Archive for the ‘fraud’ Category

The Iceman Cometh

Thursday, May 25th, 2017

This will be hard.

For a moment, squeeze yourself into the tight shoes of one of America’s 11 million unauthorized immigrants.

Eight million of you are working. You make up 5% of the civilian workforce. Twenty-six percent of you work in farming; 15% in construction. A lot of people complain you and your unauthorized, undocumented, illegal alien brethren are taking jobs from Americans who need them, although you haven’t seen a lot of those Americans lining up to pick the fruits and veggies in the hot sun.

You have a job. It’s in construction. Not important how you got it – phony papers, no papers, whatever. You live in one of the 14 states that expressly allow workers’ compensation coverage for unauthorized immigrants. There are another 24 where coverage is allowed in practice, but not expressly allowed in the statute. And, every once in a while some state legislature will try to expressly exclude you and all the others. But those attempts are always beaten back by, of all things, the business community, because adopting a law like that might lead to unfair competition.

You’re married with three children, all born in the USA. You’ve been here for seven years, although two-thirds of all unauthorized immigrants have been here for at least a decade. You’ve never been in trouble. With anyone. You own a car, but no one will ever mistake it for a Tesla. It gets you around, though. It especially gets you to work.

Last week, you fell off a ladder at work and broke your leg. First time you’ve ever been hurt at work. A Supervisor took you to an Urgent Care Center where a doctor set your leg. Unfortunate, but you’re going to be out of work for eight weeks. Can’t be helped, but, because you live in one of the magical 14 states, you’ll get workers’ compensation.

Two days later the owner calls to tell you not to worry about anything. He says he wants to make things easier for you and the family. He thinks it would help if he gave you some cash to tide you over until the workers’ comp kicks in. Why not come into the office tomorrow at, say, 11:00, so he can do that? You’re grateful, and, in your broken English, you thank him and tell him you’ll be there.

Tomorrow comes. Eleven AM and you’re hobbling in the door to the office, broken leg and all, which is when the train comes off the rails. The owner’s not there, but ICE is. Immigration and Customs Enforcement, ICE, come to arrest you. And that’s what happens.

Two weeks later you and your broken leg are sitting in the county house of correction waiting to find out what will happen to you. You’re worried deep in your bones for your wife and three kids. Worried? No, you’re terrified. So, there you sit.

How’d that feel? Having a nice day, are we?

That story’s not fiction. It happened last week in Massachusetts. The man in whose shoes you were walking is 37-year-old Jose Flores who, with his wife Rosa Benitez, fled gang violence in Honduras seven years ago. Flores now has two lawyers, one for workers’ comp, the other for ICE. The lawyers know he’s entitled to workers’ compensation coverage, but wonder how he’ll collect it if he’s deported to Honduras. So far, the Iceman hasn’t come calling for Rosa Benitez, but that could change anytime. She and the kids are living in constant fear.

What about that owner who called ICE to come get Flores? He is Pedro Pirez. His company, Tara Construction, employs roughly ten people, and, so far, he has no comment about any of this. We do know one thing. On the day Flores fell off the ladder Tara Construction was not insured for workers’ compensation.

So, who’s committing the bigger fraud? Flores or Pirez? Something to think about.

 

Report: Immigrant worker exploitation in the building trades

Wednesday, September 21st, 2016

The issue of immigrant deportation is front and center in this year’s impending election. There’s a lot of anger and invective aimed at immigrant workers, today, both those who are legal and illegal. One side of the story that is not told frequently enough is that of the unscrupulous employers who exploit these workers. For more than a dozen years, we’ve been talking about the abuse of workers who do the most dangerous jobs under appalling conditions – a situation that is often characterized as modern day slavery by journalists who investigate the employment practices.

In 2005 we wrote:

It’s one of our nation’s dirty little secrets: immigrant workers are doing some of the nation’s most dangerous jobs, are being injured and dying disproportionately in those jobs, and denied benefits when injuries and deaths occur. In a political climate where the rhetoric and emotions are high and seemingly getting higher by the day, a “blame the victim” mentality is pervasive.

The latest case in point is illustrated in an investigative report in the Boston Globe by Beth Healy and Megan Woolhouse: In building boom, immigrant workers face exploitation.

