Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: WCAB Rules on Procedure for County to Recover L.C 4850.4 Advances. FLSA Mandates Call Center Employees be Paid for Booting Up Computer. Applicant Attorney Jon Woods to Serve 4 Years for Comp Fraud. San Jose Father and Son Arrested for $12M Premium Fraud. 3 Bay Area Restaurants Settle Wage Theft Case for $6M. U.S. DOL Recovers $202K From SoCal Car Wash for Wage Theft. EEOC Releases Updated “Know Your Rights” Mandated Poster. Few California DAs File Charges for Wage Theft – But That May Change. Science May Support Apportionment of Musculoskeletal Disability to Smoking. AM Best Reports WC Profitability “Unmatched” by Other P/C Lines.
Nicole Schilder (spouse), Isabel Marsau (daughter), and Charles Marsau (son), filed death benefits claims alleging that Donald Marsau died as a result of the repetitive and cumulative stress of his employment with Stander Reubens Thomas Kinsey, insured by defendant Valley Forge Insurance, administered by CNA Claims Plus. The two applications were filed at the Sacramento District office of the WCAB.
The employer is a workers’ compensation defense law firm. Before he died, Donald Marsau was a Certified Workers’ Compensation Law Specialist at Stander Reubens Thomas Kinsey. He practiced workers’ compensation defense principally in the Sacramento area until his death on December 4, 2021.
On February 23, 2022, defendant filed its Petition for Disqualification and Request to Transfer Venue Based on Disqualification of Judges. The Petition asked to disqualify all of the WCJs at the Sacramento and Stockton District Offices. And also requested a change of venue to a district office other than the Sacramento and Stockton District Offices.
A Report on Petition for Disqualification from the Presiding Sacramento workers’ compensation administrative law Judge recommended that the Petition for Disqualification be denied or dismissed.
A WCAB panel considered the allegations in the Petition, and the contents of the Report. Based on its review of the record, and for the reasons discussed below, it denied the Petition and returned the matter to the WCJ for further proceedings as appropriate in the case of Nicole Schilder (Donald Marsau Deceased) v Stander Reubens Thomas Kinsey – ADJ15708296 (October 2022).
Labor Code section 5311 specifically states that a party may object “to a particular workers’ compensation judge” being assigned to the case at issue. (Lab. Code, § 5311.) There is no statutory or case law that allows the disqualification of multiple WCJs by a party filing a single petition to disqualify.
The Appeals Board has previously held that parties may not seek “blanket” disqualifications, and that disqualifications must be sought on a case-by-case basis. (Robbins v. Sharp Healthcare (2006) 71 Cal.Comp.Cases 1291, 2006 Cal.Wrk.Comp. LEXIS 314 (Appeals Board significant panel).)
Further, although a petition for disqualification of a WCJ is to be determined by the Appeals Board, a petition for change of venue will initially be addressed by the Presiding WCJ at the district office where the petition is filed, and subsequently an aggrieved part may seek review by the Appeals Board. Thus the “Request to Transfer Venue” was not properly before the WCAB panel and was therefore not addressed at this time.
Thus the panel did not address the merits of the disqualification or removal. However, upon return of this matter to the trial level, if defendant seeks a change of venue from the Sacrament District Office, that issue would need to be submitted to the Sacramento Presiding WCJ. Once the proper venue has been determined and the matter has been assigned to a WCJ, defendant may seek disqualification if appropriate.
The panel also said that “It is also important to note that a party’s “unilateral” and/or “subjective” perception of an appearance of bias does not constitute a factual or legal basis for disqualification of a WCJ. (Haas v. County of San Bernardino (2002) 27 Cal.4th 1017, 1034 [119 Cal. Rptr. 2d 341] Andrews v. Agricultural Labor Relations Bd. (1981) 28 Cal. 3d 781 [171 Cal. Rptr. 590].)”
The CDC updated their recommendations for using opioids to treat pain, removing specific dose and duration targets that pain experts said had caused unintended harm.
