Author: WorkCompAcademy

The Superior Court of Los Angeles County, California issued an order denying a petition seeking court approval for the transfer to factoring company Fortress Funding LLC of an applicant’s rights to payments under a workers’ compensation settlement according to the report on the Corporate Counsel website. In the matter styled In Re Rudy Andrade, No. BS139876, Superior Court Judge Amy D. Hogue held that the issuer of the annuity that funded the settlement payments was an interested party with standing to appear and oppose the petition, and that, based on the arguments in the annuity issuer’s opposition, the petition was denied.

It is not uncommon in large workers’ compensation or personal injury cases to resolve the claim by way of a structured settlement. The settlement is typically funded by an annuity purchased from another insurance company for a lump sum of money. The annuity pays a regular benefit to the claimant over his or her lifetime, and may even offer a residual payment to the heirs of the claimant. There are advantages to a structured settlement for both parties. The lump sum paid by the carrier is less than the total aggregate of future payments, thus there is cost savings. The carrier no longer has to keep an open file as the future payments are paid directly by the annuity company. The applicant receives an aggregate dollar settlement higher than what the workers’ compensation benefit would have been. And, the annuity payments are tax free.

However, after a structured settlement, some applicants have second thoughts, and want to get a lump sum of cash for their structured settlement. Indeed, there are financial companies advertising on television offering cash for assignment of a structured settlement (for a deep discount of course). It would appear that the petition of Rudy Andrade is an example of such cases. Fortress Funding LLC was seeking to buy out his annuity funded structured settlement for a discount of 13.48%. An agreement such as this requires court approval pursuant to the California Structured Settlement Act. In this case the annuity company opposed the petition, and the Superior Court denied the petition to transfer the annuity to Fortress Funding LLC..

n its opposition, the annuity issuer argued, among other things, that:

• The California structured settlement transfer act, Cal. Ins. Code § 10134 et seq., under which the petition was brought, did not apply to transfers of workers’ compensation payments.
• The proposed transfer contravened the California Labor Code § 4900 prohibiting assignment of workers’ compensation payments.
• The proposed transfer would be contrary to California common law, as the compromise and release agreement signed by the payee expressly prohibited assignment of the payments.
• The proposed transfer would be contrary to a prior order of the Workers’ Compensation Appeals Board of the State of California, which approved the underlying workers’ compensation compromise and release agreement that expressly prohibited assignment of the payments.
• The factoring transaction involved a transfer with an effective annual discount rate of 13.48%, and did not appear to be in the payee’s best interest.
• The payee had no rights to the annuity that funded the workers’ compensation payments, and could not lawfully assign the annuity payments.

Three of nine defendants were arrested in a continuing investigation into a fraudulent unemployment and disability benefits scheme based out of Sutter County, United States Attorney Benjamin B. Wagner announced. Balkar Singh, 50; Harvinder Kaur, 37; and Harjinder Kaur Thandi, 34, all of Yuba City, will be arraigned before U.S. Magistrate Judge Dale A. Drozd.

In a 36-count indictment a federal grand jury charged nine defendants with participating in a scheme to defraud the State of California of unemployment and disability benefits. The remaining defendants: Jit Kaur, 62; Daljit Kaur Sangha, 41; Sukhwinder Kaur, 54; Darshan Rani, 44, all of Yuba City; Avtar Kaur Bains, 73, of Roseville; and Mo Pegany, 56, of Ceres, will appear in court at a later date.

This is the third indictment in an ongoing investigation. Six defendants were indicted in May 2012, and six others were indicted in September 2012.

According to the first indictment, Mohammad Nawaz Khan, 56; Mohammad Adnan Khan, 31; Iqila Begum Khan, 31, all of Live Oak, and Mohammad Shahbaz Khan 56, of Yuba City, controlled a series of companies that were reported to the Employment Development Department as farm labor contractors. The Khans sold fake paystubs to other people in the community and used the companies they controlled to report false wages for the individuals who purchased those paystubs. The Khans at times instructed the purchasers how the fake paystubs could be used to fraudulently claim unemployment and disability benefits. Over the course of the conspiracy, the defendants reported wages for over 400 separate individuals that resulted in more than 2,000 fraudulent claims for unemployment and disability benefits. The loss in this case is more than $5 million.

According to the new indictment, Jit Kaur, Bains, Sangha, Pegany, Singh, Harvinder Kaur, Thandi, Sukhwinder Kaur, and Rani purchased pay stubs that falsely showed they had been paid wages by companies controlled by the Khans. The defendants would then use that pay stub to file for unemployment benefits, disability benefits, or both. According to the indictment, the defendants purchased pay stubs for approximately $250 for every $1,000 in wages. They would use those fraudulent obtained wages to file for unemployment insurance, disability insurance, or both.

