On November 18, 2015 the US Department of Justice in Eastern PA published a partial sentencing of Barbara Stanley who fraudulently obtained approximately $199,000 between July 2006 and December 2010. After committing a crime for over 4 years, why did it take 5 more years until she would be tried for her crime and then another 3 months for sentencing? Would the $199,000 ever be recovered?
Another case in California involving former San Quentin prison worker Hosea Morgan came to a head in September 2015 when he was convicted of making 2 fraudulent workers comp claims back in 2009. The trial lasted almost a month and sentencing took place about a month after in November. Adding the 2-month gap between conviction and sentencing to the 6-year gap between commission and trial is worrisome. Morgan was sentenced to six months’ jail time, 500 hours community service, and 5 years’ felony probation. Collecting the over $160,000 in restitution may never occur.
While these two cases made headlines and give a very clear picture of how much workers comp insurance fraud costs, there are countless other cases that do not make headlines nor are even reported or prosecuted. In some cases, prosecuting costs more than the fraudulent claim itself, so those cases fall to the wayside and are dismissed with no retribution. With the time it takes for fraud cases to come to conclusion, statutes of limitation may apply anyway making restitution collection impossible.
Unfortunately, even with reporting requirements in place, Special Investigative Units have no measure of keeping records for the results on how much workers comp fraud costs across the board. The examples above give the illusion that authorities are tough on workers comp fraud, however they fall short of keeping within laws that provide incarceration, fines, penalties, and restitution. Fraud cases are often handled poorly, and leniency tends to prevail in favor of the perpetrators who are either excused, plea bargained, or given light punishments.
There are, however, many reports online for restitution recoveries which reveal a very sad picture. Per the California Department of Insurance statement on Workers’ Compensation Fraud:
“In fiscal year 2014-15, the district attorneys reported a total of 740 arrests, which also included the majority of Fraud Division arrests. During the same time frame, district attorneys prosecuted 1,409 cases with 1,654 suspects, resulting in 650 convictions. Restitution of $32,065,830 was ordered in connection with these convictions and $8,647,532 was collected during fiscal year 2014-15. The total chargeable fraud was $646,186,555 representing only a small portion of actual fraud since so many fraudulent activities remain to be identified or investigated.”
With 1409 prosecutions, only 650 convictions were made. Over $32 million in restitution was ordered, but less than $7 million collected. In relation to the amount stolen (over $646 million) the amount collected is just over 1% of the total. That means $639 million could go uncollected.
Properly Investigate Every Claim
Every claim should pass through a “bulletproof investigation procedure”. This is designed to give you the proper information to make an accurate decision on the claim. Further subrosa investigation should be used as an information gathering tool. It is better to investigate EVERY claim, than to investigate no claims.
Here are 13 claimant behaviors that raise red flags:
- Injury takes longer to heal than medical guidelines specify.
- Injury is reported late, reported to a lawyer or the state commission before reported to the employer.
- Fails to attend weekly meetings.
- Is uncooperative; will not try a transitional duty job.
- Is not home during the workday when you phone.
- Only has a postal box, not a home address.
- Misses doctor appointments.
- Performs seasonal activities, hobbies, or work.
- Has moved out of town or out of state.
- Disputes average weekly wage due to additional income.
- Files for benefits in state other than principle location.
- Disputes information supplied by the employer.
- Submits repetitive medical reports indicating continuing, constant pain with conservative medical treatment.
For additional information on workers’ compensation cost containment best practices, register as a guest for our next live stream training.
Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices.
Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/
Live Stream WC Training: http://workerscompclub.com/livestreamtraining.com
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.