The new 2022 Clinical Practice Guideline addresses the following areas: 1) determining whether to initiate opioids for pain, 2) selecting opioids and determining opioid dosages, 3) deciding duration of initial opioid prescription and conducting follow-up, and 4) assessing risk and addressing potential harms of opioid use.
The Clinical Practice Guideline supports the primary prevention pillar of the HHS Overdose Prevention Strategy – supporting the development and promotion of evidence-based treatments to effectively manage pain.
According to the CDC press release “The recommendations are voluntary and provide flexibility to clinicians and patients to support individualized, patient-centered care. They should not be used as an inflexible, one-size-fits-all policy or law or applied as a rigid standard of care or to replace clinical judgment about personalized treatment.”
CDC followed a rigorous scientific process using the best available evidence and expert consultation to develop the 2022 Clinical Practice Guideline. An independent federal advisory committee, four peer reviewers, and members of the public reviewed the draft updated guideline, and CDC revised it in response to this feedback to foster a collaborative and transparent process. CDC also engaged with patients with pain, caregivers, and clinicians to gain insights and gather feedback from people directly impacted by the guideline. The expanded guideline aims to ensure equitable access to effective, informed, individualized, and safe pain care.
The new guidance, released by the Centers for Disease Control and Prevention, reflects the evolution in thinking of how opioids should be used, and the reality of how they are being used.
According to a review of the new Guidelines by Stat News, the original guidelines, issued in 2016, helped further drive down opioid prescribing levels that had been in decline since 2012, as the country grappled with its legacy of overprescribing that contributed to the overdose epidemic.
But critics contended the 2016 guidelines, while helping limit new prescriptions, introduced other harms by leading to unsafe dose reductions for people already on opioids and some long-term patients being cut off from medication they depended on.
The authors of the original guidelines warned in 2019 that their recommendations were being misapplied. And in a commentary also published Thursday, the authors wrote that they revised their recommendations because the original document was improperly cited as a justification for certain policies that restricted opioid access.
Additional materials associated with the guideline are available for patients and clinicians.
California Agricultural Network, Inc. (“CAN”) is a non-profit, mutual benefit California corporation with its principal place of business in Ontario, California. It is a collective of growers who have pooled their resources to successfully form a self-insured group.
A Self-Insured Group (SIG) is an alternative to traditional insurance, granting California members (employers) greater control over their workers’ compensation spend. CAN was formed in 2004 as a SIG for agricultural employers. Under CAN’s bylaws, all members must be self-insured employers within the agricultural industry, or provide support or services to the agricultural industry
According to a lawsuit filed in Ventura County Superior Court, because “CAN’s members share responsibility for all other members’ workers’ compensation liabilities, the manner in which each member discharges its duties has a direct pecuniary effect on every other member. The members each repose trust and confidence in every other member to discharge their duties responsibly and in good faith. Thus, by becoming a member of a SIG such as CAN, members take on legal duties to every other member, including fiduciary duties.”
The lawsuit alleges that Houweling Nurseries Oxnard, INC. (“HNOI”), became a member of CAN in 2006 and remained a member until September 2021. HNOI operated a tomato farm in Camarillo, California. In 2021, HNOI underwent a name change to its present name, Longvine California , Inc. Another defendant in the lawsuit is Casey Houweling who resides in British Columbia Canada.
CAN alleges that by March 2021, all of Casey Houweling’s interest in HNOI and/or its holding companies was transferred to Longvine and/or companies which Longvine owned or controlled, and that these transactions were “concealed” from CAN. And Defendants, “They also failed to report the transactions to the Office of Self-Insurance Plans.
California law, specifically 8 Cal.Code Regs. § 1 5203. 8, requires self-insured employers to report to OSIP any transactions which result in a material change in the form of business structure or ownership from the time the employer first obtained its Consent to Self-Insure.
Plaintiffs say that under CAN’s bylaws, membership in the group is non-transferrable. The Defendants were required to report the structural/ownership changes in HNOI to CAN so that CAN and its members could evaluate whether the restructured organization was suitable to remain a self-insured member of CAN.