“A Globe investigation found that these workers, eager for a paycheck, are often paid below the prevailing wage and illegally, in cash. They are also the most likely to be subjected to unsafe work conditions, without insurance to cover medical bills or lost pay if they get hurt. And the unscrupulous contractors who employ them are too seldom caught and penalized.
“This is not about catching a few bad actors that are dragging down the industry,’’ said Diego Low, director of the Metrowest Worker Center in Framingham, which helps workers fight for fair wages and safety. “We’ve evolved a system for providing subsidized labor to build our houses, and it’s based on the vulnerability of the workforce.”

The report notes that in Massachusetts over the last three years, federal officials logged 910 “willful or repeat violations” involving hospitalizations or deaths, but that the real number of injured workers is likely much higher. This is a population that often doesn’t have command of the language and is generally unaware of labor laws. Those who are undocumeted feel powerless to bring complaints or are fearful about seeking help from hospitals or authorities.

The article cites numerous cases of primarily young, male workers, many who speak limited or no English, who are characterized as independent contractors. It paints a portrait of a disposable population that is abandoned after injuries and left to fend for themselves to find medical care. It’s a deplorable tale, one that has been playing out across the country for years. A common theme is the layer after layer of contractors and subcontractors, making it difficult to assign responsibility. For a number of years now, state authorities have tried to enact measures to restrict abuse of the “independent contractor” designation, but it’s a pervasive problem still.

This underground economy is not just exploiting workers, it’s also grossly unfair competition to legitimate employers who operate honestly, pay insurance, pay taxes, and pay fair prevailing wages.

Related by Tom Lynch: Undocumented Immigrants In The Workers Comp Bullseye?

Kudos And Thanks To Work Comp Central’s Greg Jones

Wednesday, December 9th, 2015

Work Comp Central’s Greg Jones has relentlessly followed and reported on the Michael Drobot case in Southern California, a case that fairly oozes greed and sleaze.

For the uninitiated, Michael Drobot’s Pacific Health Corporation owned two hospitals, Pacific Hospital of Long Beach and Tri-City Regional Medical Center in Hawaiian Gardens. For around 10 years, he paid kickbacks to a number of doctors for referring spinal fusion patients to Pacific Hospital of Long Beach for surgery. In February, 2014, Drobot pleaded guilty to making the kickbacks, which are illegal, and for charging California’s workers’ compensation system, the U.S. Department of Labor and about 150 workers’ compensation insurers somewhere in the vicinity of $500 million dollars for the surgeries over the ten year period. At that time, we wrote about this with Honor Sold, Trust Betrayed: Unbridled Greed in California.

Drobot is also charged with bribing state senator Ron Calderon for his help in easing one of the SB 863 requirements, which we don’t need to go into here. Calderon has pleaded not guilty, and that case is moving through the system.

Throughout this sordid business, Greg Jones has been there, providing a valuable service with his spot-on reporting, most recently last week with his story (subscription required) that a number of the doctors who took the kickbacks, at $15,000 a pop, also had filed “more than 15,000 liens with a total claimed value of $93.8 million.” To get that story, Jones had to wade through what must have been a steamer trunk full of documents.

Personally, I owe a debt of gratitude to Mr. Jones. He found two errors in my post of 30 November, Workers’ Comp Fraud: The Michael Drobot Case Grinds On. I had written that the kickback scheme involved both of the Drobot hospitals. That was wrong. They only happened at Pacific Hospital at Long Beach. Also, I had written that Drobot had pleaded guilty to bribing Calderon. He did not. He is charged with doing it, and both he and Calderon have pleaded not guilty. Before Work Comp Central ran my post, Greg found the errors and made edits to correct them, for which I am grateful.

The Drobot case is complicated and it represents the bottom of the workers’ compensation bird cage. However, the solid reporting of Greg Jones shines an arc light on the sorry mess and will help to improve the system so that in the future the Drobots of the world will think twice about this kind of criminality.

 

 

Workers’ Comp Fraud: The Drobot Case Grinds On

Monday, November 30th, 2015

In late February, 2014, we wrote about the sordid tale of corruption perpetrated in southern California by Michael Drobot and his gang of thieves. Honor Sold, Trust Betrayed: Unbridled Greed In California describes the astonishing criminality of a large group of highly placed people whose job it was to care for others.

This from our original post:

Suppose you’re a doctor in California with a patient who complains that his back hurts a lot. Suppose further that Michael Drobot, the owner of California’s Pacific Health Corporation, will give you $15,000 if you refer your patient to his Pacific Hospital of Long Beach for lumbar fusion surgery, which may or may not be warranted. And what if Drobot’s Pacific Hospital were hundreds of miles away and that other qualified hospitals that wouldn’t pay you a kickback were much closer. What would you do?

