During slideHelloand welcome to the third module of this three-part presentation on workers’ compensation insurance fraud. I want to thank “ADP” for the opportunity to talk with you about this important subject.I am Ranney Pageler, Vice President of Fraud Investigations for EMPLOYERS, and I will be taking you through this module where, today, we will apply what we have discussed in the first two modules by reviewing the Lemus Francisco Guzman case and see how the Madrona Manor Wine Country Inn and Restaurant used the principles we discussed in the first two modules to team up with their carrier (EMPLOYERS) to fight a specific case of claimant fraud and to WIN that fight!So, let’s dive right in.
During slideFirst I want to display the EMPLOYERS legal disclaimer. My contact information will be displayed at the completion of the presentation should you have any questions or comments.
During slideIn 2005, a handy man, was terminated by the Inn for numerous violations of company rules and policies. Upon being terminated, the employee stated that he had injured his back and shoulder as the result of an injury he sustained earlier while working at the Inn. He completed a claim for benefits, but declined immediate medical treatment. The Inn noted several “red flag” indicators of fraud when reporting the claim and conveyed the information to the claim examiner. The Claim Examiner notified the EMPLOYERS Fraud Investigations Department who investigate criminal fraud issues while the claim examiner handled the administrative portion of the claim.READ THE SLIDE
DuringSlide As a result, a field compensability investigation was conducted which identified several co-workers of the claimant who stated that the claimant had told them that he was going to file a claim for a fictitious injury arising out of a fabricated workplace accident and that he would pay them to be “phony witnesses” to the accident. They all refusedREAD THE SLIDE
During Slide In late 2005, a referral for potential workers’ compensation fraud was made to the Sonoma County District Attorney’s Office. The referral included documentation of the claimant’s misrepresentations, witness statements and evidentiary documentation that supported an accusation that workers’ compensation insurance fraud had been committed by this claimant.READ THE SLIDE
During Slide: Early 2006, District Attorney Investigators independently substantiated the information contained in the Carrier referral for suspected workers’ compensation fraud and by mid-2006, the Sonoma County District Attorney generated a seven count felony complaint and an arrest warrant was issued for Mr. Guzman.The claimant immediately fled the country and remained “outstanding” for more than four years.
During SlideFor the next four years, both the carrier and law enforcement had to attempt to locate Mr. Guzman. Not to do so would have allowed the arrest warrant to go “stale” and could have become a bar to Mr. Guzman’s criminal prosecution if he was eventually located.READ THE SLIDE
During SlideMay 2, 2011, Francisco Lemus Guzman was arrested. On July 27, 2011, he admitted that he had never suffered an injury while working at the Inn and pled guilty to the workers’ compensation fraud charge as part of a plea bargain involving other unrelated criminal charges. The six year struggle had resulted in proving that Mr. Guzman’s claim against the Madrona Manor Wine Country Inn & Restaurant had been “TOTALLY FRAUDULENT”.READ THE SLIDE
During SlideBefore we look at the results of this investigation, let’s review the difference between a “Totally Fraudulent” and a “Partially Fraudulent” clam:READ THE SLIDE
During SlideIn October, 2011, Unit Stat filings were processed by EMPLOYERS to remove Mr. Guzman’s totally fraudulent claim from the Madrona Manor Wine Country Inn and Restaurant’s experience rating retroactively to April, 2005, when the fraudulent claim had been filed.READ THE SLIDE
During SlideThe policyholder received Tens of Thousands of dollars in refunded premium from carriers that insured them during the years following the filing of Mr. Guzman’s fraudulent claim. But NONE of it would have occurred if not for the policyholder and the carrier teaming up to fight and win against this fraudulent workers’ compensation claim. The policyholder letter on the screen pretty much says it all.
During Slide:This concludes the presentation. Read Slide.On behalf of EMPLOYERS, America’ s small business specialist, and ADP, thank you for attending this brief presentation on Workers’ Compensation Fraud.