According to the allegations “HNOI, indeed, no longer had the financial strength or suitable management to remain a CAN member. By September 2021, in fact, it could no longer remain in business, and sold its Camarillo facility to a marijuana grower.”
Plaintiffs go on to say that HNOI ended up laying off all of its staff. Further, HNOI and its owners, failed to undertake even minimal steps to prevent or minimize post-termination claims by laid off workers, a foreseeable and often avoidable consequence of any business shutdown. More than 100 laid off employees filed workers’ compensation claims against HNOI after being laid off.
Allegedly HNOI had by then ceased its membership in CANSIG, but CAN was left responsible to pay the post-termination claims of its injured workers. CAN remains liable as a matter of law for all of those claims, which are continuing to develop and will increase in cost as time passes.
Plaintiffs say that Casey Houweling in the meantime, having left CAN and its members responsible for millions of dollars in unpaid workers’ compensation claims, took advantage of HNOI’s closure by starting a new company, Houweling’s Camarillo, Inc., hiring back the same employees whom he and his co-defendants laid off, and continuing HNOl’s former tomato growing operations on the exact same site that had been farmed by HNOI. In so doing, “Casey Houweling engaged in egregious self-dealing, in contravention to all of his 9 legal and fiduciary duties to CAN and its members.”
CAN therefore seeks damages in its lawsuit against several defendants for losses caused by various theories of liability that left the insurance network “holding the bag” for more than $3 million in workers’ compensation claims.
According to a report on this suit by Pacific Coast Business Times, the Houweling’s Tomatoes property in Camarillo was sold in September 2021 to Glass House Group, a publicly traded cannabis company with other greenhouses in Santa Barbara County. Glass House paid around $93 million and has converted part of the space into cannabis greenhouses. There were 486 employees in August 2021, after Glass House agreed to buy the property.
They report that for now, Glass House has split the Camarillo facility into cannabis and tomatoes, and has said that if cannabis becomes legal at the federal level, it will devote all 5.5 million square feet to cannabis.
Forbes reports that Glass House is one of the fastest-growing, vertically integrated cannabis companies in the U.S., with cultivation, processing, distribution and retail operations in California, where voters legalized recreational marijuana in 2016.
Last May, Glass House reported that it has begun marijuana cultivation operations at its new 5.5 million square foot greenhouse in Southern California after receiving approval to open the facility from state and local regulators. The company received licenses from the California Department of Cannabis Control and Ventura County on March 11 and began cultivation operations at the massive facility the same day with the transfer of thousands of young plants from an existing site in Santa Barbara.
A federal grand jury charged 46 year old Sohail Mamdani D.O., who lives in Los Banos, for mail fraud and money laundering in connection with a disability insurance fraud scheme, and unlawful use of a DEA registration number and fraudulently obtaining possession of a controlled substance,
US News reports that Sohail H. Mamdani is a general surgeon in Hanford, California and is affiliated with Memorial Hospital Los Banos. He received his medical degree from Nova Southeastern University – College of Osteopathic Medicine. The Osteopathic Medical Board of California reports that his Osteopathic Physician and Surgeon license is still active.
According to court documents, between February 2020 and March 2022, Dr. Mamdani submitted over 6,000 initial claims to EDD for disability insurance payments despite having never seen or treated the majority of the claimants.
As part of the fraud, Mamdani would charge the purported patient a fee for both the initial disability claim and any supplemental claims. In addition, in order to avoid federal reporting requirements, Mamdani structured financial transactions. The investigation reveals potential intended losses to EDD of up to $99 million dollars with potential actual losses of over $53 million.
Mamdani is separately charged with unlawfully using another doctor’s DEA registration number for the purpose of unlawfully obtaining controlled substances. Additionally, Mamdani wrote a number of fraudulent prescriptions in the names of other individuals in order to obtain controlled substances himself.
This case is the product of an investigation by the Drug Enforcement Administration, the Federal Bureau of Investigation, and the California Employment Development Department. Assistant U.S. Attorneys Alexandre Dempsey and Michael Tierney are prosecuting the case.
