Injured Worker Stakeouts: Do Private Investigators Commit Fraud?

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

Have you noticed a suspicious vehicle lurking in your neighborhood lately, or is there a stranger that seems to be everywhere you go? If you have an active workers’ compensation claim, then you may not be imaging things. More and more, we are seeing insurance companies willing to spend thousands of dollars to hire private investigators to conduct clandestine surveillance of an injured worker’s daily activities and documenting these activities with video cameras. This type of surveillance often comes as a shock to our clients.

When these situations arise, the question we hear most often is, “Can they do that? Is this legal?” The answer is yes. Private investigators may photograph or video people in their private residences so long as they are clearly visible to the general public and there is no expectation of privacy. They can also conduct a full background investigation and obtain information about any other claims you made for personal injuries or if you have ever been charged with a crime.

While there are honest private investigators in the field, there are also those who will cheat. One investigator deflated an injured worker’s tire and then videotaped the person “working” to fix the flat tire. Another investigator reported talking on the phone to someone who told him that an injured worker was working while also receiving workers’ compensation benefits. A follow up done by our firm proved that the person with whom the investigator claimed to have talked has a serious hearing impairment and could not use the telephone.  

Injured workers need to be aware that surveillance can happen in any case. It has become part of the workers’ compensation system. By the way, if you do notice a suspicious car parked near your home, call the police.

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Cost Shifting: Worker’s Compensation Dirty Little Secret

Today’s post comes from guest author Thomas Domer, from The Domer Law Firm.

Today I taught worker’s compensation “Offsets” in the course I teach at Marquette Law School. The students were aghast at the amount of “cost shifting” that occurs in worker’s compensation: that is, medical costs paid by a variety of sources other than worker’s compensation for medical expenses that should be paid by the worker’s compensation insurer.

We all pay an additional price for medical costs borne by group health insurance carriers, Medicaid, and Medicare that should in fact be paid by worker’s compensation insurers. This “cost shifting” occurs in two significant ways. First, if the claim is denied by the worker’s compensation insurance carrier, medical costs may be paid by the worker’s group health insurance or other private insurance company, or through State Medicaid or federal Medicare programs (the cost of which we all pay in taxes). When those claims are settled, the worker’s compensation insurer routinely saves money by reduced negotiated payment contracts with medical providers, between the provider and the group health carrier, Medicare, or Medicaid (rather than the “full boat” payments that should be paid by the worker’s compensation insurer). If the treatment is deemed work-related after a hearing, the worker’s compensation insurer will pay the other insurer, but at reduced rates.

Second, since only about one in ten cases involves any kind of litigation, workers who are not represented routinely bill their group or other insurance carrier for medical treatment that should be paid by worker’s compensation. Bolstering this notion is a recent article in the Insurance Journal. In the article Jonathan Gruber, Professor of Economics at M.I.T. was quoted indicating that worker’s compensation carriers should see fewer claims as a result of more Americans obtaining health insurance under the Affordable Care Act. He said “As more people have health insurance there is less need for them to have injuries covered by worker’s compensation and this should lower worker’s compensation costs.” Nowhere in this analysis is the notion that the appropriate payor for a worker’s compensation injury should be a worker’s compensation insurer, not health insurance premiums (which are shared by us all) nor Medicare and Medicaid (again shared by us all in the form of taxes).

Workers hurt on the job should have their medical treatment paid by the worker’s compensation insurer, who has received a premium for that risk from the worker’s employer. Cost shifting may increase worker’s compensation profits, but it hurts both the employers’ and the employees’ bottom line.

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Tips to Prevent Carbon Monoxide Poisoning

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

The Centers for Disease Control and Prevention (CDC) estimate that at least 430 people die each year from unintentional carbon monoxide poisoning (www.cdc.gov/features/copoisoning/). Several years ago we represented a young lady who was exposed to carbon monoxide (CO) poisoning at a convenience store where she worked. Some repairs were being made to concrete and the workers were using gas-powered tools to cut into the concrete and there was improper ventilation. She collapsed and was taken to the hospital with possible brain damage.

 

Carbon monoxide is a colorless, odorless and tasteless gas that can severely damage the human body and in some cases it can lead to death. The following tips can protect your family from CO poisoning:

 

  • Know the symptoms of CO poisoning. These include headaches, dizziness, vomiting, confusion, weakness, blurred vision and nausea. Extreme symptoms include severely impaired mental state, coordination loss, loss of breath, increased heart rate, chest pain and loss of consciousness. Persons experiencing CO poisoning symptoms should be removed from the enclosed environment and taken to a medical professional. Call your local authorities to make a report.
  • Be aware of CO sources in your home. Any gas burning appliance such as a furnace, boiler, gas stove, water heater, fireplace and gas-powered tools can be a CO source. Make sure these types of appliances are serviced regularly to lower the risk of CO poisoning.
  • Don’t put a gas generator in the house, garage or outside your house near a window. Generators have the capability of producing CO levels several hundred times those found in normal automobile exhausts. The CDC recommends that generators should be used at least 20 feet away from your house in a properly ventilated area.
  • Install a CO detector to alert of a possible CO leak.

