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Category: Daily News

Drobot Files Amended Complaint Against Colleagues

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Michael Drobot pleaded guilty more than a year ago to criminal charges related to paying more than $20 million in kickbacks and bribing California state Sen. Ron Calderon to preserve a loophole in state law that enabled him to charge insurers sky-high prices for spinal hardware used at the Pacific Hospital of Long Beach. He is scheduled to be sentenced next year.

The State Compensation Insurance Fund filed a Rico case against Drobot and others in federal court to recoup payments made to Defendants, who it alleges concealed the system of illegal kickbacks, fee-splitting, corporate practice of medicine, and other misconduct. The State Fund pleadings and documents filed in that case makes an interesting read if not a well documented tutorial on the dark side of the practice of medicine.

Michael Drobot last April filed a 15 page third-party complaint for equitable indemnity and declaratory relief against 22 doctors, health executives, chiropractors and a lawyer. Equitable indemnity says in theory that Drobot should not have to pay the State Fund, but if it ends up that he does, then he wants others to share the blame with him and pay the damages.

On August 10, Drobot filed his First Amended Third Party Complaint, in federal court again asking others who profited from the enterprise to step forward and pay the State Fund should they prevail in the case. The Amended Complaint adds details, substance, some dollar values to the terse information previously alleged by Drobot. More importantly, the alleged schemes for movement of money such as research fees, consulting agreements, and the like are more clearly alleged.

Just one illustrative example is the allegations against Philip A. Sobol MD, a physician and principal of Sobol Orthopedic Medical Group, Inc., Sobol allegedly referred patients, and performed surgeries at Pacific Hospital between 2005 and 2013. During that same timeframe there were option agreements between the parties to purchase his medical practice. Over $5 million was paid to Sobol under this option agreement, which the State Fund alleges the money “included disguised payments for unlawful patient referrals to PHLB, that were computed and based on patient referrals.”

The new pleading goes on to specify how the allegations implicate other physicians, and medical operatives in the complex structure that Drobot now claims must come forward and take responsibility should the State Fund prevail. A careful study of these pleadings would indeed be the basis for a claim investigation framework involving any of these parties and a good learning experience on how kickbacks can be hidden and masked.

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Bumble Bee Foods to Pay $6 Million For Industrial Death

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NBC News reports that Bumble Bee Foods will pay $6 million for the 2012 death of an employee who was cooked in an industrial oven with tons of tuna – the biggest settlement ever in a California for workplace safety violations involving a single victim.

Jose Melena, 62, was loading a 35-foot-long oven at the company’s Santa Fe Springs plant before dawn Oct. 11, 2012, when a co-worker, who mistakenly believed Melena was in the bathroom, filled the pressure cooker with 12,000 pounds of canned tuna and it was turned on. His body was found two hours later after the pressure cooker, which reached 270 degrees, was turned off and opened.

The state report, which was filed with the National Institute for Occupational Safety and Health, said the manned oven system was inherently dangerous, finding that the chain that pulls carts of tuna into the ovens would sometimes get snagged, requiring operators to enter the ovens to pull the carts through.

Los Angeles County District Attorney Jackie Lacey said Bumble Bee will pay $3 million to replace all of its outdated tuna ovens with automated ovens and will never require workers to set foot inside the super-heated, pressurized steam cookers. The company will also pay $1.5 million in restitution to Melena’s family, and it will pay the district attorney’s Environmental Enforcement Fund $750,000 for workplace safety programs and $750,000 in fines, penalties and court costs.

In addition, Saul Florez, Bumble Bee’s former safety manager, pleaded guilty to a felony count of willfully violating lockout rules and indirectly causing Melena’s death. He was sentenced to three years’ probation, ordered to complete 30 days of community labor and assessed $19,000 in fines and penalties.

And another co-defendant, Angel Rodriguez, Bumble Bee’s director of plant operations, will be allowed to plead guilty to a misdemeanor in 18 months if he completes 320 hours of community service, pays $11,400 in fines and takes classes on confined space rules.