The answer? Many doctors took the money and delivered up their patients to the Drobot surgical mill. Drobot paid the doctors in this scheme somewhere between $25 and $50 million.

Drobot’s two hospitals, Pacific Hospital of Long Beach and Tri-City Regional Medical Center in Hawaiian Gardens, billed thousands of mostly spinal fusion surgeries to California’s workers’ compensation system, the U.S. Department of Labor and workers’ compensation insurers. Over an eight year period, the hospitals were paid more than $500 million.

Drobot pleaded guilty in early 2014 to paying the kickbacks. He also pleaded guilty to bribing state Senator Ron Calderon to the tune of $100,000 for massaging the SB 863 legislation so that the fraud could continue for all of 2013. After his indictment in February, 2014, Calderon pleaded not guilty.

The wheels if justice have ground slowly but exceedingly fine in the nearly two years since. Former U. S. Attorney Andre Birotte, Jr., now a U. S. District Judge in California’s Central District, passed the baton to his replacement U.S. Attorney Eileen M. Decker. Last week Decker announced that Drobot’s CFO, James L. Canedo, and Paul Richard Randall, a “health care marketing recruiter” (he recruited doctors to refer patients in return for the illegal kickbacks) pleaded guilty to fraud, money laundering, conspiracy and other crimes. Also, two orthopedic surgeons, Philip Sobol of Studio City and Mitchell Cohen of Irvine, and Alan Ivar, a Las Vegas chiropractor who used to live in Southern California, have agreed to plead guilty to conspiracy and other charges.

There will certainly be more to come in this tale of sleaze.

Employee Misclassification: The Beat Goes On And On And On And…

Wednesday, July 8th, 2015

Bill Clinton used to say that (fill in the blank) would last “until the last dog dies.” Well, friends, today’s topic is all about a dog that won’t die, absolutely refuses to die, will outlive us all, cannot be killed. You get the point.

Eleven years ago (I almost feel like writing “in a galaxy far away”), the Insider started to track the illegal practice of misclassifying employees. We found that, while it was almost ubiquitous in the construction industry, its tentacles reached into other industries as well. We saw it as widespread right in our backyard of Massachusetts. We found a 2005 paper addressing the issue in the Maine construction industry published by the Labor and Worklife Program, Harvard Law School and the Harvard School of Public Health. We conducted employer seminars on it in many states.

At the time, we thought it was a pretty egregious practice that would be hard for state Attorneys General to ignore, so it would probably get fixed lickety split. We were half right. It was egregious, and Ags from the majority of states published stern regulations, as did state Departments of Insurance. But “fixed?” Nope.

Then, in 2005, a national class-action lawsuit with hundreds of plaintiffs from 30 states was filed against FedEx Ground alleging that workers were misclassified as independent contractors. This was mother’s milk to us. We had our bogeyman, and his name was Fedex. Since then, we’ve written about this Dorian Grey issue ten times. Here’s an example from 2006

FedEx loses contractor battle in Mass – Last year, my colleague Jon Coppelman blogged that FedEx should beware of Massachusetts when calling drivers “independent contractors.” Last week, the Massachusetts Department of Workforce Development ruled that a FedEx ground driver was not an independent contractor, and was therefore illegally denied unemployment benefits. Of course, this opens a can of worms about the denial of other statutory benefits, like workers comp. This is not the end of the lawsuits by any means. FedEx faces ongoing challenges in multiple states. The moral of the story: if you work with independent contractors, be sure they meet state and federal criteria to qualify as such.

Fast forward to now. Specifically, to Wall Street Journal writer Laura Weber’s 30 June story “Bosses Reclassify Workers To Cut Costs.” Ms. Weber’s story manages to be both objective reporting and poignant at the same time. Here’s an exccerpt:

Employers have long shifted work from employees to independent contractors, often relabeling the workers and slightly altering the conditions of their work, court documents and settlements indicate. Now, businesses are turning to other kinds of employment relationships, such as setting up workers as franchisees or owners of limited liability companies, which helps to shield businesses from tax and labor statutes.

In response, some state and federal agencies are aggressively clamping down on such arrangements, passing local legislation, filing briefs in workers’ own lawsuits, and closely tracking the spread of what they see as questionable employment models.

