A taxing idea to help curb workers comp premium fraud

Insurers and states could team up to detect more rate evaders

A grand jury empaneled by Manhattan DA Cyrus Vance yesterday issued a sweeping report on widespread premium fraud in the Empire State’s workers compensation system. New York insurers lose nearly $500 million in premium in just the construction industry, the report says.

Vance highlighted the report in a keynote speech yesterday at the annual meeting of the New York Alliance Against Insurance Fraud (NYAAIF). He outlined several useful reform ideas, including:

• Increasing penalties, especially for large-dollar fraud schemes,

• Requiring insurers to conduct more audits of insured businesses,

• Creating a uniform application form, and issuing IDs injured workers can use to get medical treatment; and

• Developing an integrated database of information on applications, audits and certificates of insurance.

The last recommendation details how data analytics can be employed to better detect fraud, but it needs to go further.

What’s still needed is a simple solution to determine if an insured is accurately reporting payroll. The state could set up a relatively simple database with aggregate payroll data that it maintains from tax information all employers are required to report by law. Using tax-ID numbers, insurers could query the database and determine if there are discrepancies with data reported on comp applications.

Yes, some employers do defraud both insurers and the state in under-reporting payroll, but most don’t because penalties for tax fraud are much steeper than premium schemes.

To protect privacy, the aggregated data from the state wouldn’t have to be disclosed to insurers — only whether the data doesn’t match. A mismatch then would trigger an audit.

This solution — combined with advanced analytics to detect misclassification — could deter and detect much of the fraud, except for the very sophisticated schemes.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Fake injuries, real problems in work comp

Malingering and exaggerated claims leading to growing problems

blogSpectators at the “Cage of Fire and Strength” tournament would not have guessed that fighter “Noodle” Davis was disabled.

In fact, that’s what he was telling his employer and workers compensation carrier to believe. The Los Angeles fireman is one case among many in a growing population that is bilking employers, insurers and taxpayers in bogus comp and disability scams.

Recent statistics show a 20% increase in questionable workers compensation claims, according to the National Insurance Crime Bureau.

Comp cases are unfortunately often seen as lighthearted types of scams. Rather than gruesome surgeries, or fatal arsons, fraudulent comp claims frequently involve uninjured workers faking ailments. Amusing surveillance videos may accompany such cases. They include classics like a “back injury” case, where the worker is filmed playing basketball or lifting boxes, and a “leg injury” case, with an employee throwing a walker into the trunk and jumping in the car.

Most comp fraud cases involve a single worker trying to scheme the system, like Noodle Davis’ case. Workers also may cash in on the comp income while earning money illicitly on the side. Ohio photographer Richard Ketcham was sentenced last week for running a photo business while supposedly disabled. In Massachusetts, a corrections officer ran a body shop while collecting comp money.

Disability fraud has at times turned into a group affair. The ongoing Long Island Rail Road bust has netted the arrests of numerous workers, doctors and even an electrician, who all allegedly were cooperating toward a fraudulent early retirement. For years, workers retired by claiming disabling injuries. Many collected tens of thousands of dollars while playing golf and other recreational sports.

Comp fraud also can turn tragic. When a California contractor fell from a tree and died, his grieving family learned the man’s employer hadn’t purchased the required coverage. Early this year, a Massachusetts roofer admitted to misclassifying his business and lying about payroll to illegally lower his comp premiums —  leaving employees dangerously uncovered when injury strikes.

At all ends of the spectrum, comp and disability fraud are serious issues. Stealing comp money raises premiums and threatens jobs. Taxpayers are ripped off, as well, as in the Long Island Rail Road case. And the wellbeing of uncovered workers and their families is jeopardized.

But as the latest convictions show, these frauds also are serious business for scammers who think they’ll go undetected and get away with flagrant thievery.

About the author: Jennifer Tchinnosian is communications specialist for the Coalition Against Insurance Fraud.

Comp scammers more daring or just dumber?

Fraud of the MonthHow desperate (or dumb?) do you have to be to get a buddy to shoot you in the leg in order to file a workers comp claim? That’s what Pierre Lamont Taylor did while working for UPS in Baltimore. He and his cousin, Joseph Francis Brooks, got the idea one day while watching television. Brooks shot Taylor to stage a robbery. UPS’ insurer paid out a cool quarter million to Taylor who shared his payday with his cohort and everything was fine until a friend spilled the beans to Maryland state police.

Brooks was sentenced last week by a judge who said the scheme by the pair “ranks as one of the dumbest things” he’s seen in all his years as a lawyer, prosecutor and judge.