 

For more information please visit www.serpefirm.com/personal-injury-blog/.

 

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2014 Top Ten Workers’ Compensation Fraud Cases

Today’s post comes from guest author Leonard Jernigan, from The Jernigan Law Firm.

  Number Value
Non-Employee Fraud Cases 9 $ 74,876,000.00
Employee Fraud Cases 1 $ 450,000.00
Total $ 75,326,000.00

Five of the top ten fraud cases in 2014 are from California. The other five cases are from Florida, Texas, Arizona, Washington and Georgia. As usual, non-employee fraud cases dominated the list and the dollar amounts are staggering, led by the $36 million over-billing case out of southern California. An emerging issue is the misclassification of workers, and we will likely see more of these cases in 2015 as enforcement steps up in this area.

1. (California) Medical Equipment Company Overbills $36 Million (3/17/14)

The owners of Aspen Medical Resources were indicted in on 49 felony counts of fraud.
The owners of Aspen Medical Resources were indicted in on 49 felony counts of fraud.

The owners of Aspen Medical Resources had all their assets seized and put into receivership by the Orange County District Attorney. They were indicted in on 49 felony counts of fraudulent overbilling of $36 million for hot-cold physical therapy machines. Although these machines retail between $250 and $500 Aspen often billed Southern California workers’ compensation claims departments thousands of dollars each time a machine was rented.  

2. (California) 15 Medical Professionals Indicted in $25 Million Scheme – Small Child Dies (6/24/14)

Ahmed Kareem, one of 15 doctors accused of participating in a workers’ compensation scam.
Dr. Ahmed Kareem   is accused of participating in a workers’ comp scam.

Fifteen doctors, pharmacists and other medical professionals in Southern California were charged in a $25 million workers’ compensation scam which was linked to the death of a baby. Prosecutors alleged insurance fraud and conspiracy in the 44 count indictment which detailed that the head of a workers’ compensation claims management firm hired pharmacists to produce a pain-relief cream and then gave kickbacks to the doctors that prescribed it and conspired to submit phony claims. A 5-month old boy ate the cream and died when his mother, who was using the prescribed cream for back and knee pain, allowed her son to suck her fingers to sooth him. The next morning he was found dead and tests showed he had ingested lethal amounts of drugs in this cream.

3. (California) Lowe’s Settled Independent Contractor Misclassification Case for $6.5 Million (7/3/14)

Lowe’s misclassified its installers as independent contractors, rather than employees.
Lowe’s misclassified its installers as independent contractors, rather than employees.

Over 4,000 “Lowe’s professionals” in California are members of a class action alleging that Lowe’s misclassified its installers as independent contractors, rather than employees, thus depriving them of a variety of employee benefits, from workers’ compensation insurance coverage to 401(k) plan participation. Lowe’s, without admitting liability, recently settled the case after mediation for a sum that could be as much as $6.5 million. The plaintiffs claimed that Lowe’s retained and exercised control over their work by requiring them to identify themselves as working for Lowe’s, wear Lowe’s hats and shirts, and attend training by Lowe’s.

4. (California) Paving Company Cheats System of $4 Million (6/19/14)

Sabas & Lucia Trujillo
Sabas & Lucia Trujillo face criminal charges for workers’ comp’ fraud.

Five owners (Sabas Trujilo, Lucia Trujilo, Rick Trujilo, Laura Fitzpatrick and Alex Trujilo), operators and employees of a Corona, California based paving company are facing criminal charges for alleged wage theft, premium fraud, workers’ compensation and payroll fraud. The Riverside County District Attorney’s Office alleges that the individuals’ criminal actions enabled them to illegally obtain about $4 million. After launching an investigation, the state obtained search warrants for both companies, seizing computers and bank, payroll and other documents. The state conducted several wage audits on several hundred projects, which ultimately led to the filing of criminal charges.

5. (Florida) False Insurance Certificates Check Cashing Scheme Defrauds Insurance Company of $1 Million (11/18/14)

Arturo Santos Zuniga paid laborers cash to avoid paying workers' comp'.
Arturo Santos Zuniga paid laborers cash to avoid paying workers’ comp.