All this is happening against the backdrop of a broader shifting of risk from employers to workers, who shoulder an increasing share of responsibility for everything from health-insurance premiums to retirement income to job security. Alleged misclassification of workers has been one of the primary battlegrounds of this shift, leading to high-profile lawsuits against Uber Technologies Inc. and FedEx Corp., among others. Both have recently lost or settled big cases. Uber is appealing one decision, and FedEx settled in California for $228 million but is continuing to challenge classification lawsuits in other states.

Today I’m an employee; tomorrow I’m an Independent Contractor; the next day a Franchisee, or, oh, I don’t know, CEO of my own one-person LLC. Not only will the dog not die, his bark is really loud.

Very smart people are cooking up these schemes. I ask you – Do you think they are:

  • Bettering the lives of America’s workers?
  • Enhancing American productivity?
  • Propelling more workers into the ranks of the dwindling middle class?
  • Growing shareholder value?

I’d like to know what you think. Write me at tomlynch@lynchryan.com.

Work Comp Fraud Control, Barn Door Style

Wednesday, June 3rd, 2015

A recent edition of 20/20 – Who’s Freeloading – deals with insurance. The first 12 or 13 minutes focuses on flagrant workers comp fraudsters caught in the act. The episode shows a worker with an alleged injured foot strutting the beauty pageant walkways; a worker incapacitated with a shoulder injury break dancing in a commercial; a “disabled” worker competing in extreme wrestling. While one might think someone deceiving their employer would have the street smarts to keep a low profile, this is often not the case. Many clueless fraudsters are caught in very public activities: See Caught on The Price is Right.

These cases are egregious and infuriating, particularly because the claimants are so brazen.
It’s worth noting that workers comp fraud comes in many flavors, and individual claimant fraud may be the tip of the iceberg: doctor mills, employer premium fraud and attorney fraud add up to much more in terms of sheer costs to the system.

Still, that can be cold comfort to an employer who deals with a fraudulent claim. It can feel very personal to to be duped and swindled by an employee.

We encourage employers who suspect fraud to work with their insurers to ferret it out – it should be a zero tolerance approach. But chasing down fraud after it occurs is still a case of “closing the barn door” style of management — the horse has already escaped.  In the Coalition Against Insurance Fraud’s Emerging Issues, Professor Malcolm Sparrow, a pre-eminent fraud expert from the JFK School of Government at Harvard University says it better:

There is widespread misplaced emphasis on detecting and investigating committed crimes, rather than on controlling, neutralizing, and deterring future crime. Despite some progress, the probability of detection and of criminal prosecution is still extremely small. The risk/reward ratio is still very attractive in insurance fraud — small risk with high reward. There is great potential in shifting the investment balance from heavily weighted identification of already committed crime — the “pay and chase” model — to more investment in detecting attempted fraud and defeating it.

We believe that vigilant employers can nip most fraud in the bud with a tight workers comp management program that focuses on preventing injury, treating employers fairly and compassionately when injuries do occur and closely monitoring the recovery process until return-to-work on full or transitional duty. By actively demonstrating vigilance repeatedly, opportunistic fraudsters may think twice and sophisticated fraudsters may choose an easier target. Here are some best practices:

  • Zero tolerance message. Educate employees about their rights and responsibilities under workers comp, and be clear that your intention is to care for anyone who is injured on the job, but that you aggressively prosecute fraud as a crime.
  • Publicize your return-to-work program. Establish and reinforce a goal of recovery and return-to-work for any work-related injuries.
  • Train supervisors. Your supervisors should understand workers comp and their role in the process. They should understand the employer/employee rights and responsibilities and what to do if an injury occurs. They should be alert for red flags.
  • Aim for same-day injury reporting. Train employees to report injuries immediately when they occur.
  • Conduct accident analyses. As soon as possible after a work injury or near miss, gather facts and witnesses while things are fresh. This will also set the stage for getting to the root cause and taking any remedial actions to prevent future occurrences.
  • Set the tone at point of injury. Escort an injured worker to the treating physician in your network. Remind them of rights / responsibilities and that you will be monitoring their recovery.
  • Keep in close touch with out-of-work injured employees. Let the employee know how important they are to the team. Have transitional work available that conforms with any restrictions and establish a return to work date.
  • Work with your insurer. Be familiar with “red flags” and report any suspicious activity immediately.