Recent workers comp scams have become more brazen, dumb and sometimes violent. A handful are detailed in this month’s web feature highlighting prominent and interesting cases. Some are laughable, some sad, but all hurt the integrity of this needed line of insurance, as this month’s article concludes:

People who defraud the workers comp system — whether they’re workers, employers or medical providers — increase already expensive insurance premiums on businesses, many of which already are on the edge of solvency. This prevents them from expanding their businesses and hiring new employees — something this nation desperately needs right now. Workers comp fraud also is an affront to the truly injured workers and makes it harder for them to get the compensation they deserve.

Good Morning America features the Coalition

QuiggleABC-TV’s premiere morning newscast featured an excellent piece on workers compensation fraud this morning. It profiled a handful of insightful cases, including comp claimants who were caught skydiving and running a race in drag. This segment not only is entertaining, but also serves to build awareness about fraud and communicates who ends up paying for these crimes. This awareness helps to deter fraud, as well. Some people will think twice about committing fraud if they see others getting caught and punished.

The segment includes an interview with the coalition’s Jim Quiggle, who initiated the idea for the segment and provided producers with the cases that were profiled. You can view the segment here.

Social media as an investigative tool

social mediaI’m in negotiations to buy a new home and have started gathering intelligence on the sellers to understand their motivations and gain an upper hand in our deliberations. Now I’m no great sleuth and don’t have access to many of the tools investigators use these days. But I do know my way around the Internet, so I start with Google and get some basic information on the young couple selling this house, such as their occupations, published writings, schools they attended, etc. Interesting, but hardly insightful.

Then I turn to Facebook. From checking up on long-ago girlfriends and long-forgotten college buddies, I know a lot of people keep their Facebook pages open — or just don’t know how to set the preferences to keep them from prying eyes. So I search on the husband’s name and get a quick match. Unfortunately, his page is restricted to his Friends.

Then I try the wife’s page and have better luck. It’s open for everyone to see. Perusing her page I get a sense of who she is, her likes, her friends and her hot buttons. And then a post from a couple months back hits me straight in the face — she announces to her friends she’s pregnant with her third child. Now this is a tiny house that must seem even smaller with two kids, let alone three. These are very motivated sellers and, with this nugget of information, I expect to buy this home at a very good price.

My little investigative endeavor pales against the exploits and successes insurance investigators are enjoying these days using social networking sites. An article in Business Insurance on Monday profiled several success stories on catching workers comp cheats.

Frank Pinder, head of GlobalOptions SIU, recently told us about a case of an injured worker who claimed he was too hurt to get out of bed, yet he had time to update his MySpace page and post upcoming dates and venues his rock band was playing. “When our investigator arrived at the gig, the drummer not only banged away for the entire set without pain, but showed no signs of injury when carrying his drum set and amplifiers on and off the stage,” Frank reported.

Another case involved a women who claimed fear of leaving home prevented her from working. Frank says it took a day for his investigators to check her Twitter page and her Tweets to learn about social events she was planning to attend including a friend’s baby shower.

With people in their 30s and 40s now dominating social media outlets, the Internet has become an invaluable tool for fraud investigators. If you have a clever example of using social media as an investigative tool, please share it with us.

A prison guard’s second worst nightmare

I’m not familiar with the specifics of this case, but this is a much longer prison term than we’ve seen in many years for this type of fraud.

Ex-Prison Guard in Sacramento Sentenced To 7 Years

A former Folsom prison guard has been sentenced to seven years in prison for faking injuries to get money from the state.

It’s one of the most severe sentences ever for pension fraud in California.

June Lucena claimed she was too injured to work after falling 16 to 20 feet from a guard tower in 1999 and undergoing surgery on her shoulder and jaw.

But surveillance tape showed the 45-year-old piloting a jet ski and frolicking on a water slide.

A Sacramento County jury convicted Lucena on 14 counts of fraud for faking injuries to get workers’ compensation and state disability. Permanently disabled guards get tax-free pensions of half their pay for life.

Lucena’s attorney, Lance Daniel, called Friday’s sentence “outrageous,” and said he has filed notice to appeal.

Prison can be especially tough on ex-guards. This should serve as a strong deterrent to other prison employees in the state. Defrauding workers compensation isn’t worth the risk.

Stupid comp claimant tricks

I’m old enough to admit I don’t know who Hannah Montana is and I’ve never heard her music. But she must be a huge sensation because people are willing to do foolish things to win tickets to her concerts.

The latest contest was a 40-yard dash for men dressed in women’s clothing, sponsored by a Hartford, Conn. radio station. Apparently, one workers comp claimant had nothing better to do one day last October, so he donned a dress, wig and high heels and entered the competition.

When a local tv station covered the drag race, an alert viewer spotted comp claimant Garrett Dalton, 41, and blew the whistle. It took a while, but Dalton, a corrections officer, was finally arrested this week for workers comp fraud. Being branded a cheat is shameful enough. But having your photo in drag plastered about? That ought to send a signal that cheating workers comp just isn’t worth it.