If convicted of mail fraud, Mamdani faces a maximum statutory penalty of 20 years in prison and a fine of up to $250,000 or up to twice the gross gain or gross loss caused by the fraud.
He faces a maximum statutory penalty of 20 years in prison and a fine of up to twice the value of property involved in the transactions or up to $500,000 if convicted of the money laundering charges.
He also faces a maximum statutory penalty of four years in prison and a $250,000 fine for each of the drug related charges.
Healthgrades named the 50 recipients of its 2023 Specialty Excellence Awards Oct. 25, including the top hospitals for surgical care.
Using 2019-2021 Medicare Provider Analysis and Review data, Healthgrades analyzed risk-adjusted mortality and complication rates for 15 of the most common in-hospital surgical procedures, including cardiac, vascular, joint replacement, prostate, spine and gastrointestinal surgeries.
And nine of California Hospitals were on the list of 50 national hospitals to received an Award.
– – Eisenhower Medical Center(Rancho Mirage, Calif.)
– – Kaiser Permanente San Jose Medical Center
– – Kaiser Permanente San Leandro Medical Center
– – Kaiser Permanente Woodland Hills Medical Center
– – Los Robles Regional Medical Center (Thousand Oaks)
– – Palomar Medical Center Escondido
– – Providence Saint John’s Health Center (Santa Monica)
– – Redlands Community Hospital
– – Scripps Green Hospital (La Jolla)
To help consumers evaluate and compare hospital performance specific to specialty areas, Healthgrades communicates performance in two ways – through ratings and awards.
To measure performance, Healthgrades used Medicare inpatient data from the Medicare Provider Analysis and Review (MedPAR) file purchased from the Centers for Medicare and Medicaid Services (CMS) for years 2019 through 2021. For Appendectomy and Bariatric Surgery, Healthgrades used inpatient data provided by 16 states that provide all-payer data for years 2018 through 2020 (one year behind MedPAR data years).
Patient outcomes data for 33 conditions or procedures were analyzed for virtually every hospital in the country, with the exception of Appendectomy and Bariatric Surgery for which hospitals in 16 all-payer states were assessed.
The first and most fundamental way that Healthgrades communicates performance is through star ratings. Star ratings are an evaluation of the hospital’s actual performance as compared to the predicted performance for that hospital based on a specific risk-adjustment model applied to that hospital.
Under programs set up by the Affordable Care Act, the federal government has cut payments to hospitals that have high rates of readmissions and those with the highest numbers of infections and patient injuries. . For the readmission penalties, Medicare cuts as much as 3 percent for each patient, although the average is generally much lower. The patient safety penalties cost hospitals 1 percent of Medicare payments over the federal fiscal year, which runs from October through September.
The Hospital Readmissions Reduction Program has been a mainstay of Medicare’s hospital payment system since it began in 2012. Created by the Affordable Care Act, the program evaluates the frequency with which Medicare patients at most hospitals return within 30 days and lowers future payments to hospitals that had a greater-than-expected rate of return. Hospitals can lose up to 3% of each Medicare payment for a year.
Section 1886(q) of the Social Security Act sets forth the statutory requirements for HRRP, which required the Secretary of the U.S. Department of Health and Human Services to reduce payments to subsection (d) hospitals for excess readmissions beginning October 1, 2012.
In addition, the 21st Century Cures Act directs CMS to assess a hospital’s performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full Medicaid benefits beginning in FY 2019.
The legislation requires estimated payments under the peer grouping methodology (that is, FY 2019 and onward) equal payments under the non-peer grouping methodology (that is, FY 2013 to FY 2018) to maintain budget neutrality.
California Healthline has established a searchable database searchable by state or hospital name. It is available on their website, and is open to the public.
But the federal government has eased its annual punishments for hospitals with higher-than-expected readmission rates in an acknowledgment of the upheaval the COVID-19 pandemic has caused, resulting in the lightest penalties since 2014.
