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Living easy

Workers’ comp fraud has bedeviled the county school budget to the tune of $3.1 million so far this year


Like a seductress sighing "take me," easy workers’ compensation pickings lay waiting for the bold and the larcenous.

This is the working stiff’s illicit ticket to ride–and many in this county take it.

And here’s why: Imagine your own endless pool of cash, which permits you to avoid the hassle of going to work while enjoying all of its benefits, perhaps for the rest of your life. Imagine free hot tub sessions and back massages and other healthful treatments, and liberal travel expense reimbursement. Imagine accomplishing this without attracting the attention of the law. Now, queue up for the handouts.

Too late, according to a special contingent of local school district officials who decreed last week that rampant workers’ compensation fraud among employees of San Luis Obispo County schools has met its Waterloo.

"We are mad as hell, and we aren’t going to take it anymore," Diana M. Larsen, deputy superintendent for business services for Lucia Mar Unified School District, enthusiastically informed a dozen earnest people scattered around a long conference table in a nondescript Atascadero office complex.

Yet uncertain nods greeted her declaration, her listeners plagued by their knowledge that in this county and elsewhere, the history of workers’ compensation fraud detection and prosecution is sketchy, at best.

During the past nine years, 79 cases of alleged workers’ compensation fraud have been presented by various entities to the San Luis Obispo County district attorney. Of those, 10 convictions were secured.

In the last three years, 29 such cases have made their way to county prosecutors for consideration, but not one single complaint has been issued. Initiating action against system abusers has proven difficult, to put it mildly, because adequate preparation is often found by prosecutors to be lacking.

There is talk about the Lucia Mar School District employee, yet unidentified, who has been on the public payroll for 21 years, has filed 21 separate workers’ compensation claims for injuries to every imaginable part of the body, has worked approximately 21 days in his career, and will retire with at least 21 years pension credit. Larsen says this story is no exaggeration. But no one has been able to prove fraud.

Fraud and its stepchild, abuse, exist in every cash-payout program, so pilfering from the worker’s compensation fund is not fresh news. (Fraud involves lying or deception for illicit gain; abuse is skillful manipulation or ignoring of the rules.)

Ever since the state government in 1913 first required employers to provide such financial assistance to workers injured on the job, clever exploiters have milked the system. Countless millions of malingerers have limped, gimped, and pimped their way through untold billions of dollars of workers’ compensation money.

John Garamendi, the state’s insurance commissioner, said in a recent op-ed piece in the Ventura County Star that "we have an imploding system that will collapse if new laws aren’t in place by January. Our system encourages fraud and invites litigation."

Larsen has a stake in quelling the raid on the workers’ comp fund. She says unscrupulous school district employees are jeopardizing the very education of county children.

Larsen is chair of the risk management committee for the Schools Insurance Program for Employees. SIPE is a joint powers authority established in 1977 by a union of all the county’s public school districts and community college to administer its self-insurance system for workers’ compensation.

Its members have formed what may be the first employers’ task force to take on the issue of fraud in the workers’ comp system. Panelists presently are struggling with ways to stifle at least the more blatant examples of fraud by workers’ comp claimants, whose persistent and successful efforts have bedeviled the county school budget to the tune of $3.1 million for the current year.

That’s three times what it was only three years ago, according to Larsen.

Some of this frenetic claims activity can be attributed to the octopus-like spread in sophistication of methods for beating the system. Numerous school district employees, for example, carry around a paperback book titled, "100 Ways to Screw Your Employer," according to Larsen.

SIPE originated as an economical way to do business, but its one-time practicality has morphed into a fiscal nightmare because of the overriding impact on the bottom line from phony injury claims.

Most common in the endless plethora of work-related physical ailments that people can endure are so-called "soft tissue injuries" requiring, as often as not, the complete or partial exclusion of all sorts of tasks, the seemingly endless attention of an expensive chiropractor or two, and occasional visits to a patient plaintiffs’ lawyer.

This appears to be the end assumption for anyone who wishes to rip off the workers’ compensation system: There are layers upon layers of graft, theft, and collusion through which the crafty can profitably traverse before getting even close to the flame, to even the most perfunctory official scrutiny.

Then, perhaps, the lurid details and startling videotape evidence of specific, outrageous examples of undeniable fraud might be brought to the attention of the local district attorney.

Finally, among that handful of totally egregious raids on the people’s money, 13 percent of the crooks will eventually endure conviction for their crimes.

With these odds, this isn’t even gambling for the perpetrators.

Larsen’s group was discussing with representatives of the San Luis Obispo County district attorney’s office a blueprint for changing the current culture of fraud.

In addition to enlisting more help from the law, local school districts have recently hired a variety of private consultants, including investigators, to step up the attack on fraud from within and abuse and, in Larsen’s words, to "put an end to all this."

Private investigator Alan Bond, whose prior work in law enforcement prepped him to understand this kind of technical crime, has been retained by the task force to train risk managers and others in the nuances of accident investigation. In this way, Bond said, legitimate claims can be handled properly, and questionable claims can be investigated from the start.

Plans also are afoot to initiate a policy of filing civil lawsuits against suspected abusers. This would have the impact of not only increasing pressure on potential subjects of investigations, but of reducing the burden of proof for the accuser. Successful civil prosecutions require only a "preponderance of evidence."