Fraud resources

10 “Red Flag” Warning Signs of Workers’ Compensation Fraud

10 ways for employers to fight workers’ comp fraud

Seven Steps You Can Take to Stop Workers’ Compensation Fraud

National Insurance Crime Bureau

Coalition Against Insurance Fraud

III – Insurance Fraud

Where’s Aristotle When ABC Needs Him?

Friday, April 18th, 2014

This morning, ABC’s Good Morning America shone its media arclight on Cathy Caswell as she spun the great big wheel on The Price is Right, not once, but twice. But while doing so Ms. Caswell was drawing $3000 per month in workers comp indemnity payments, according to ABC. And she was collecting those payments because of a shoulder injury, which prevented her from standing, running, reaching or grasping, as reported by ABC’s eagle-eyed Cecilia Vega. Vega “reported” that Caswell was one of “the countless people accused of faking an injury” to the tune of “hundreds of millions of dollars.”
The report then cut to some fraud words of wisdom from private eye, “master of disguise” (not my words; they’re Vega’s), Bob Keane who fancies himself cut from the James Bond cloth. Keane claimed that if you’re committing fraud the only way to avoid being caught by him is “by completely staying in your house for three to five years,” because if you venture outside he’s going to “get you.”
By using phrases like “countless people” and “hundreds of millions of dollars” ABC implies that Ms. Caswell is merely the tip of a very big iceberg. Frankly, I think Ms. Vega skipped Philosophy 101 – Aristotelian Logic. You know, the part about faulty inductive arguments going from the particular to the general? But I digress.
We all know that there are people who commit workers comp fraud. In fact, some of them are workers who fake injuries or malinger trying to milk the system. But the fraud committed by workers is dwarfed by that of many others in the system.
Consider Devon Lynn Kile and her husband Michael Petronella. In 2010, while Ms. Kile sought to appear on the Bravo TV series “The Real Housewives of Orange County,” the couple gained a different kind of notoriety when federal authorities, after raided their three roofing businesses as part of a two year probe, charged them with 31 felony counts involving tens of millions of dollars of underreported workers comp premiums. Petronella went to jail for 10 years, and Kile was sentenced to 10 years probation and ordered to make $2.8 million in restitution.
There are many dimensions to fraud in the workers comp system. While many people think of fraud primarily as a problem involving employees, in dollar terms most fraud is committed by other players in the system. There are opportunities for wrong-doing in virtually every financial transaction within a system that generates multiple billions of dollars every year.
Just to be clear, fraud can be committed by, yes, employees, but also by employers (see Devon Kile), attorneys, medical providers, claim adjusters, insurance agents and even investment firms (see the “Coingate” scandal in Ohio).
Despite the many opportunities for fraud in the comp system, outright fraud is relatively rare. The vast majority of transactions within the comp system, involving all of the above players, are carried out with integrity and good faith. Nonetheless, vigilance is always necessary to ensure that comp dollars are spent prudently and wisely.
ABC has scheduled an expanded report on Ms. Caswell, et al, this evening on its World News Tonight program. It should make for some interesting, if infuriating, entertainment, faulty logic and all.

Dying On The Job in Boston

Thursday, March 27th, 2014

We lost two firefighters in Boston, yesterday.
A 9-alarm fire on Beacon Street in Boston’s Back Bay, aided by 45 to 50 mile per hour winds off the Charles River, took the lives of Lt. Edward J. Walsh and Firefighter Michael R. Kennedy. Walsh, 43, was married with three children; Kennedy, 33, was a Marine Corps veteran. They were trapped in the basement of the four story apartment building when a window blew out, the winds rushed in and part of the building exploded.
Deputy Chief Joseph Finn said, “In 30 years, I’ve never seen a fire travel that fast.”
Once again, we are reminded that firefighting is a lot like combat, a lot of waiting for something to happen, and then the world falls in.
This, from today’s Boston Globe, should give one a sense of the emotional trauma of the event:

After the seventh alarm sounded, all firefighters were ordered from the building through a haze of screams and sirens. But when word came that some firefighters were missing, some vowed to go back in.
“No companies should be going in anywhere; stay away from the building,” firefighters were instructed in the mayday call.
“We are aware of the potential we see in front of us; we’re going back inside the building,” came the reply.
But the firefighters were told, “Stay out of the building.”