Defending Against Workers Compensation Fraud: Module II
Ranney P. Pageler V.P. Fraud Investigations Department EMPLOYERS® Ranney has successfully referred more than 600 criminal prosecutions in 23 states for workers’ compensation fraud related crimes. Anti-fraud program has been the subject of several news media articles and broadcasts. Member of several anti-fraud organizations and taskforces.3
Claimant Fraud Detection and Investigation The Policyholder Recognizes several “Red Flag” indicators of fraud: The claim was filed late (upon termination of employment). Injury was unwitnessed. The facts did not support the claimant’s own description of accident. Medical treatment was initially declined by claimant. Notifies the carrier of suspected fraud: Notified the claim examiner of the “Red Flags” for potential fraud. Claim examiner notified the EMPLOYERS Fraud Investigations Department of the potential fraud issues. 4
Claimant Fraud Detection and Investigation (Cont’d) The Insurance Carrier Claim examiner coordinated the administrative claim handling, while the EMPLOYERS Fraud Investigations Department conducted a criminal investigation. Policyholder, employees and others were interviewed. Documentary evidence was identified and collected. Claimant’s previous claims history was obtained and reviewed. Claimant and witness statements were documented and scrutinized. Any exculpatory evidence was identified, documented and reviewed. 5
Referral of Criminal Investigation Package to LawEnforcement The Insurance Carrier A formal report of investigation was prepared, documenting the overt acts that demonstrated that the crime of workers’ compensation insurance fraud had been committed by this claimant. The Investigation Report identified suspect(s), evidence, witnesses, the amount of actual/potential loss and a timeline of relevant events. The completed investigation “package”, including the report of investigation and all evidence items was provided directly to the appropriate law enforcement agency for further investigation. Communication was maintained between the claim examiner and the EMPLOYERS Fraud Investigations Department to ensure proper administrative handling of the claim. 6
Prosecutorial Review and Criminal Charging Law Enforcement and the Prosecutorial Agency Law enforcement independently investigated and substantiated the facts, statements and evidence contained in the insurance carrier’s investigative package. The Prosecutorial Agency assessed the criminal prosecution potential following a referral from law enforcement. The prosecutor submitted a seven-count criminal complaint, with affidavit in support thereof, to the court, which then issued a felony arrest warrant for the claimant. The claimant then fled the country for a period of more than four years.7
Handling Fugitive Flight The Insurance Carrier and the Prosecutorial Agency The insurance carrier had to check its records annually to determine if any contact had been made with the claimant. The insurance carrier then had to annually notify the prosecutorial agency that had filed the criminal complaint of its records’ search and request that the arrest warrant remain active. The prosecutorial agency had to attempt annually to locate the wanted fugitive and re-activate the warrant in the various national and state law enforcement databases. 8
Obtaining the Criminal Conviction The Prosecutorial Agency The claimant was arrested during the commission of another unrelated crime. The arresting agency discovered the outstanding felony warrant during the jail booking process. The claimant was brought to the court that had issued the felony arrest warrant where he ultimately pled guilty and admitted that no industrial accident/injury had occurred. The claimant was sentenced to extended probation, ordered to pay restitution and held in custody facing other criminal charges and subsequent deportation. 9
Totally Fraudulent v. Partially Fraudulent Claim The Criminal Conviction Impact A totally-fraudulent claim is a claim where it can be proven that the injury never happened or was never industrially related: both the occurrence and the total amount of the claim is removed from the policyholder’s experience modification history (as a non- compensable claim), retroactively to the initial date of the fraudulent claim. A partially-fraudulent claim is a claim where it can not be proven that the injury never occurred, merely proven that the injury had no effect on the claimant after a specific date: an occurrence remains on the policyholder’s experience modification history, but the amount of the claim is reduced by the amount of the fraud. 10
Obtaining a Retroactive Positive Financial Result for thePolicyholder The Insurance Carrier Amended Unit Statistical Reports were filed by the carrier, retroactively removing the financial impact of the fraudulent claim from the policyholder’s experience rating history, even after more than six years had expired from the initial date of injury to the date of criminal conviction. EMPLOYERS issued a refund check to the policyholder to cover the adjustment of premium for the covered policy periods that had been adversely effected by the fraudulent claim. All subsequent insurance carriers had to provide similar premium refunds to the policyholder for the policy periods covered by those carriers. 11
What Did All of This Mean to the Policyholder? The policyholder’s letter says it all:12
Contact You may contact Ranney P. Pageler directly at EMPLOYERS® Fraud Investigations Department: Fraudfighters@employers.com (800) 750-3939 While we can only handle suspected fraudulent cases for EMPLOYERS policyholders, please feel free to contact us with general workers’ compensation fraud questions. We can also provide contact information to direct you to the appropriate government agency or insurance fraud unit for your jurisdiction.12