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Surveillance Leads to Arrest of Monterey Cook

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The County District Attorney’s office reports that a Marina man pleaded no contest to workers’ compensation fraud in Monterey County Superior Court .

Sven Hoffman, 56, was charged with one felony count of making a false statement for the purpose of obtaining workers’ compensation benefits and one felony count of knowingly failing to disclose an event that affected his right to an insurance benefit. He will be sentenced by Judge Carrie M. Panetta on Sept. 22.

Hoffman was a prep cook at a local corporation, and on June 13, 2013, he claimed that his right wrist was injured from kneading dough. He later added his left wrist to the injury report and received medical treatment as well as total temporary disability payments. He repeatedly indicated he could not return to work as he continued to receive medical treatment and financial benefits.

An investigation showed that during this time, Hoffman failed to disclose he had been working and engaged in various activities, including cooking for a private party, working as a consulting chef at a local restaurant, providing a homemade pizza demonstration and assembling office furniture. Surveillance showed he was also very active repairing a long section of a private fence and working out strenuously at a local gym.

Both of the felony charges carry a maximum penalty of five years in prison and a substantial fine. Also, in insurance fraud cases, state law allows restitution to be ordered and can include expenses like attorney’s fees and investigation costs. The employer has reported a loss of $36,256.83.

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NAIC Sets Insurance Company Cybersecurity Standards

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The National Association of Insurance Commissioners (NAIC) is ratcheting up its efforts to tackle cybersecurity issues. Following up on its adoption of Guiding Principles for Cybersecurity this spring and developing new reporting requirements for insurers to better track cyber insurance policies issued in the marketplace, the NAIC is moving forward with three additional initiatives designed to help protect consumer information and educate the public about cyber risks. The three NAIC initiatives are:

1) The NAIC’s Cybersecurity Task Force released a Consumer Cybersecurity Bill of Rights draft was released for public comment. The bill of rights is intended to set standards for helping consumers if their personal information is compromised. The Task Force expects to adopt these standards this summer;
2) The Cybersecurity Task Force is also coordinating with state insurance regulators to conduct examinations of insurance companies to verify companies are taking appropriate steps to protect sensitive data, including confidential personal information;
3) The NAIC is co-sponsoring a forum with the Center for Strategic and International Studies (CSIS) on September 10 in Washington, D.C., entitled “Cyber Risk Management and Insurance.” Cyber experts, policymakers and business leaders will discuss cyber risks faced by American businesses and consumers, and how best to manage those risks.

“Ramping up our efforts in this critical area will help state insurance departments better address both the threat and responses to cyber breaches,” said Monica J. Lindeen, NAIC President and Montana Insurance Commissioner. “Understanding what regulators, consumers and companies can do to craft best practices will help minimize the impact on insurance consumers and the insurance industry in the long-term.”

“Since before the first major breach of an insurer, the NAIC has been at the forefront of cyber issues,” said Adam Hamm, North Dakota Insurance Commissioner and Cybersecurity Task Force Chair. “We will continue our work at the NAIC to protect consumers and support efforts to improve cybersecurity in the insurance sector.”

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Survivors of Deceased Firefighter Pilots Litigate Death Benefits

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The Sacramento Bee reports that for nearly a dozen years, top officials at the California Department of Forestry and Fire Protection knowingly withheld death benefits from the families of 14 contracted firefighter pilots killed in the line of duty.

Since 2002, the claim that seeks more than $4 million plus interest for the survivors.filed this month alleges, “high level executives of Cal Fire, including the current director of Cal Fire, the current deputy director of Cal Fire (and their predecessors) … engaged in a pattern of deceit and deception specifically designed to hide the existence of (the benefit) from the survivors and dissuade them from seeking any such death benefit from Cal Fire.”

Cal Fire spokeswoman Janet Upton said in an email to the Sacramento Bee that the department has not yet formally received the claim, but “has been working on benefits” for survivors of Geoffrey Hunt, a contracted pilot killed last October. The department also has “been reviewing records to ensure that past Cal Fire contracted pilots have also received them,” Upton said.

