Sunday, February 1, 2009

Insurance Fraud And Illegal Referral Fees: Attorney And Chiropractors Arrested

On December 11, 2008, the Los Angeles County District Attorney’s Office (LADA) reported that Hamid Taghizadeh, an attorney, was charged in Case No. BA349614 with 86 felony counts, including claims for filing false and fraudulent claims, receiving or offering compensation for referrals, and insurance fraud. Two chiropractors Bassam Michael Naber, D.C. and Youself Rushdi Helo, D.C. were also charged as it was alleged that they created false documents as part of the insurance fraud.

There are three additional co-defendants: (1) Jose Miguel Ayala (apparently a law firm marketer) who allegedly received over $191,000 in capping fees in 10 months; (2) Claudia Belen Cota (an administrative assistant at attorney Taghizadh’s office) who received more than $83,000 in capping fees over a two-year period; and (3) Zekrolla Taghizadeh, the attorney’s brother who is alleged of helping him run his office or “the scam” as the LADA’s office would call it.

The case began in July 2004 after a California Highway Patrol officer pulled over an alleged capper. Two sets of warrants were executed shortly thereafter, including one to attorney Taghizadeh’s office, and the items were subsequently sealed for attorney-client privilege reasons and/or physician-patient privilege reasons since chiropractor records were also seized. Two years later, the seized items were unsealed following a failed attempt by attorney Taghizadeh to litigate the return of the property all the way up to the California Supreme Court.

Among the items recovered was a capping ledger that contained a cryptic code. The book included numeric sequences such as “10-1, 1-12, etc.” The code was eventually broken by a CHP sergeant who determined that the code represented the first and last letters of the cappers name. Jose Ayala, for instance, was “10-1.”

According the California Department of Insurance: the California Highway Patrol, National Insurance Crime Bureau, Mercury Insurance Company, AIG, 21st Century Insurance, Sentry Insurance, Hudson Insurance, Allstate Insurance and Safeway Insurance all provided valuable assistance during the course of this investigation.

For more:,0,5354261.story

Please remember that an information or felony complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent unless proven guilty in court.

Although we do not know all the facts, what are a few things that this felony case can teach attorneys, physicians and chiropractors who work on personal injury cases?

1. The dangers of paying referral fees or kickbacks to a marketer, capper, or client/patient are clear. First, it is against the law and can jeopardize your professional license. Second, once there are no “real” cases for the marketer, they will make them up be either staging accidents or creating accidents on papers in order for them to keep making money. Generally, they will never tell the attorney or physician about this fraud or staged case. The patients or clients will be in on it and they may even have a script as to what to say. Many of these patients and clients are low income and will take big risks for an extra $1,000. When it all comes to light years later, the government authorities will often find it impossible to believe that the attorney or physician did not know that the accidents were staged or created.

2. Even if your office is not the one paying the referral fees or kickbacks, if you are in the chain – you will be targeted. For example, if the attorney is paying his office manager for referring cases, she refers staged cases and those cases are sent on a lien basis to the chiropractor, it may be presumed that the chiropractor knew or should have known. Imagine a trial when 10 patients or clients get up and testify that the case was fraudulent, and that since they’re not being prosecuted they have an incentive to say that they believed the doctor or lawyer knew even if they can’t point to any real evidence.

3. Look for patterns in your practice and practice compliance. Personal injury law firms and medical clinics often operate on volume. They also delegate a lot of authority to non-professionals. Think about how these marketers or referring sources could obtain so many patients or clients. Find out how these patients/clients came to the marketer, attorney or clinic as part of your due diligence.

4. If there is a case which smells like fraud and you decide to “drop it” conduct an investigation into what actually happened, who referred it and document your efforts. Often we have seem the fact that attorneys or physicians “dropped” suspicious cases as evidence that they knew what was going on – especially when they continued to take cases from the same referral sources.

5. The personal injury business has gotten much more competitive over the years given insurance companies’ common refusal to pay fair sums to settle legitimate claims. In addition, marketing on TV, radio and in the press can be costly. Resist the temptation to get business in by paying referral fees. If the marketer or capper gets caught – even for something else – you can be assured that he or she will turn on you. Be aware that there are individuals working undercover out there and you may be on videotape or audiotape.

6. If you enter into a marketing arrangement with an investigator or office person, run the arrangement by an attorney who specializes in representing licensed professionals and get an opinion that the arrangement does not violate the Business and Professions Code.

7. If you have a volume business, set up a written compliance plan and evaluate a certain number of cases per quarter and have it operated by an outside attorney or compliance officer. If there are any problems, do something about them immediately. Remember you are only as strong as your weakest link and one fraudulent or staged accident case can do great damage to your career.

8. If a significant portion of your cases are being sent to Special Investigation Units (SIU) of the insurance companies, conduct your own internal investigation. Hire an outside attorney to determine whether there are any legitimate issues or if it is simply that the carrier does not like the ethnicity of your clients or you or some other improper reason. Do not rationalize to yourself that personal injury attorneys' or physicians' claims are all being sent to SIU. At least with an outside investigation, you can demonstrate that you worked hard to ensure that fraud couldn't infiltrate your office. The personal injury business has fraud in it and you do not want to get caught up in it.

9. Have written policies for your office staff and paraprofessionals regarding the rules regarding the payment of compensation or something of value for the referral of a patient or client. We have seen more than one case where someone was making money on the side -- without the knowledge of the attorney or physician -- by accepting kickbacks for referrals.

Any questions or comments should be directed to: Tracy Green is a principal at Green & Associates. The firm focuses its practice on the representation of licensed professionals, including attorneys in internal investigations, State Bar proceedings, search warrants and criminal matters.


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