The pandemic threw hospitals into turmoil, inundating them with covid patients while forcing many to postpone elective surgeries for months. When the Centers for Medicare & Medicaid Services evaluated hospitals’ previous three years of readmissions, as it does annually, the government decided to exclude the first half of 2020 because of the chaos caused by the pandemic. CMS also excluded from its calculations Medicare patients who were readmitted with pneumonia across all three years because of the difficulty in distinguishing them from patients with covid.
Akin Demehin, senior director of quality and patient safety policy at the American Hospital Association, said the changes were warranted. “The covid pandemic did a lot of really unprecedented things to care patterns of hospitals,” he said.
After making those changes, CMS evaluated 2½ years of readmission cases for Medicare patients who’d had heart failure, heart attacks, chronic obstructive pulmonary disease, coronary artery bypass grafts, and knee and hip replacements. As a result of its analysis, CMS penalized 2,273 hospitals, the fewest since the fiscal year that ended in September 2014, a KHN analysis found.
To limit penalties, many hospitals in recent years have instituted new strategies to keep former patients from needing a return visit.
Shiekh Shoes, LLC hired Britani Davis as a sales associate in August 2018. As part of her “new hire” paperwork, Davis and Shiekh signed an agreement “to resolve any and all disputes or claims each may have against the other which relate in any manner whatsoever as to Employee’s employment . . . by binding arbitration” and to “waive their right to commence, be a party to, or class member of, any court action.”
Davis’s employment at Shiekh would prove to be short, however, as she resigned from the position a mere three months after being hired. According to Davis, she was subjected to ongoing, sexually explicit, and demeaning comments, unwanted touching, and indecent exposure from her co-worker, Danilo Ensuncho, as well as other harassing conduct from Shiekh customers.
On March 25, 2019, Davis filed a complaint against Shiekh and Ensuncho for various causes of action including sexual harassment. On July 8, Shiekh, represented by counsel, answered Davis’s complaint, asserting the arbitration agreement as an affirmative defense.
On July 30, Shiekh filed a case management statement, in which it requested a non-jury trial, estimated a trial between five to seven days, and noted that the case would be ready for trial “within 12 months of the date of the filing of the complaint.” Shiekh also anticipated conducting written discovery, depositions, and expert discovery, and filing motions. Additionally, Shiekh noted its willingness to participate in a settlement conference, neutral evaluation, or binding private arbitration.
On August 14, the court scheduled a jury trial for July 20, 2020. On January 13, 2020, Shiekh filed a substitution of attorney, listing itself as its new attorney. On June 30, Davis sought to continue the trial date, Shiekh filed no opposition. The court granted the motion and continued the trial date to September 28, 2020.
On August 24, seven months after being unrepresented by counsel, Shiekh filed a substitution of attorney designating its new attorney. On October 5, 2020 – about 17 months after Shiekh was served with the complaint and seven months before the new trial date – Shiekh moved to compel arbitration and to stay the action pursuant to both the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) and California Arbitration Act (CAA) (Code Civ. Proc., § 1280 et seq.).
The court, denied the motion. The Court of Appeal affirmed in the published case of Davis v. Shiekh Shoes, LLC – A161961 (October 2022).
After the parties completed briefing, the United States Supreme Court issued its decision in Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708 (Morgan), holding that under the FAA, courts may not condition a determination of waiver on prejudice. In light of this, we directed the parties to submit supplemental briefs on the applicability of the FAA and Morgan, if any, to the issues raised in the appeal. Both parties submitted briefs accordingly.
Courts have recognized that where the FAA applies, whether a party has waived a right to arbitrate is a matter of federal, not state, law. The Supreme Court in Morgan remarked that “outside the arbitration context, a federal court assessing waiver does not generally ask about prejudice,” and generally, that “court[s] focus[ ] on the actions of the person who held the right,” rather than the “effects of those actions on the opposing party.”
The California Supreme Court has not yet addressed Morgan. Thus, it has not spoken on whether prejudice remains a “critical” consideration in the waiver inquiry under California law, as it held prior to Morgan.