If Cal Fire declines to pay the benefits, the claim is a likely precursor to a court battle over the interpretation of a state law. The statute requires Cal Fire to pay a one-time death benefit if a contracted pilot flying a firefighting aircraft “dies while performing the duties specified in the contract.” Cal Fire and other agencies, including the U.S. Forest Service, contract for firefighter pilots through private companies. The survivors say U.S. Forest Service contracts are covered by the law because the pilots perform firefighting duties for the state.

Paul Goyette, the attorney representing the families, said during an interview at his Gold River offices that the department “has never followed the law, not once,” leaving some grieving families to struggle financially after their primary breadwinner perished.

Federal public-employee death benefits exclude contractors, including pilots who fly firefighting aircraft, Goyette said, and the contracted companies carry workers’ compensation insurance only as required by law. Upton said Cal Fire is “working with federal authorities” to get rid of the exclusion and ensure “federally contracted pilots receive federal benefits.”

In the absence of a federal death benefit, state law requires Cal Fire to make a lump-sum payment to pilots’ survivors “commensurate with the death benefit payable to a mid-career firefighter employed by the department.” Alternatively, it can pay an amount equal to what the federal program would have paid at the time of the pilot’s death had he or she been eligible.

The federal benefit, which is adjusted annually, was $262,100 in 2003 when two pilots named in the claim, John Attardo and Carl Dobeare, died fighting the East Highlands fire in San Bernardino County. The current federal lump-sum benefit is $339,310.

The complaint alleges that even as Cal Fire brass attended services for the fallen and consoled grief-stricken family members, they misled survivors and hid the state’s legal obligation to pay benefits.

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Symposium Scheduled on Medical and Provider Fraud

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On Thursday August 27 the San Bernardino District Attorney’s Office in association with the Employers’ Fraud Task Force and Floyd, Skeren and Kelly is presenting an educational symposium on Medical and Provider Fraud in the Workers’ Compensation System. Learn from law enforcement officials and workers’ compensation professionals, who’s gaming the system and what you can do about it. Here is the agenda for the day.

8:00 a.m. – Registration/Continental Breakfast/Networking
9:00 a.m. – Welcome and Introductions: David Simon, Lead Deputy DA, SBDA’s Office, Workers’ Compensation Fraud Unit
9:15 a.m. – Why do Some Doctors Cheat and Become Crooks: David C. Hall, Ph.D., QME Clinical Psychologist
9:50 a.m. – Medical Fraud and Abuse: Trends and Solutions: Laura Clifford, Executive Director, Employers’ Fraud Task Force
10:45 a.m. – Compounding Pharmacy Fraud: Suzanne Honor-Vangerov, Managing Attorney, Floyd, Skeren and Kelly; Tony Park, Attorney, California Pharmacy Law
11:45 a.m. – Suspected Fraudulent Claims Best Practices: David Simon, Lead Deputy DA, SBDA’s Office; Laureen Pedroza, Bureau Chief, Ca. Dept. of Ins. Fraud Division
1:15 p.m. – Current Trends with Liens: Suzanne Honor-Vangerov, Managing Attorney- Lien Unit, Floyd, Skeren and Kelly
1:50 p.m. – Up coding: Gary Auer, SIU Director, Anthem Blue Cross
2:30 p.m. – Chiropractor Rules, Regulations, Enforcement, Complaints: Robert Puleo, Executive Officer, State of California Board of Chiropractic Examiners and Maria Martinez, Special Investigator
3:25 p.m. – Ethics: Terry Smith Managing Partner, Floyd, Skeren and Kelly,Troy Slaten, Managing Partner and Robert Dudley, Attorney, Floyd, Skeren and Kelly

The symposium will take place at the Ontario Police Department, 2500 S. Archibald Ave, in Ontario, CA. The $55 registration fee includes continental breakfast and all materials. Register using the online form, or you can pay by mailing a check by printing and filling out this registration form (PDF). For additional information contact Laura Clifford lauraclifford@sbcglobal.net.