It took five hours to recover Walsh’s body. As he was carried out on a stretcher, all the firefighters formed an Honor Guard line. “Everyone saluted him, and Eddie was taken for his last ride,” said Steve MacDonald, a Fire Department spokesperson. If that doesn’t stir emotions inside you, then you have something other than blood coursing through your veins.
Reminiscent of the 1972 Hotel Vendome fire just a couple of blocks away that killed nine firefighters, and the 1999 Worcester Cold Storage Warehouse fire that took the lives of six, yesterday’s inferno sledgehammers us with the understanding that firefighting is a deadly business.
Seeing the soot-covered, teary faces of the men and women who watched Lt. Walsh take his “last ride” made me think of the other end of the pole, the sometimes messy business of workers comp.
In most states, injured workers are given two-thirds of their average weekly salary (60% in Massachusetts), tax free, while they’re recovering and unable to return to work. Police and firefighters, on the other hand, public sector employees, receive 100% of their average weekly salaries, also tax free. In essence, it’s a promotion.
This different treatment can sometimes anger taxpayers, usually when abuse occurs. And abuse does occur, not often, but when it does it can make headlines. In Massachusetts, we vividly remember the case of Albert Arroyo, a 20-year veteran of the Fire Department, who, after being deemed “totally and permanently disabled,” which allowed him to receive 100% of his salary, tax free, made the Boston Globe front page when he finished eighth in the 2008 Pro Natural American Bodybuilding Championship, with a picture to prove it.
Although Arroyo was acquitted of fraud charges in 2011 by a federal jury, the whole thing left a bit of a stink. US Attorney Carmen Ortiz, Boston Mayor Tom Menino and just about everyone else in authority complained loudly and in print that justice had not been done.
We all want our tax dollars spent well, but every once in a while, like yesterday, we come up against two truths that won’t go away: First, protecting the citizenry can be a tragic and deadly business; and second, with the exception of soldiers, I don’t know of any other occupations where people give their lives in the line of duty to protect others. Do you?

Honor Sold, Trust Betrayed: Unbridled Greed in California

Wednesday, February 26th, 2014

“What is here?
Gold? Yellow, glittering, precious gold?”

— Timon of Athens by William Shakespeare
Suppose you’re a doctor in California with a patient who complains that his back hurts a lot. Suppose further that Michael Drobot, the owner of California’s Pacific Health Corporation, will give you $15,000 if you refer your patient to his Pacific Hospital of Long Beach for lumbar fusion surgery, which may or may not be warranted. And what if Drobot’s Pacific Hospital were hundreds of miles away and that other qualified hospitals that wouldn’t pay you a kickback were much closer. What would you do?
It is illegal under both California and Federal law to pay doctors for referring patients to hospitals. Yet, according to Andre Birotte, Jr., U.S. Attorney for the Central District of California, this is precisely what Drobot was doing on a massive scale in California from 2003 through 2008. The kickbacks amounted to between $20 million and $50 million. That was chump change compared to what Drobot netted from the surgeries. On Friday, Birotte announced that Drobot had pleaded guilty to paying the kickbacks in what amounted to a $500 million dollar fraud conspiracy and now faces up to 10 years in prison.
Drobot began building his health care empire in the mid-1990s. He bought a number of hospitals, but Pacific Hospital was his jewel in the crown. It was his “spine center,” and, according to U.S. Attorney Birotte, it is where doctors, who apparently think the Hippocratic Oath a mere suggestion, would refer patients for questionable lumbar fusion surgery at $15,000 per surgery. That is, unless the referral was for a cervical fusion, in which case the kickback was only $10,000. Needless to say, there were more lumbar fusions.
Workers compensation paid for all of this. More than 150 insurance companies were “ripped off,” according to Eric Weirich, Deputy Commissioner of the California Insurance Department’s Enforcement Branch.
The Los Angeles Times has been covering the Michael Drobot saga for the last 6 years. Drobot’s Pacific Health Corp. got itself out of big trouble in 2012 when it agreed to pay $16.5 million dollars to the government to avoid criminal conspiracy charges. From 2003 to 2008 it recruited homeless people, drove them to one of Pacific Health Corp’s hospitals and then charged Medicare and Medicaid for services never performed. The whole thing makes “ambulance chasing” look like a PBS donor acknowledgement.
But that little traipse into the dark side pales in comparison to the spinal fusion scheme.
In 2012, California SB 863 threatened to put more than a little crimp in Michael Drobot’s hose of money. Up until SB 863, Pacific Health Corp was paid highly inflated prices for both the surgeries and the surgical hardware, because it could charge duplicate invoices for the surgical implant hardware. The provisions of SB 863 would have severely limited duplicate payments beginning 1 January 2013. If Dobrot couldn’t collect the duplicate payments he wouldn’t be able to pay the kickbacks to get the patients he needed to keep the scheme going. He desperately wanted those provisions to be mitigated to some degree. To do that, he needed help.
He got it from friends in high places – the California Legislature. It’s a little murky as to method, but prior to final passage, SB 863 was changed to allow half the duplicate payments to continue, status quo, for all of 2013. The authorities have been looking into this, and U.S. Attorney Birotte has begun to reel in the fish.
The day before he indicted Michael Drobot, Birotte indicted state Senator Ron Calderon and his brother, former Assemblyman Tom Calderon, on 24 charges, including bribery and money laundering. Ron Calderon is alleged to have been paid more than $100,000 in bribes by Michael Drobot and in an FBI sting operation that Calderon thought was a film studio. If convicted, he faces up to 400 years in prison. And that’s the blood in the water that California’s media sharks now circle. Here’s an LA Times infographic of the Calderon family’s tree of connections and alleged corruption.
.
However, as that great TV salesman, Ron Popeil, used to say, “But wait! There’s more!”
An FBI affidavit leaked to, of all places, Al Jazeera America, is making life uncomfortable for at least four other legislators, including Senate President Pro Tem Darrell Steinberg. Look deeply enough at this and one begins to think that Teapot Dome was nothing more than a benign business deal gone bad. (See the full associated Al Jazeera story: State Compensation Insurance Fund’s lawsuit against Michael Drobot)
Notwithstanding all of this, I keep coming back in my mind to those doctors, those chiropractors, those medical professionals who sold their souls and endangered their patients for all that “yellow, glittering, precious gold.” I ask, “Where is the outrage?” At some point, one hopes that U.S. Attorney Birotte turns his eyes to them.

