Author: WorkCompAcademy

Maurosan Milhomem pleaded no contest to six felonies related to his complex fraud schemes of insurance premium fraud and payroll tax fraud. He also admitted a white collar crime enhancement that he caused the loss of more than $500,000.

Milhomem is the owner of Viking Pavers, Inc., a construction company based out of Point Richmond, California. The successful resolution to this criminal case was a result of a joint investigation by the Fraud Division of the California Department of Insurance, Criminal Investigation Division of the Employment Development Department, and the Contra Costa County District Attorney’s Office.

The Contractors’ State Licensing Board and Department of Industrial Relations previously issued Viking Pavers, Inc. civil citations in 2017. Investigators from the Board and Marin County District Attorney’s Office discovered a subcontractor work crew operating for the company without a license and without worker compensation insurance under the name FF Services during a random job site inspection.

The Business and Professions Code does not permit construction companies to subcontract construction work unless the crews have their own license. This is because licensed subcontractors are required to have their own bond and workers compensation insurance to protect homeowners and employees.

The District Attorney’s Office learned of the fraud after employees of Viking Pavers were involved in a vehicle accident. The employees were never reported during premium audits as employees or subcontractors. These audits help confirm if an employer is following the law and ensure the appropriate classifications for their employees and subcontractors.

The investigation by the Contra Costa County District Attorney’s Office revealed that Viking Pavers continued to use FF Services as an unlicensed subcontractor after the civil citations and throughout 2018. The company re-routed the payments off the books to avoid detection during required audits. Forensic accountants traced payments to FF Services and other unlicensed and uninsured work crews, initially through a check cashing service in Richmond, California, and then through the bank accounts of a newly created a shell company. A subsequent search warrant at the business resulted in the seizure of over $80,000 in cash.

Milhomem will serve 364 days in county jail and is eligible to serve the sentence through electronic home detention. In addition, he will serve five years of formal probation. He is ordered to pay $1,109,603 to Markel Corporation for the underpayment of workers’ compensation insurance premium, $808,455.34 to the Employment Development Department for the underpayment of tax liability and $312,000 to Berkshire Hathaway for the underpayment of workers’ compensation insurance premium.

The Court ordered the seized cash forfeited as criminal restitution pursuant to the plea agreement.

On September 30, 2008, Patrick Sauceda was injured while working as a teacher for the Fresno Unified School District. He injured his head, left eye, and left knee following a physical attack by a student. The case was resolved by a Stipulations with Request for Award on December 13, 2010.

He then filed a Petition for Increased Benefits for Serious and Willful Misconduct of Employer. He alleges thad his industrial injury was the result of being assaulted by a special education student who had been previously identified and known to the School District to be a person with propensities for causing serious injury to others and who had stated on more than one occasion that he intended to kill or cause serious injury to Mr. Sauceda.

He claimed that the special education program manager, Nancy Miser, “was advised that a specific student in applicant’s classroom had a prior history of physically attacking two different teachers on separate occasions at a previous school [and] that this student had made specific threats that he intended to kill or seriously injury applicant,” but Ms. Miser refused a request to move the student to “another emotionally disturbed program on another campus,” stating that “applicant would have to find a way to deal with the student.”

The classroom had no radio or telephone for use in case of emergency.

The WCJ awarded Serious and Willful Misconduct benefits. Reconsideration was denied in the split panel decision of Sauceda v Fresno Unified School District.

Labor Code section 4553, a finding of liability is appropriate where the employer 1) knew of the dangerous condition; 2) knew that the probable consequences of the continuance of that condition would involve serious injury to an employee; and 3) deliberately failed to take corrective action.

“Here, it is undisputed that defendant knew of the dangerous condition. Defendant has admitted to knowing that the student assailant had a prior history of physically attacking two different teachers on separate occasions at a previous school and that this student had made specific threats that he intended to kill or seriously injury applicant.”