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Former Santa Monica Pain Physician to Serve 3 Years

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The Los Angeles County District Attorney’s Office announced that a former Santa Monica physician pleaded no contest this month to obtaining a controlled substance by fraud.

Dr. Daniel Shin, 50, returns to court on Nov. 4 for sentencing before Los Angeles County Superior Court Judge Charlaine Olmedo. Under the terms of a negotiated plea, he will be sentenced to three years in county jail.

Shin, who has since lost his license to practice medicine, operated a pain management clinic on the second floor of a squarish medical office building that dominates the corner at Wilshire Boulevard and Harvard Avenue in Santa Monica. Prosecutors said Shin along with his office manager, Thomas Mark Oseransky, 50, and a colleague, Dyno Travato West, 39, orchestrated a complex scheme to write and fill prescriptions for oxycodone. He faced 27 counts stemming from what Los Angeles County District Attorney’s Office spokeswoman Jane Robison called “an elaborate scheme” to fill fake prescriptions for oxycodone using his office manager Thomas Mark Oseransky and employee Dyno Travato West as stand-ins for patients.

West earlier pleaded no contest to conspiracy and multiple counts of obtaining a controlled substance by fraud and was sentenced to 32 months in state prison. Oseransky returns to Department 105 on Sept. 17 for a pretrial hearing.

California Medical Board records show that in 2009 Shin was placed on probation by the board for two years after admitting to violating the state Business and Professions Code for failing to disclose a misdemeanor conviction. Shin was disciplined again in 2012 for failing to complete a clinical training program. He was placed on five years probation. In March 2014, was Shin ordered by Sacramento County Superior Court Judge Robert Longoria to “cease and desist from the practice of medicine,” according to medical board records.

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Federal Court Invalidates Unapproved Large Deductible Comp Policies

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A recent court decision may have the potential to change the practice of side “deductible” agreements in workers’ compensation policies in California, a practice that some say often goes on under the regulatory radar.

The Insurance Journal reports that Zurich American Insurance Co. and American Zurich Insurance Co. had such a side agreement with Los Angeles, Calif.-based Country Villa Service Corp. Sometimes also called “deductible agreements,” or “program agreements,” they can retroactively alter an existing policy. The agreement between Zurich and Country Villa altered the deductible structure, among other things, in the policy. However, Zurich did not file it with the Workers’ Compensation Insurance Rating Bureau as required by Insurance Code 11658.

A dispute arose after the insured was sued by Zurich for breach of contract, and Country Villa challenged the policy under a case known as Zurich American Insurance Company v. Country Villa Service Corp. It went to the U.S. District Court for Central California, which ruled in favor of Country Villa on July 9 by granting the company partial summary judgment. With respect to the Incurred Deductible Agreement attached to the policy, the key finding was “The IDAs are illegal, void, and unenforceable in their entirety” since it violated Insurance Code 11658 that requires policies to be reviewed by the WCIRB and approved by the CDI.

The Zurich v. Country Villa decision is not a final determination, and is subject to years of additional litigation, but it may force insurers to file any side agreements with regulators before a policy is issued. Zurich was forced into a settlement in 2013 with the California Department of Insurance over a similar side agreement conflict. CDI eventually agreed to drop its prosecution over the “non-filing of Deductible Agreements” with the WCIRB and CDI, a settlement agreement shows. In that settlement Zurich admitted no liability or wrongdoing, but agreed to make the filings and agreed not to enter into or amend a deductible agreement with a California employer unless it has been submitted to the WCIRB and CDI for review.

The court in Zurich v. Country Villa cited that settlement, as well as a case in New York, Monarch Consulting, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburg, in which the New York Supreme Court Appellate Division ruled in 2014 that arbitration clauses in side agreements with an insurance carrier were unenforceable. That case is now headed for New York’s highest appellate court.

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Court of Appeal Rules Unskilled Temp is Special Employee

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Jose Franco was employed by tempSERVE, a temporary staffing agency. In July 2009, Franco was assigned to work for West Coast as a general laborer assisting Melgoza, a West Coast forklift driver to help load and unload trailers with pipe.