Arturo Santos Zuniga, who also went by the name David Hernandez, was busted for paying laborers in cash to avoid paying workers’ compensation insurance premiums. Zuniga paid a North Lauderdale man to create and insure a fake or “shell” company, Behar Services Incorporated, and “rented” out insurance certificates to uninsured subcontractors in South Florida. Payments to the uninsured subcontractors were made through checks to the fake company, which were then cashed at check cashing stores. Behar Services Incorporated got its insurance policy by saying it had 10 employees doing carpentry and office work with an annual payroll of $210,000. The annual premium was about $26,500. Law enforcement financial reports show that just in the months from July to October, more than $7.3 million had been cashed out at check cashing stores to Behar Services Incorporated and/or the North Lauderdale man who started the company. A $7.3 million payroll would have cost more than $1 million more than the existing policy. No estimate of lost tax revenue was given.

6. (Texas) Man to Pay $806,000 for Underreporting Payroll to Workers’ Comp Carrier (3/11/14)

Howard Douglas Whiddon of Travis County was ordered to pay $806,000 in restitution.
Howard Douglas Whiddon was ordered to pay $806,000.

Howard Douglas Whiddon was ordered to pay $806,000 in restitution to workers’ compensation insurer Texas Mutual Insurance Co. after pleading guilty to workers’ comp fraud-related charges. He intentionally misrepresented the payroll of a related company, thus lowering his premiums. Mr. Whiddon was sentenced by a Travis County, Texas court to 10 years of deferred adjudication and 160 hours of community service.

7. (Arizona) Paul Johnson Drywall Inc. Agreed to Pay $600,000 in Back Wages, Damages and Penalties to 445 Employees (5/19/14)

Paul Johnson Drywall Inc. classified its workers as “members/owners” instead of employees.
Paul Johnson Drywall Inc. classified its workers as “members/owners” instead of employees.

Paul Johnson Drywall Inc. classified its workers as “members/owners” instead of employees, which stripped them of workers’ compensation and other protections afforded to employees. The owner, Robert Cole Johnson agreed to take concrete steps to ensure that misclassification of its workforce does not occur again and to pay $556,000.00 in overtime back wages and liquidated damages to at least 445 current and former employees. The employer also agreed to pay $44,000.00 in civil monetary penalties. Investigators found that the drywall contractor violated the Fair Labor Standards Act overtime and record-keeping provisions.

8. (Washington) Summit Drywall, Inc. Ordered to Pay $550,000 in Unpaid Wages and Damages to 384 Workers (2/20/14)

The owner of Summit Drywall, Inc. was ordered to pay damages to 384 employees.
Summit Drywall’s owner was ordered to pay damages to employees.

Thomas Kauzlarich, the owner of Summit Drywall, Inc. was ordered to pay $550,000 in overtime back wages and liquidated damages to 384 current and former employees. An investigation showed that the company violated the Fair Labor Standards Act’s overtime and record-keeping provisions from October 15, 2009 to April 15, 2013. The article did not report the amount of reduced workers’ compensation premiums paid.

9. (Georgia) Nurse Gets 5 Years in Prison for $450,000 Bogus Workers’ Comp Claims (8/26/14)

A VA nurse from Glenwood, GA, will serve five years in prison for mail fraud and fraudulent claims.
A VA nurse from Glenwood, GA, will serve five years in prison for mail fraud and mailing fraudulent claims.[/caption] Loretta Smith, a VA nurse from Glenwood, GA, will serve five years in prison and must repay $450,000.00 in federal funds by filing bogus workers’ compensation claims, pleading guilty to two counts of mail fraud in the mailing of fraudulent claims, in which she received more than $450,000.00. She agreed to forfeit the equivalent of $454,740.06 in cash, real estate and other property. She was also sentenced to three years probation after her release.
10. (California) Drywall Company Owners Arraigned on $420,000 in Fraud Charges (12/11/14) The owners of a defunct drywall company, National Drywall in San Bernardino, CA, were arraigned on charges that they defrauded their workers’ compensation insurance carrier of $260,000.00 and stole $160,000.00 from their workers.
 
Honorable Mention 

(Oregon) Uncooperative Hillsboro Businessman Convicted of $481,519 Tax Evasion – Only Gets 30 Days In Jail (9/30/14)

Stephen Nagy engaged in fraudulent schemes to evade payment of payroll taxes.
Stephen Nagy engaged in fraudulent schemes to evade payment of payroll taxes.

Stephen Nagy was the former president of Hillsboro-based S&S Drywall Assemblies. The IRS assessed the company $481,519 in federal employment taxes, penalties and interest between June 2009 and September 2010. Nagy met with the IRS and chose not to comply with the payment plan and engaged in a variety of interrelated fraudulent schemes to evade the payment of the delinquent payroll taxes. Nagy intimidated, manipulated, and threatened the loss of much needed jobs to gain the cooperation of his employees. Special agents of the IRS learned that Nagy had transferred all of S&S Drywall Assemblies income, contracts, receivables and assets to ASM Drywall, Inc. a shell company he created and placed in his sister’s name. The Oregon attorney general prosecuted Nagy in 2011 on allegations of criminal anti-trust and racketeering. He was sentenced to 30 days in jail and five years of supervised probation.