Applicant has amply shown that defendant deliberately failed to take corrective action. Defendant has made no attempt to deny that, when presented with the evidence from the student assailant’s file, the administrative team at applicant’s place of work declined to take any action to remove the student assailant from applicant’s classroom.

San Diego-based clinical laboratory Progenity, Inc. admitted that it submitted fraudulent bills to TRICARE, the Department of Defense health care benefit program that covers military service members and their dependents, and to the Federal Health Care Employee Benefits Program (FEHBP), for clinical tests that it knew were not covered or properly payable by either program.

In addition, Progenity, formerly known as Ascendant MDx, Inc., and previously headquartered in Carlsbad, California, admitted that it offered improper incentives to patients and doctors to use its laboratory services.

To account for its fraud, Progenity has agreed to pay a total of $49 million in civil settlements in federal courts in the Southern District of California (SDCA) and the Southern District of New York (SDNY), as well as to multiple states.

Progenity offered noninvasive prenatal testing (“NIPT”) to pregnant women. NIPT refers to a category of genetic tests that screen for fetal chromosomal abnormalities, through analysis of fetal DNA present in a pregnant woman’s blood.

This form of genetic testing, however, did not have FDA approval and was considered by TRICARE as a “laboratory-developed test.” As a result, TRICARE did not cover NIPT tests for its beneficiaries.

Therefore, in order to get reimbursed by TRICARE, Progenity falsely and fraudulently used a medical billing code that TRICARE covered, but that Progenity knew did not accurately reflect that the NIPT test.

The U.S. Attorney’s Office for SDCA launched both a criminal probe into Progenity’s fraudulent billing practices and a civil investigation of the false claims Progenity had submitted to TRICARE and the FEHBP. Separately, SDNY initiated its own investigation into misconduct by Progenity relating to the improper incentives provided to patients and doctors to use its laboratory services. SDNY also coordinated with multiple state Attorneys General to investigate Progenity’s miscoding of NIPT to Medicaid programs in New York and several other states.

Progenity’s settlement agreement requires the company to pay $16.4 million to settle the SDCA civil matter, $19,449,316 to settle the SDNY civil matter, and $13,150,684 to settle the state civil allegations.

The civil settlements were based on an ability-to-pay, payment-over-time basis, following an analysis of financial condition submissions made by Progenity. In light of Progenity’s remedial efforts, cooperation with the investigation, and payment of restitution to TRICARE and the FEHBP, the criminal investigation was resolved via a non-prosecution agreement, requiring that Progenity admit its misconduct and be subject to additional terms and conditions for up to a 24-month period.

In an opinion out of the United States District Court for the District of New Jersey, Osterbye v. United States, 2020 U.S. Dist. LEXIS 116591 , the Court denied Defendant Selective Insurance’s Motion to Dismiss Plaintiff’s suit and allegations that Defendant failed to reimburse Medicare for Osterbye’s medical expenses under the Medicare Secondary Payer Act (MSP) private cause of action pursuant to 42 USC § 1395y(b)(3)(A).

Plaintiffs’ decedent, Anna May Osterbye, a Medicare beneficiary, was injured in a fire at her home allegedly caused by the negligence of a plumbing contractor, insured by the Defendant. Osterbye.

The claim resulted in a settlement in the amount of $740,000 including $13,562.90 that Medicare estimated for reimbursement of conditional payments. On April 29, 2013, the Plaintiffs executed a Release.

After Plaintiffs reimbursed $13,562.90 to Medicare, Medicare issued a final demand letter for an additional amount of $118,071.28 on June 4, 2013. The Plaintiffs then proceeded to exhaust administrative appeals with Medicare. On June 26, 2019, the Medicare Appeals council dismissed Plaintiffs’ request for review.

On August 28, 2019, Plaintiffs elevated the dispute to the United States District Court. Defendant’s Motion to Dismiss asserted two main arguments 1) The statute of limitations time-bars Plaintiff’s MSP claim and 2) Dismissal is appropriate based upon the settlement agreement and release.

