They were arrested on 18 felony counts of workers’ compensation insurance fraud totaling more than $11 million in losses.

 

5. (California) Truck Drivers Awarded More Than $2 Million Due To Misclassification By Employer (2/3/15)

Pacer Cartage, Inc. (one of the largest port trucking companies in the U.S.) owes $2,026,483 to seven truckers due to “unlawful payroll deductions and expenses as part of a wage theft scheme” by the company. The employees were incorrectly classified as “contract laborers” who were forced to lease their trucks by their employer, and the employer avoided paying workers’ compensation premiums. Their leases were deducted from their paychecks, and the employees were not allowed to use the trucks for any other business purpose or drive them home.

 

6. (California) NFL Player and Gallagher Bassett Adjuster Plead Guilty to Wire Fraud & Filing False Workers’ Comp Claims for $1.5 Million (10/1/15)

Claims Adjuster Kimberly Jones filed fraudulent workers’ compensation claims on behalf of former NFL player Marcus Buckley between 2001 and 2011. In 2006 Buckley filed a workers’ compensation claim that was settled for $300,000 in 2010. After the case was settled, Buckley and Jones filed numerous requests for reimbursement under Buckley’s closed cases providing fictitious invoices, statements and credit bills. Buckley received more than $1.5 million.

 

7. (New York) Plumbing and Heating Contractors Settle for $1.4 Million(4/21/15) Four Long Island City plumbing and heating contractors misclassified and underpaid a total of 300 employees. At least 25 employees were misclassified as independent contractors, several hundred were not paid overtime, and the companies’ recordkeeping did not meet the Fair Labor Standards Act requirements. The companies settled out of court when the Wage and Hour Division’s New York City District Office investigated and litigation began for a total of $710,000 in back wages to cover September 2010-April 2014 and damages for 300 employees equaling $1.42 million dollars.

 

8. (Washington) Drywall Contractor in Walla Walla Must Pay More Than $1 Million in Workers’ Compensation Premiums and Penalties (4/17/15) Shawn A. Campbell and his wife were held personally liable for over $1 million in unpaid premiums, interest and late penalties for their company. Campbell listed his employees as co-owners in order to avoid paying workers’ compensation premiums.

 

9. (Utah) Construction Company to Pay $700,000 for Misclassification Scheme (5/1/15) CSG Workforce Partners (a.k.a. Universal Contracting, LLC and later as Arizona Tract/Arizona CLA) required their workers to classify themselves as “members/owners” which limited their legal rights and gave them no minimum wage guarantee, no time-and-a-half overtime pay, no workers’ compensation insurance and no unemployment insurance. When the employers found out that the state of Utah was investigating, they packed-up and left for Arizona. However, they were tracked down and charged $600,000 in back wages to employees as well as $100,000 for their willful violations of employment laws.

10. (Massachusetts) Roofing Business Owners Indicted for Workers’ Comp Fraud Totaling $615,000 (3/25/15) Two business owners allegedly failed to accurately report their payroll and underreported earnings in order to be granted lower insurance premiums in three roofing companies between 2008 and 2014. They avoided paying a total of more than $615,000 in insurance premiums alone.   For more information, contact: Leonard T. Jernigan, Jr. Adjunct Professor of Workers’ Compensation Law N.C. Central University School of Law The Jernigan Law Firm 2626 Glenwood Avenue, Suite 330 Raleigh, North Carolina 27608 (919) 833-0299 ltj@jernlaw.com www.jernlaw.com Twitter: @jernlaw Blog: www.ncworkcompjournal.com