Friday, August 21, 2009

Increase In Prosecution Of Employees And Employers For Workers' Compensation And Disability Fraud

With the economic issues facing the economy, there has been an increase in the number of workers' compensation and disability fraud cases filed against employers, workers and others.

Here are three examples of individuals who were recently charged with workers' compensation or disability fraud. A criminal complaint contains only allegations against an individual and individuals must be presumed innocent unless and until proven guilty.

There have also been a number of recent cases against employers for workers' compensation premium fraud which we will discuss in a separate future post.

Why the increase in the prosecution of these cases? First, the District Attorney's Offices have separately funded units to prosecute these cases. The funding is from workers' compensation premiums and not from county budgets. Second, the insurance companies are aggressively putting these cases together along with the Department of Insurance and present them as a package for filing at the DA's Offices so that most of the work is done.
Third, when the economy has problems, workers' compensation claims increase. From the workers' standpoint, we have seen an increase in claims (including some false or exaggerated ones) since many workers do not have health care insurance and this allows workers to obtain medical treatment post-employment. Further, since unemployment can run out after a number of months, a disability (partial or full) claim will allow the employee to obtain financial benefits apart from unemployment.
Fourth, the high cost of workers' compensation in California has caused many employers to leave the state and reducing fraud by prosecuting individuals and employers is politically popular.
1. San Bernardino Man Arrested for Workers’ Compensation Fraud
On July 29, 2009, Jose Haro-Arriaga, a 43 year-old San Bernardino man, was charged with workers' compensation fraud in San Bernardino County. The allegations in the nine-count criminal complaint are as follows. In December 2005, Mr. Haro-Arriaga filed a workers' compensation claim alleging an injury after two subjects stole a backpack leaf-blower he was wearing and operating during his employment as a landscape worker. Mr. Haro-Arriaga is alleged to have misrepresented the facts of his industrial injury, presented false or fraudulent statements in support of his claim for compensation, in order to obtain benefits in excess of $39,000. In addition, Mr. Haro-Arriaga allegedly gave false statements during a deposition, and allegedly concealed and failed to disclose his prior industrial injuries. His bail was set at $25,000.
2. San Bernardino Man Charged With Insurance Fraud And Grand Theft For Allegedly Operating His Own Business While Receiving Disability Benefits
On June 5, 2009, the San Bernardino District Attorney's Office charged Arno Offerman of Rancho Cucamonga with insurance fraud and theft related charges that stemmed from a workers compensation claim that Mr. Offerman had filed. The District Attorney's Office alleged that Mr. Offerman suffered a work related injury in July 1999, while working as a termite and pest control inspector. As a result of his alleged injury, Mr. Offerman was determined to be incapable of working and was subsequently placed on temporary total disability (TTD). Insurance documents showed that Mr. Offerman received TTD payments from late 2002 through June of 2005, and that he received over $64,000 dollars in TTD payments during that time.
During the same time period that Mr. Offerman was receiving TTD payments from the California Insurance Guarantee Association (CIGA), he was also earning income by operating his own termite and pest control business in Rancho Cucamonga, which Mr. Offerman allegedly failed to disclose to the insurance company (CIGA).
The investigation grew and allegedly revealed that while Mr. Offerman was operating his termite and pest control business he employed numerous employees that he failed to report to the California Employment Development Division (EDD). In addition to failing to report his employees to EDD, Mr. Offerman also failed to deposit with EDD the statutorily required taxes for his employees. Thus, this case was both an individual disability fraud and an employer's failure to pay the employment taxes to EDD.
3. Rialto Woman Plead Guilty To Insurance Fraud And Sentenced To Probation
In another worker's compensation fraud case prosecuted by the San Bernardino District Attorney's Office, Sherilee Peace was charged with insurance fraud relating to her workers' compensation claim. Ms. Peace claimed she injured her lower back and hip in March 2004, while employed by The Press Enterprise as an advertising representative. She delayed reporting the injury for two months.
In filing the claim, Ms. Peace made several alleged misrepresentations regarding her prior claim and medical history, her prior employment and her physical activities and abilities. The insurance company did a sub rosa (undercover) investigation and were able to contradict information she gave regarding her physical capabilities by surreptitiously obtained surveillance video.
Ms. Peace subsequently pleaded guilty to two counts of insurance fraud and under the terms of the plea agreement, was to be sentenced to three years of felony probation, ninety days in jail and payment of over $22,000 in restitution.

Posted by Tracy Green. Any questions or comments should be directed to: Tracy Green is a principal at Green & Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have handled numerous workers' compensation fraud cases representing individuals, businesses, medical providers and attorneys. The firm website is


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