With respect to the statute of limitations defense, administrative remedies were not exhausted until June 26, 2019- over 6 years after the settlement and release were executed. Plaintiffs were unable to seek judicial review on their MSP claim until all administrative remedies were exhausted. It was not apparent on the face of Plaintiffs’ Complaint that Plaintiffs’ MSP private cause of action is time-barred and denied the Motion to dismiss on the statute of limitations defense.

Defendant argued that the Court should dismiss Plaintiff’s claims by enforcing the Release Plaintiffs executed on April 29, 2013. The Court ultimately determined that whether the Plaintiffs’ Release should be nullified based on mutual mistake turns on a factual inquiry that was better left for a later time.

The ultimate outcome of this case is yet to be determined; however, there are several clear warning signals and reminders found within this case. Relying on an initial Conditional Payment Letter, and not a Final Demand amount can leave a primary payer open to significant exposure. Understanding the Conditional Payment Recovery process also includes understanding the inner workings of the Medicare Administrative Appeals process, and the associated delay.

Several legal experts say workplace safety rules may clash with federal protections for individual rights if employees resist potential employer efforts to require them to take a prospective COVID-19 vaccine, but safety considerations will likely carry more weight in court.

According to the report in Business Insurance, “When there is a vaccine, it will be a gamechanger, but it will raise issues,” said Dennis Brown, managing shareholder in the San Jose, California, office of Littler Mendelson P.C., which represents employers.

“Because COVID-19 is highly contagious and dangerous for some people – there will be a big rush by employers to require vaccinations, and part of that is driven by fear,” he said. “Employers will be under tremendous pressure to require the vaccine.”

Yet Mr. Brown and other employment law attorneys say they are bracing for challenges to vaccine requirements.

Employers may require vaccines to comply with regulations such as the U.S. Occupational Safety and Health Administration’s general duty clause, which calls for employers to provide safe work sites. But they also face requirements to comply with legal exemptions for individuals on the basis of health or religion.

Title VII of the Civil Rights Act, for example, bars employment discrimination on the basis of religion, among other things, and the Americans with Disabilities Act states that a disabled person can be exempt from receiving a mandatory vaccination under certain conditions.

“The Title VII and ADA disability accommodations are not new to employers, but this context is new,” said Casey Denson, a New Orleans-based employment law attorney for her own firm, Casey Denson Law LLC, which represents employees. She said there’s no legal precedence concerning vaccine exemptions for COVID-19, so it’s unclear how courts will rule.

Mr. Brown said courts are “less hospitable” to religious exemptions than to medical concerns “as a general rule” and that the pandemic could further tip the scales away from accepting personal religious exemptions in favor of protecting all workers and businesses. Overall, in health care settings, exemptions almost never stand as “the balancing test you go through between individual liberty and public health and safety tilts heavily to public safety,” he said.

How the EEOC guidance would pertain to a COVID-19 vaccine remains to be seen, Ms. Denson said.

“It’s going to depend on the type of business you have, whether you are interacting with coworkers, customers or older individuals” shown to be at risk for COVID-19 complications, she said. “Even though we have legal frameworks for decisions on vaccines it’s going to be a complicated decision.”

“We will have to see how things play out,” said David Kurtz, Boston-based partner with Constangy, Brooks, Smith & Prophete LLP, which represents employers.

“When it came to influenza vaccines, the EEOC said employers should consider encouraging people to get vaccines but not force them. (COVID-19) will absolutely shake things up. One of the things that is so unusual with COVID-19 is when people have the flu they know it; when it comes to COVID-19 you hear that people are asymptomatic. That’s part of the problem employers are facing.”

Samuel Burgess, Syracuse, New York-based senior counsel with Bond, Schoeneck & King PLLC, said courts will likely side with employers seeking to protect their entire workforce through compulsory vaccinations.

“We’ve seen this in the schools context with the measles and the flu shot requirements in the health care setting, and how courts aim to look at protection for the public and the greater good,” he said.