Even if the trial court may have improperly conditioned its waiver determination on a showing of prejudice, its decision may still be affirmed so long as any other correct legal reason exists to sustain it.
Shiekh’s lengthy delay in moving to compel arbitration cannot be squared with an intent to arbitrate. By the time Shiekh filed its motion, 17 months had elapsed since it was served with the complaint. This length of time, in the court’s view, was significant, as reflected in its comments at the hearing on Shiekh’s motion: “[T]his issue of waiver comes up at least once a month in this calendar. And I gotta tell you . . . [¶] . . . [¶] . . . I’ve never seen [a delay] that’s as long as seventeen months . . . .”
The Court of Appeal concluded by noting “In light of Shiekh’s nearly one-and-a-half-year delay in moving to compel arbitration, request for trial, active participation in discovery, acquiescence to the trial and discovery schedule, and court appearances, the trial court had ample evidence from which to conclude Shiekh’s actions were inconsistent with an intent to arbitrate.”
The Administrative Director of the Division of Workers’ Compensation submitted the thirty-second annual workers’ compensation report summarizing the results of audits conducted by the DWC Audit & Enforcement Unit for 2021.
Congratulations to the 31 entities who met or exceeded the Profile Audit Review (PAR) standard, and the following were in the top five positions with the best audio scores.
1. Warner Bros. Studio Facilities – Burbank
2. Schools Insurance Authority – Sacramento
3. RICA & RICC – San Francisco
4. Zenith Insurance Co. – Los Angeles
5. Cherokee Insurance Company – Sterling Heights, MI
Labor Code sections 129 and 129.5 provide the framework for oversight and enforcement of the regulations of the Administrative Director for the prompt and accurate provision of workers’ compensation benefits.
The performance of any insurer, self-insurer, or third-party administrator is rated for action in specific areas of benefit provision. Of foremost importance is the payment of all indemnity owed to the injured worker for an industrial injury. The timeliness of all initial and subsequent indemnity payments and compliance with the regulations of the Administrative Director for provision of notice for a qualified or agreed medical evaluation are also measurable performance factors.
The Audit & Unit completed 40 audits, of which 37 were routinely selected for routine Profile Audit Review (PAR). In addition, another 3 audits were selected as target audits based on the failure of a prior audit. The PAR audit subjects consisted of 13 insurance companies, 4 self-administered/self-insured employers, 18 third-party administrators (TPA), and 5 insurance companies/third-party administrators that combined claims-adjusting locations. The Audit & Enforcement Civil Penalty Unit completed 1 Utilization Review Investigation based on a credible referral and complaint.
The Statewide 2021 Audit Ranking Report (Exhibit 4) ranks all insurers, self-insured employers, and TPA audited during 2021 according to their performance measured by the PAR and FCA performance standards. Low performance rating numbers reflect good claims-handling performance, and high performance rating numbers reflect poor performance. Rankings on Exhibit 4 are from the best to the worst performers.
The complete report for this audit shows the remaining scores of the audit participants for 2021.
Deloitte is the largest professional services network by revenue and number of professionals in the world and is considered one of the Big Four accounting firms along with EY (Ernest & Young), KPMG and PricewaterhouseCoopers (PWC). The company secured multi-million dollar deals in California and seven other states, based on promises of powerful anti-fraud technology and secure, scalable telecoms infrastructure.
In a presentation to the Kansas Department of Labor, in which it claimed to have prevented $100 billion in pandemic unemployment fraud, Deloitte touted “advanced AI-driven fraud detection,” as well as “identity proofing” to help “prevent unauthorized activity,” technologies that had been deployed across U.S. states for over a decade.
With its claims of being able to modernize and secure unemployment systems, according to the follow up report by Forbes, Deloitte was seen as the obvious choice to help states with the incoming tidal wave of Covid benefits applications for the $650 billion pot of pandemic welfare funds. “Deloitte was the only company that had a production-ready PUA system available,” said Kimberly Hall, director of the Ohio Department of Job and Family Services, in written testimony in May 2020.