Every day when Franco reported to work at West Coast, he would locate Melgoza. Melgoza would then give Franco their lineup for the day. Franco spent the work day with Melgoza, receiving instructions from Melgoza regarding their tasks. He was never instructed or supervised by anyone from tempSERVE. Although West Coast could not fire Franco, West Coast could remove him from the job at any time. West Coast provided the hammer and table saw Franco used to do his job. However, Franco and tempSERVE provided Franco’s safety equipment, i.e., hard hat, gloves, eye protection and steel toed boots.

On September 28, 2009, a pipe struck Franco injuring his foot and knee. His medical bills and disability payments were paid by workers’ compensation insurance. Franco also filed a civil complaint for negligence against West Coast and Melgoza. West Coast and Melgoza moved for summary judgment on the ground that West Coast was Franco’s special employer and therefore Franco is statutorily barred from bringing an action against West Coast and Melgoza for personal injuries. The trial court agreed and granted the motion. The Court of Appeal affirmed in the unpublished case of Franco v West Coast Pipe Inspection.

In determining whether a special employment relationship exists, the primary consideration is whether the special employer has ‘[t]he right to control and direct the activities of the alleged employee or the manner and method in which the work is performed, whether exercised or not..”

Franco interprets his own testimony on West Coast’s supervision over him as not demonstrating the type of detailed control and direction necessary to find an employment relationship. However, contrary to Franco’s position, he provided unskilled labor and this labor was directly supervised by Melgoza. Thus, West Coast had the power to direct and control Franco.

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Generic Drugmakers Under International Criminal Scrutiny

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Allergan Plc’s Actavis unit got a subpoena from the U.S. Justice Department seeking information on the marketing and prices of its generic drugs, becoming the biggest company yet to draw scrutiny in the government’s widening antitrust probe of the industry. The June 25 subpoena also sought information about communications with competitors regarding the products. While the company didn’t supply further information and didn’t specify the competitors, rivals including Lannett Co., Endo International Plc, Par Pharmaceutical Holdings Inc. and Impax Laboratories Inc. have made similar disclosures in the past several months.

Lannett also reported earlier this year that the U.S. is conducting a criminal antitrust investigation into the generic-drug industry. The company and its senior vice president of sales and marketing were served with grand jury subpoenas.

Generic-drug prices have drawn attention in Washington after sharp increases for some medications in the past few years. Some 10 percent of generic drugs doubled in price between July 2013 and June 2014, and half of all generic drugs rose in price, according to an analysis earlier this year of Centers for Medicare and Medicaid data. One pharmacy benefits manager reported that consumers and insurers paid an average of $13.14 per prescription for the 50 most popular generics in 2010. Four years later, the average was up to $62.10–an increase of 373%.

Allergan is the fourth-biggest maker of generic drugs in the world, measured by sales. The drugmaker agreed last week to sell its generics business to the largest company in the industry, Teva Pharmaceutical Industries Ltd., for $40.5 billion.

Price gouging probes are not limited to the US. Last year, UK government officials lambasted Pfizer’s proposed takeover of AstraZeneca, and it has drawn criticism for its hard line on generic Lyrica use.The U.K.’s Competition and Markets Authority (CMA) said Pfizer and partner Flynn Pharma abused their hold on the market by charging “excessive and unfair” prices for phenytoin sodium capsules, raising costs by as much as 2,600%,

For more than a year, the Justice Department (DOJ) has been pursuing a criminal investigation into the possibility of pricing collusion among makers of generics, and now a report says the probe may also be looking into whether trade associations were used as a conduit to trade drug-pricing information. No specific associations were named. The Generic Drug Association (GPhA), the largest trade group for generics producers, had no specific comment on the report.

Meanwhile, lawmakers have introduced identical bills in the House and Senate that would require generic drug makers to pay additional rebates to state Medicaid programs for any medicine that increases in price faster than the inflation rate. Under current law, brand-name drug makers are required to pay an additional rebate to Medicaid, but generic drug makers are not required to do so. The Congressional Budget Office has concluded that this proposal would save the Medicaid program $500 million over the next ten years.

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