This case is the product of a joint investigation by the Federal Bureau of Investigation, the Department of Labor, Office of Inspector General, and the Employment Development Department, Investigations Division. Assistant United States Attorney Jared Dolan is prosecuting the case.

If convicted, the defendants face a maximum statutory penalty of 20 years in prison and a $250,000 fine for each count.

“Fraud against the employer-funded Unemployment Insurance program or the employee-funded Disability Insurance program costs all of us and will not be tolerated,” said Pam Harris, Director of the California Employment Development Department (EDD). “EDD’s investigators are committed to detecting and deterring fraud to protect the integrity of these vital programs, which are meant to benefit hardworking Californians and businesses.”

Applicant played professional football for four years with the Arizona Cardinals (Cardinals) from 1999 to June 24, 2003. The Cardinals are a National Football League (NFL) team based in Arizona, where the players regularly train and practice for games. During the four years applicant was employed by the Cardinals, the team played a total of 80 games; 40 of them in Arizona and the remainder in 16 other states, including 7 games in California.

In the summer of 2010 he heard from another former NFL player, Michael Jameson, that he could file a workers’ compensation claim of cumulative industrial injury in California and he filed an Application for Adjudication of Claim, alleging that he incurred industrial injury to multiple body parts as a result of “cumulative injury” incurred while playing and practicing for the Cardinals during the four year period ending in 2003.

The Cardinals contend that the California Workers’ Compensation Appeals Board (WCAB) should decline to hear applicant’s workers’ compensation claim because each of the three employment contracts he signed with the Cardinals contains an identical forum selection clause that said “This Contract has been entered into in the State of Arizona and in no other state, and the parties acknowledge that the Player’s principal place of employment shall be within the State of Arizona and in no other state. Claims for workers’ compensation shall be filed with the Industrial Commission of Arizona, and the parties agree that they shall be subject to the workers’ compensation laws of the State of Arizona and of no other state.”

The WCJ found that the WCAB “has jurisdiction over applicant’s claim,” but that “Applicant’s contacts with California are not sufficient to warrant exercising the Board’s jurisdiction in light of applicant’s contractual agreement with his employer to file his workers’ compensation claims in Arizona.” Based upon those findings the WCJ further ordered that applicant “take nothing” on his claim for California workers’ compensation benefits, which is tantamount to dismissal of the claim. The WCAB affirmed the decision in the En Banc decision of Dennis McKinley v Arizona Cardinals: The Travelers Indemnity Company.

Under applicant’s theory that each and every game in which he played contributed to the injurious exposure that caused his claimed cumulative injury, at least 16 other states besides California could have concurrent jurisdiction over the claim for workers’ compensation. In that there are 16 other states that could potentially exercise jurisdiction over applicant’s cumulative injury claim for workers’ compensation, the WCAB carefully considered whether that claim is properly adjudicated in California. The answer to that question also implicates the exclusive remedy aspect of workers’ compensation that is part of California law and the similar laws of most states. In view of this limited connection with California, and in light of the Arizona forum that applicant and the Cardinals reasonably identified in their employment contracts, the WCAB decline to exercise jurisdiction over his claim for workers’ compensation.

Applicant’s primary connection during his four years of employment by the Cardinals was with the State of Arizona. The Cardinals’ home base is in Arizona and that is where the team is headquartered. Applicant regularly trained and practiced at the team’s facility in Tempe, Arizona, and he spent the substantial majority of his work time in that state. By contrast, applicant was not a resident of California when he contracted to play football for the Cardinals and his contracts of employment were made in Arizona. The majority of applicant’s work duties were performed in Arizona where he regularly practiced and where the Cardinals played 40 of their 80 games during the period of his employment. In addition, 33 of the other 40 games were played in states other than California. In short, there was limited connection with California with regard to applicant’s employment by the Cardinals and his claimed cumulative injury. In the view, of the WCAB, that limited connection is insufficient for the WCAB to exercise jurisdiction over his claim for workers’ compensation in derogation of the Arizona forum he and the Cardinals reasonably identified in their employment contracts as the place where any claim for workers’ compensation would be filed.

Applicant argues that because he paid California income tax for games that were played in the state he has a due process right to have his workers’ compensation claim adjudicated by the WCAB. However no authority holds that payment of state income tax requires the WCAB to adjudicate an employee’s claim for workers’ compensation, and tax law does not control how California’s system of workers’ compensation is administered, given the very different purposes of those laws.

With respect to public policy issues raised by the applicant, the WCAB concluded “In the special circumstances of this case, we conclude that California has a stronger public policy interest in following the parties’ forum selection clause than it does in exercising jurisdiction over applicant’s claim for workers’ compensation.”

