Tag Archives: 2014

2014 Top Ten Workers’ Compensation Fraud Cases

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Guest author and respected colleague Leonard Jernigan, from The Jernigan Law Firm in North Carolina, wrote today’s post. His analysis is a tradition at this time of the year that highlights one of the many misconceptions in workers’ compensation. 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.

This is the third time that this blog has featured his compiled yearly list, and the information continues to be fascinating, informative and often disturbing. Each of the examples affected real people and their loved ones. Especially tragic was the situation where a workers’ compensation scam was linked to the death of a 5-month-old baby boy.

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 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.

It is my hope that you have a safe and productive 2015.

  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

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

This entry was posted in Fraud, Workers' Compensation and tagged , .

Roger Moore Chairs Nebraska State Bar Association Work Comp Section Seminar

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Attorney Roger Moore

Firm partner Roger Moore recently completed his term as the chairman for the Nebraska State Bar Association (NSBA) Workers’ Compensation Section for 2014 with the conclusion of the Annual Workers’ Compensation Seminar on Nov. 14.

“My responsibilities were to develop topics, secure speakers and serve as master of ceremonies for the seminar by communicating with a variety of individuals over the course of numerous months,” Moore said. Roughly 100 people attended this year’s seminar, including firm associates Brody Ockander and Brianne Rohner Erickson

Moore completed his final year of serving a four-year rotation of leadership positions within the Workers’ Compensation Section, which started when he was nominated for and elected to the treasurer position three years ago. Moore was the third member of the firm to serve as chairman of the NSBA Workers’ Compensation Section. Partner Todd Bennett and I are past chairmen as well. Moore has participated as a member of the WC Section for the last 14 years, and is admitted to practice law in both Nebraska and Iowa.

There are currently more than 30 sections in the NSBA, according to its website. Each section is made up of a group of attorneys who share similar interests and voluntarily join that section. Attorneys can belong to more than one section.

The Workers’ Compensation Section is consistently one of the largest sections of the association. The section’s goals, according to Moore, are similar to the NSBA’s mission, which can be found here. Some of the priorities that Moore highlights include “to foster and maintain integrity, professionalism, civility and high standards of conduct by NSBA members,” and to help “provide quality support and services for NSBA members.”

Moore’s service is yet another example of the efforts our attorneys and staff have made to be leaders in the legal community, both as participants and leaders in shaping the legal conversations that affect our clients.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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Examining the Reality of Workers’ Memorial Day

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We write this blog post to bring attention to an article that was a big dose of perspective about all the recent Workers’ Memorial Day celebrations. The official day is April 28 for Workers’ Memorial Day, and many groups spend a lot of effort in organizing events, discussing safety, and holding memorials. Unfortunately, as the article points out, those efforts don’t always translate into safer workplaces and fewer fatalities.

What Karen C. Yotis and Robin E. Kobayashi did was talk to “a few thought leaders in the workplace safety arena” to get the reality of the situation by asking the question: “Has worker safety improved at all during the past year?” The experts they spoke with included “Tammy Miser, Founder/Executive Director of United Support & Memorial For Workplace Fatalities; Kim Bobo, Executive Director for Interfaith Worker Justice; Charles R. ‘Chuck’ Davoli, 2014 President of Workers’ Injury Law & Advocacy Group and a Louisiana Workers Advocate; and Rebecca Shafer, attorney, author, and a workers’ compensation/risk management maven who has spent her professional life advocating for safe workplaces.”

There is often a disconnect between thought and reflection and then taking action to change a situation. The blog post treads into the waters of holding people and businesses accountable and also taking action that leads to long-term change in the form of safer work environments.

Attorneys Rod and Jon Rehm are members of WILG’s Board of Directors, which is currently led by Mr. Davoli, and the other attorneys at Rehm, Bennett & Moore are all members of WILG because of the group’s efforts towards both accountability for businesses and safety for workers.

While we urge you to read the entire blog post that’s linked to in the first paragraph, here are a couple of thought-provoking highlights.

First, it is striking that a “cost containment expert” like Ms. Shafer describes how businesses must focus on safety. Although it’s at the end of the linked article, Ms. Shafer’s commentary is excellent – the article says that she “speaks out so passionately on the employer’s obligation to keep an unrelenting focus on safety.” Here’s a partial quote that she gave to the article: “ … the bottom line is that each employer needs to make safety the #1 priority. … Until worker safety is TOP priority, a company will continue to have very little success in achieving a balanced workers’ compensation insurance program.” She writes about making safety a higher priority than profitability, but realistically, companies would be much more profitable if they were also much safer.

Finally, Mr. Davoli shared a list of “nine safety elements” for “the construction and building trades” that a Workplace Safety Task Force created in Louisiana with WILG’s help.

Here’s that excellent list:

“1. A designated safety budget as part of the normal operating budget.

 2. A formal safety committee that meets on a regular schedule.

 3. An employer that pays employees for the hours they spend attending voluntary off-duty safety training sessions.

 4. A formal personal protective equipment training program.

 5. Written and formal safety goals that are updated periodically.

 6. Safety training for subcontractors.

 7. Detailed safety reports to employees on a regular basis.

 8. Regularly scheduled safety training programs for existing employees.

 9. A disciplinary procedure for employees who commit unsafe acts.”

The reflection portion of Workers’ Memorial Day must turn to action. The reality is that until businesses buy into and change their work culture to be safe, there will always be a need to remember those who were killed at work.

Thanks to Ms. Yotis and Ms. Kobayashi for writing such an excellent piece.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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