More than 100 insurance-fraud bills are pending state action. Major state supreme court cases also could have a dramatic impact on fighting fraud. Privacy of consumer data – and how it affects fraud investigations – should be also be closely watched this year.

The California legislature rushed through AB 375, the nation’s most sweeping data privacy law last June. The California Consumer Privacy Act of 2018 (CCPA) takes effect Jan. 1, 2020.

The CCPA applies to insurers and all other businesses in the state and has very severe restrictions on the use of private data. It is not clear what impact it might or might not have on an insurer’s ability to even report fraud.

California legislators rushed a bill through to avoid a ballot initiative proposed by Alastair Mactaggart. Mactaggart agreed to withdraw the initiative if a law was signed by the Governor. Legislators in other states will watch closely for how California’s more-sweeping law moves forward.

The NAIC approved its model data security law. The model already was adopted last year by South Carolina, Ohio, and Michigan. Many other states will likely debate adopting versions of the NAIC model this year.

And there is relentless push back from the applicant/plaintiff attempting to impose personal bad-faith liability. Insurer employees can be sued personally for bad faith in Washington state, a lower court ruled.

Keodalah v. Allstate Insurance arose from a motorcycle collision with a pickup truck in Seattle, resulting in an uninsured motorist claim. The appeals court ruled that Tracey Smith, the Allstate adjuster, can be sued personally, including claims for treble damages and attorney fees. Liability also would extend to outside experts who assist insurers, such as IME physicians, third-party investigators and defense attorneys.

Keodalah addressed a split of authority in Washington. Several federal court judges issued rulings from 2005 through 2016 that non-insurer entities were exempt from bad faith claims and Consumer Protection Act claims.

In 2017, another Division of Washington’s Court of Appeals in Merriman v. American Guarantee & Liability Ins. Co., held that Washington’s generalized statute requiring good faith in the “business of insurance” applied to the insurer’s third-party administrator.

The Keodalah case has been appealed to the Washington state Supreme Court, and will be closely watched..

Courts in Montana, Texas, Mississippi and Kentucky, have long recognized claims against adjusters for bad faith and violations of statutes governing claim-handling practices. In contrast, numerous other courts – including in Oklahoma, Indiana, Hawaii, Alabama, Tennessee, New Mexico, West Virginia, California, New York and Pennsylvania – have held that adjusters generally cannot be liable for bad faith. Many other jurisdictions are undecided.

The plaintiffs bar has also sought to apply RICO laws as a penalty in workers’ compensation claims in a number of jurisdictions for at least a decade with poor results. The 9th Circuit Court of Appeals just affirmed the dismissal of a California effort in the unpublished case of Black v CorVel Enterprises Comp Inc.

Many countries have legalized or decriminalized cannabis use, leading to concerns that this might result in an increase in cannabis use and associated harm.

Indeed, when it comes to “medical marijuana” the litigation and legislative trend seems to focus on the question of “cannabis – yes or no, – without contemplating the related questions of “how long” and “what kind.”

As the following study points out, there are highly potent forms of cannabis available in pot shops where an injured worker might fill a prescription. The legislators and litigation outcomes make no reference whatsoever to potent and dangerous types of cannabis which may sit side by side with other types in a pot shop.

Currently, cross-sectional and prospective epidemiological studies as well as biological evidence support a causal link between cannabis use and psychotic disorder. Meta-analysis shows a dose-response association with the highest odds of psychotic disorder in those with the heaviest cannabis use.

Nevertheless, it is not clear whether, at a population level, patterns of cannabis use influence rates of psychotic disorder.

For that reason, researchers aimed to identify patterns of cannabis use with the strongest effect on odds of psychotic disorder across Europe and explore whether differences in such patterns contribute to variations in the incidence rates of psychotic disorder.

To accomplish this mission, they targeted 901 patients aged 18 – 64 years who presented to psychiatric services in 11 sites across Europe and Brazil with first-episode psychosis and recruited controls representative of the local populations. The results of the study were published online this month in the Lancet Psychiatry.

Differences in frequency of daily cannabis use and in use of high-potency cannabis contributed to the striking variation in the incidence of psychotic disorder across the 11 studied sites. Given the increasing availability of high-potency cannabis, and the researchers say “this has important implications for public health.”

Daily cannabis use was associated with increased odds of psychotic disorder compared with never users increasing to nearly five-times increased odds for daily use of high-potency types of cannabis.