The WCAB concluded “our concern about court congestion and the overburdening of already strained judicial resources is not based upon abstract speculation. The NFL consists of 32 teams playing in 23 states and occasionally in foreign countries. Each club is allowed a maximum of 53 players on their roster. Because three NFL teams are domiciled in California, players from all of the 29 other teams could potentially claim that they incurred some portion of a cumulative industrial injury in California merely because they played one or more games in the state. In fact, numerous claims have been filed in California by professional football players and other professional athletes, and those claims impose a substantial burden on the WCAB’s limited resources.”

As debate swirls about future funding for California’s $3.7 million a year Controlled Substance Utilization Review and Evaluation System (CURES), a new California Workers’ Compensation Institute study asserts that allowing 3rd party payer access to CURES would improve quality of care and strengthen utilization and cost control over opioid prescriptions dispensed to injured workers, which for accident year 2011 claims alone would cut California workers’ compensation claim costs by an estimated $57.2 million

Excessive use of prescription painkillers has become a nationwide public health problem, and a huge cost driver in California workers’ compensation, where highly addictive “Schedule-II” narcotics such as oxycontin and fentanyl have been widely used, even for relatively minor sprain and strain injuries. In 2011, the Division of Workers’ Compensation adopted chronic pain management guidelines to help control the use of these drugs to treat injured workers, but they have continued to account for a growing proportion of workers’ compensation prescriptions. One tool California does have to combat prescription drug abuse is CURES, its 3-year old electronic prescription monitoring program run by the Department of Justice. CURES allows doctors, pharmacists and law enforcement to track the prescription history of patients receiving opioids to identify fraud and abuse patterns. Many workers’ compensation stakeholders assert that access to CURES data, coupled with enhanced medical cost containment strategies (including pharmacy benefit managers, medical provider network monitoring and utilization review) could significantly reduce inappropriate opioid prescriptions dispensed to injured workers. However, since a $70 million cut in the Department of Justice budget was announced in late 2011, the state has struggled to come up with the $3.7 million a year needed to fund CURES.

Using data from prior studies and CWCI’s Industry Claims Information System database, authors Alex Swedlow and John Ireland estimate that 23 percent of the 500,000 California job injury claims in accident year 2011 involved opioid prescriptions. Though the Institute projects that access to CURES would generate no savings on the 41 percent of workers’ compensation opioid claims involving a single prescription, potential savings from reduced medical and indemnity payments on the 59 percent of the opioid claims involving multiple prescriptions would range between 3 to 7 percent – or $57.2 million on the accident year 2011 claims.

Debate over the funding of CURES continues, as Attorney General Kamala Harris this week urged Governor Brown to restore funding for the program in light of the state’s improving budget picture. In the meantime, the Institute has released its analysis in a white paper, “Estimated Savings from Enhanced Opioid Management Controls Through Third Party Payer Access to CURES.” The white paper is available in the Research section of the Institute’s website, www.cwci.org.

Two administrators pleaded guilty Friday to 101 fraud and other charges related to a case that prosecutors say was the largest medical-fraud operation in the nation, while three others charged are expected to go to trial later this year.

According to the report in the Orange County Register, four of the five defendants, office workers at a Buena Park surgical outpatient center, including an attorney, already were tried and convicted in Superior Court Judge Thomas Goethals court in November after a 10-week trial on charges either of filing false tax returns or failing to file taxes or both. A doctor, also charged in the case, has not been tried yet.

The four defendants already prosecuted in the first phase of their cases were personnel connected to Unity Surgical Outpatient Center, where healthy people from all over the United States were recruited for unneeded surgeries, including tummy tucks and hysterectomies, generating $154 million in billings to insurance companies.

When Goethals sentenced the four in December to prison terms on the tax-evasion convictions and ordered them to pay millions in restitution in the first phase of the case, he also told them he would add no additional time to their sentences if they plead guilty to the fraud counts.

The judge said then he felt the tax convictions and the fraud charges were all part of the same “ugly, expensive … felonious scenario.”

Administrators Rosalinda Landon, 66, who received five years and four months on the tax counts, and Dee Francis, 63, who was sentenced to six years in prison on tax charges, accepted the judge’s offer. Unity accountant Andrew Harnen, 58, received the same term as Landon, and lawyer Roy Dickson, 64, got two years and eight months. All four defendants were ordered to pay restitution, ranging from $41,000 to $1.1 million. Harnen and Dickson, each facing more than 100 counts, including insurance fraud and grand theft, did not take the judge’s offer and will to go to trial later this year.

The case is expected to last more than six months, which would make it one of the longest criminal trials in Orange County. If convicted on those counts, the two face more than 55 years in prison.

Orange County prosecutors William Overtoom and George McFetridge have said that Unity doctors performed 1,307 invasive procedures on patients, including some who were recruited and paid between $300 and $1,000 to undergo unnecessary colonoscopies, hysterectomies, the removal of cysts, and treatment of sweaty palms and hemorrhoids.

The prosecutors say Unity billed insurance companies $154 million in a scheme in which 2,841 healthy people from all over the country were recruited for the unneeded surgeries.