 
For more information, contact:
Leonard T. Jernigan, Jr.
Adjunct Professor of Workers’ Compensation
N.C. Central University School of Law
The Jernigan Law Firm
2626 Glenwood Avenue, Suite 330
Raleigh, North Carolina 27608
(919) 833-0299
neb@jernlaw.com
Website: www.jernlaw.com
Facebook: https://www.facebook.com/jerniganlawfirm
Twitter: @jernlaw
Blog: www.ncworkcompjournal.com

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What Does Supreme Court’s Warehouse Workers’ Ruling Mean?

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

Last Monday, the U.S. Supreme Court ruled 9-0 that contracted warehouse workers for Amazon did not have to be paid for time spent waiting to clear through an anti-theft security screening after their shifts. Justice Clarence Thomas ruled that time spent in an after-work security screening was not integral and indispensable to the primary activity of a warehouse worker, therefore not covered under the federal Fair Labor Standards Act. So what does that mean for you?

First of all, this should mean that any worker who has to go through a security check after work will not have to be paid by their employer for the time that process takes. However other pre- and post- workday activities should still be covered under the Fair Labor Standards Act. Donning and doffing safety equipment is still compensable because such safety equipment helps an employee work safely. Call-center workers still should be paid for time spent booting up and logging into a computer and phone because a call-center employee is unable to do their job if they are not logged into their phones and computers. Employees should also consult with a lawyer about state wage and hour law as state law may be friendlier to employees.

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Getting Rid of Old Medications

Today’s post comes from guest author Hayes Jernigan, from The Jernigan Law Firm.

       Flushing drugs down the toilet is the old way of getting rid of unwanted, expired or unused drugs, but recent studies have shown that this practice harms our environment. Low levels of drugs, such as birth control and anti-depressants among others, are being found in our lakes, rivers and streams and are negatively impacting fish populations and other aquatic life. Long term exposure in our waters can eventually lead to drug-resistant bacteria that will ultimately render our drugs ineffective.

       The U.S. Drug Enforcement Administration has recently released recommended ways to dispose of controlled substances including take-back events, where pharmacies, hospitals or clinics allow you to bring them your unused medications for them to dispose of properly, or mail-back programs and also collection receptacle locations, where you can drop off your unused medications. You can ask your pharmacist about whether any of these programs are offered in your area or contact your city or county’s trash and recycling services. If none of the recommended take-back programs are available in your area you should follow these 3 simple steps to dispose of most medicines in your household trash:

  • Mix medicines (do NOT crush tablets or capsules) with an unpalatable substance such as kitty litter or used coffee grounds; and
  • Place the mixture in a container such as a sealed plastic bag; and
  • Then throw the container in your household trash.

(Before throwing out your empty pill bottle or other empty medicine packaging, remember to scratch out all information on the prescription label to make it unreadable).

 Sources: http://www.fda.gov/Drugs/ResourcesForYou/Consumers/BuyingUsingMedicineSafely/EnsuringSafeUseofMedicine/SafeDisposalofMedicines/ucm186187.htm

http://www.deadiversion.usdoj.gov/fed_regs/rules/2014/2014-20926.pdf

http://www.dec.ny.gov/chemical/45083.html

Photo source: http://www.citizenscampaign.org/campaigns/pharmaceutical-disposal.asp

 

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The High Road: Investing in Your Workers

Today’s post comes from the United States Department of Labor.

Congress still hasn’t answered President Obama’s call to raise the national minimum wage. But states and localities are acting on their own, through legislative action and ballot measure. And across the country, forward-thinking businesses are leading by example. In community after community, I’ve visited with employers who know that paying workers a fair wage isn’t just the right thing to do; it’s also good for business.

boston beer collage
boston beer collage

Nobody would argue that Boston Beer Company founder and chairman Jim Koch doesn’t know what he’s doing. He produces America’s most successful craft beer, Sam Adams, served in bars, restaurants, stores and entertainment venues nationwide. His brewery has won more awards in international beer-tasting competitions that any other. I had the pleasure of meeting with Jim earlier this week, touring the Boston brewery, and learning about how he treats his 1,200 employees. “You can’t have engaged employees if you don’t invest in them,” he says. That’s why Jim offers his employees paid sick leave and starts everyone, including part-time workers, well above the minimum wage.

letter logic
letter logic

Later in Nashville, I met with a handful of small business owners who similarly value their employees, recognizing that the high road is the smart road. Among
them is Sherry Stewart Deutschmann who founded and runs LetterLogic, a company that processes statements, letters and checks for…

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