What’s odd about this picture?

Tuesday, August 13th, 2013

Delaine Davis has been sentenced to 4 to 6 years in Wyoming Women’s Center jail. Her crime was workers’ compensation fraud of $11,072. She knowingly collected workers comp benefits while being gainfully employed in another job. In addition to her jail term, she was ordered by Judge Marvin L. Tyler to pay $11,072 in restitution to the State of Wyoming.

Is it just us, or does that penalty seem a little harsh? Perhaps there are some extenuating circumstances that contributed to the sentence that weren’t revealed in news reports. Certainly, we would agree that fraud is bad and should be punished – we have no argument with that. Apparently, Ms. Davis willfully violated the law. She should indeed be required to pay restitution and suffer some punishment for her crime — but 4 to 6 years seems pretty steep to us — particularly in contrast to the “up to 6 month” jail penalty for a willful violation resulting in a worker fatality under OSHA’s general duty clause:

(e) Any employer who willfully violates any standard, rule, or order promulgated pursuant to section 6 of this Act, or of any regulations prescribed pursuant to this Act, and that violation caused death to any employee, shall, upon conviction, be punished by a fine of not more than $10,000 or by imprisonment for not more than six months, or by both; except that if the conviction is for a violation committed after a first conviction of such person, punishment shall be by a fine of not more than $20,000 or by imprisonment for not more than one year, or by both.

In looking further into the data, we turned up this SHRM article: Report Finds OSHA Resources Lacking, Penalties Weak, which notes that:

“The median penalty for a fatality investigation conducted in FY 2012 was $5,175 for federal OSHA, and the median current penalty for the state OSHA plans combined was $4,200, according to OSHA enforcement data.

Criminal enforcement under the OSH Act has been and remains exceedingly rare, the report said.

Only 84 cases have been prosecuted since 1970, with defendants serving a total of 89 months in prison. During this time there were more than 390,000 workplace fatalities, according to Labor Department data. In FY 2012 13 cases were referred for possible criminal prosecution.”

Fraud is serious business and we all pay the price. Wyoming has chosen to wield a pretty big stick in doling out punishment, noting that “Workers’ compensation is intended to help workers injured on the job, We won’t stand for people who defraud and abuse this important program.” OK. But when it comes to protecting workers and keeping them safe, the state takes less of a hard line and more of a courtesy approach to safety, generally favoring carrots over penalties. This hasn’t produced great results: While there have been some small improvements of late, Wyoming has a pretty ignominious record when it comes to worker fatalities. Except for the most recent year, Wyoming has consistently ranked as the worst or the next-to-the-worst state for worker fatalities over the past decade.