It is an arduous assignment the SIPE committee has accepted, and not just because of the abundance of fraudulent claims.

For years, there has been a relative lack of cooperation between county prosecutors and school districts, SIPE members generally agreed, though reasons for that unfortunate situation are varied.

Some believe it is a simple dearth of resources, which severely limits the amount of investigative time that can be spent on each case and, in turn, restricts the number of fraud complaints that reach any kind of closure.

Others think a lack of resolve on the part of prosecutors helps perpetuate comp fraud. Additionally, prosecutors are interested in pursuing only those cases with the highest possible guaranteed conviction rate.

Still others consider the possibility of a loosely knit but highly effective conspiracy linking legions of primary medical providers, unscrupulous lawyers, and outrageously expensive chiropractors to hordes of unprincipled, greedy, and lazy employees in an unceasing assault on the workers’ comp fund.

Linda Larkins, who administers workers’ compensation claims for SIPE, is more specific in her finger-pointing.

"The problem is Bill Herreras," she said without qualification, referring to a longtime county plaintiff’s lawyer whose success rate at collecting from her fund unmistakably rankles her.

Herreras keeps offices in Arroyo Grande and San Luis Obispo. He has 30 years of lawyering under his belt and specializes in representing people suffering work-related injuries. And he doesn’t think he’s the problem. Rather, he suggested, the competition is simply inadequate.

"I just have a great deal of experience in workers’ comp," he said. "I make Linda pay a fair price and she, I suppose, resents that. But my clients appreciate and respect what I do for them."

Herreras believes he’s demonized by Larkins and other critics because he wins.

"I’m on top of the rules," said Herreras, "and the rules are designed to protect both the employer and the employee. [Employers] just have to educate themselves and be prepared to meet the requirements."

For his own part, Herreras is past president and an active board member of the California Applicant Attorneys Association, which lobbies incessantly for injured worker benefits. In an arena of rules, where the contestant with the greatest knowledge wins, Herreras noted: "A lot of this is ignorance on the part of insurance companies and employers."

Larkins doesn’t consider legal skills to be the primary difference in workers’ comp disputes. She concedes the edge in many negotiations goes to those displaying "a willingness to bend the rules." And the master of that, said Larkins, is Herreras.

Herreras counters with the observation that much of what county school district officials think of as workers’ compensation fraud or abuse is usually little more than "a lack of understanding" on the part of fund administrators and investigators.

"Fraud is less than 1 percent in the system," he said. "But every time a worker gets injured, [employers] somehow think it’s un-American, that people shouldn’t get hurt on the job. A lot of these injuries are not witnessed by others. A lot of injuries occur over a long period of time. Too often, employers think that because a worker has an injury, that there is fraud. There are [fraud] cases, certainly, but they are miniscule. We’ve all seen films of people doing activities their doctor told them they shouldn’t be doing. But fraud? It’s very rare."

Rather than point the finger of suspicion at him, Herreras said Larkins and her school district associates, if they are truthful and have done their homework, should recognize "the major cost of workers’ comp–medical care, which consumes 60 cents of every premium dollar."

"But, look," he said, "injured workers are entitled to medical care. School districts are very comfortable in dealing with inexperienced people, and those who are underrepresented."

Every claim for injury under workers’ compensation calls for medical treatment, which often lasts for long periods and calls for many–in some cases, hundreds–of treatments, usually by chiropractors.

"I will admit that chiropractors’ costs are quite significant," said Herreras.

But as expensive as chiropractors can be, their share of the fund pie can pale against that collected by the pain management specialist.

Insurance administrators take considerable pains themselves to avoid having cases go that far, because the cost of business goes way up when pain management and treatment enters the picture.

By the time claims have reached the pain management stage, abuse not only becomes more expensive, but much more difficult to stop.

Take, for example, the case of Dr. Boris Pilch, San Luis Obispo County’s most notable pain management physician.

Pilch’s practice was geared toward treating workers’ compensation patients, and a prominent sign in his waiting room proclaimed that such patients were welcome.

For years, the state’s board of medical examiners trailed Pilch and his associates.

Eventually, the district attorney’s office received six billing fraud cases naming Pilch and two associates, Russ Levitan and Dale Kiker.

A task force combining personnel from the FBI, an insurance investigators’ group, Fresno County fraud investigators and the San Luis Obispo district attorney’s office participated in an inquiry into double billing and billing for services not rendered.

Assistant District Attorney Daniel Hilford was assigned to the case. Nevertheless, after what local prosecutors described as "a massive investigative effort," nothing happened.

"The investigation was completed with the inability to prosecute any of the providers [physicians] for fraud," according to a report from the district attorney.

Pilch has retired from the medical profession because of health problems, effectively terminating a pending investigation by state regulators.

The lack of success by employers in efforts to stop workers’ compensation fraud will not deter future efforts, said Larsen.

"If we need to spend $100,000 to investigate and prosecute a fraudulent case," she said, "we would rather do that than pay out $10,000" for fraudulent injury expenses. We are very serious about this." Æ

News Editor Daniel Blackburn can be reached at

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