For contracts in California, Colorado, Illinois, New Mexico, New York, Ohio,Virginia and Wisconsin, Deloitte either deployed tailored uFACTS systems or upgraded legacy infrastructure, and built up attached teleservices centers.
Those deals – worth at least a combined $370 million – contributed to Deloitte’s record $50 billion and $60 billion yearly revenues in 2021 and 2022. According to local government data, in states where Deloitte was either asked to help prevent fraud or ran the benefits system, there was as much as $21.2 billion in fraud. uFACTS systems alone saw up to $3.2 billion.
But in Ohio, as the price of the Deloitte contract spiraled, according to Forbes, so did the cost of the fraud. Starting at an initial $10 million in 2020, the Deloitte deal jumped to $122 million as of October 2022. Meanwhile, at least $166 million in fraudulent applications was paid out through the Deloitte system in the state fiscal year between July 2020 and June 2021, according to figures the state auditor provided to Forbes. But this data is incomplete: It does not take into account figures from the 2022 fiscal year, which are still being tallied, nor the $1.2 billion in benefits payments that have been flagged as potentially fraudulent and are still being adjudicated.
Despite Deloitte’s claims of advanced anti-fraud detection, the breach of the uFACTS system in Ohio was rudimentary and brazen, according to the search warrant reviewed by Forbes. One of the accused’s customers, in an interview with a Labor Department investigator, said the suspect was advertising her ability to remove fraud flags on Instagram, the warrant said. The suspect also successfully claimed unemployment under her own name, even though she was working for both the Ohio Department of Job and Family Services and the U.S. Postal Service at the time. Deloitte and its subcontractor Randstad, which was the direct employer of the suspect, did not detect her alleged crimes, which were first reported by an anonymous tipster.
In October last year, Brandi Hawkins, a teleservices representative with access to the Michigan unemployment system, was convicted of approving hundreds of fraudulent claims that led to the loss of $3.8 million in government funds. Deloitte noted in its report that Hawkins was able to remove fraud flags on the Michigan benefits database for weeks after her termination.
Unlike Hawkins, an unnamed suspect in an Ohio case also claimed to be able to get fraudulent applications approved in other states where she didn’t have direct access to the system, investigators said. According to the government, she was particularly successful in California, where Deloitte had deals worth a total of $88 million with the Employment Development Department (EDD) for Covid-19 benefits. In late 2020, the suspect’s customers had fraudulent applications approved in California, totalling over $50,000 in payouts from the West Coast state, Labor Department officers claimed. The same customers had already had fraud flags on applications in Ohio removed and been given a payout, according to the warrant, showing it was possible to file claims in multiple states under the same name and receive insurance checks.
Along with complaints that millions of calls to Deloitte-supported centers in California were going unanswered, assemblyman David Chiu told local media in March 2021, “Deloitte has continued to underperform.” The call centers, he added, were a “mess.” In January 2021, in an assessment of the EDD’s work on Covid-19 benefits, the state auditor slammed the agency for failing to act promptly to prevent as much as $10.4 billion in potentially fraudulent unemployment payments. It highlighted an estimated $810 million paid out to incarcerated individuals who were ineligible for payouts. By October last year, the EDD’s own estimate for total lost to fraud stood at $20 billion.
Other states weren’t even able to put a figure on the amount of fraud perpetrated through their systems. In a similar deployment to Ohio, Illinois spent $14.3 million for a uFACTS setup and another $42.7 million to prop up attached call centers, according to government contract records. But the deployment was “inadequate” as it didn’t collect accurate data on PUA claims, according to state auditor Frank Mautino. He told Forbes, “We know that there was a large amount of fraud,” but it will have to wait until next year’s audit to get the requisite data to put a dollar amount on the criminal activity.
Deloitte’s woes with its Covid benefits contracts go right back to the early days of the pandemic. In May 2020, a mistake by Deloitte led to personal information of as many as 240,000 unemployment insurance applicants in Colorado, Illinois and Ohio leaking on government benefits websites. The company settled a class action suit over the breach for $4.95 million in 2021.