Use of high-potency cannabis was a strong predictor of psychotic disorder in Amsterdam, London, and Paris where high-potency cannabis was widely available, by contrast with sites such as Palermo where this type was not yet available. In the Netherlands, the THC content reaches up to 67% in Nederhasj and 22% in Nederwiet; in London, skunk-like cannabis (average THC of 14%) represents 94% of the street market whereas in countries like Italy, France, and Spain, herbal types of cannabis with THC content of less than 10% were still commonly used.

Researchers concluded that their findings are consistent with previous epidemiological and experimental evidence suggesting that the use of cannabis with a high concentration of THC has more harmful effects on mental health than does use of weaker forms.

If high-potency cannabis were no longer available, 12·2% of cases of first-episode psychosis could be prevented across the 11 sites, rising to 30·3% in London and 50·3% in Amsterdam.

The United States Attorney’s Office for the Central District of California collected over $317 million in criminal, civil and forfeiture actions in Fiscal Year 2018.

Last year’s collections also include over $235 million worth of assets forfeited to the United States for crimes committed both here and abroad, And $21.2 million was secured through civil enforcement matters in which prosecutors recovered federal funds lost primarily through fraud or other misconduct.

Additionally, the office’s Civil Division worked with other U.S. Attorney’s Offices and colleagues in Washington to collect an additional $162.2 million in civil cases that were pursued in conjunction with these other Justice Department components, a figure that includes a $65 million settlement with Prime Healthcare Services and its chief executive officer to resolve allegations of Medicare fraud.

Prime Healthcare Services, Inc.; Prime Healthcare Foundation, Inc.; Prime Healthcare Management, Inc.; and Prime’s Founder and chief executive officer, Dr. Prem Reddy, agreed to pay the United States the $65 million to settle allegations that 14 Prime hospitals in California knowingly submitted false claims to Medicare by admitting patients who required only less costly, outpatient care and by billing for more expensive patient diagnoses than the patients had (a practice known as “up-coding”).

Prime Healthcare Services and the not-for-profit Prime Healthcare Foundation constitute one of the largest hospital systems in the nation, with 45 acute-care hospitals located in 14 states. It is headquartered in Ontario, California,

The 10 California hospital defendants owned by Prime Healthcare Services are parties to the settlement agreement: Alvarado Hospital Medical Center, Garden Grove Medical Center, La Palma Intercommunity Hospital, Desert Valley Hospital, Chino Valley Medical Center, Paradise Valley Hospital, San Dimas Community Hospital, Shasta Regional Medical Center, West Anaheim Medical Center and Centinela Hospital Medical Center. Four other hospital defendants owned by Prime Healthcare Foundation are also parties to the settlement agreement: Sherman Oaks Hospital, Montclair Hospital Medical Center, Huntington Beach Hospital and Encino Hospital Medical Center. Prime Healthcare Management, a subsidiary of Prime Healthcare Services, provides management, consulting and support services to hospitals owned and operated by Prime.

“We are focused on securing restitution for crime victims, recovering taxpayer money obtained by fraud, and stripping criminals of their ill-gotten gains,” said United States Attorney Nick Hanna. “The hundreds of millions of dollars we recovered in 2018 stand as a tribute to the tenacity and hard work of our prosecutors and staff.”

The United States Attorney’s Office for the Central District of California is based in Los Angeles and has branch offices in Santa Ana and Riverside. Currently, approximately 275 Assistant United States Attorneys serve about 20 million people who reside in the counties of Los Angeles, Orange, Riverside, San Bernardino, Ventura, Santa Barbara and San Luis Obispo.

The “Medical” Marijuana industry is at the doorsteps of the Workers’ Compensation industry. However, according to a report in the Los Angeles Times, political corruption is abundant in an industry that transacts business in green dollar cash. One might wonder if any of that green cash might help push the workers’ compensation political doors open to the pot merchants.

California is awash in cannabis cash from inside and out of the state, partly because pot remains an illegal drug under federal law, so banks won’t accept cash from the businesses. The state’s black market for cannabis was estimated to be worth $3.7 billion last year – more than four times the size of the legal market, according to the firm New Frontier Data.

In the more than two years since California voters approved the licensed growing and sale of recreational marijuana, the state has seen a half-dozen government corruption cases as black-market operators try to game the system, through bribery and other means.

Proposition 64, approved in 2016, allowed the state to license businesses to grow and sell pot but required the firms to also get approval from the cities and counties, most of which have outlawed pot operations. Proposition 64 also outlawed the transportation of cannabis out of the state, which was an issue in the Siskiyou County indictments against Chi Yang and his sister, Gaosheng Laitinen.

Yang allegedly approached Jon Lopey, the sheriff in his county office in Yreka in the summer of 2017, and initially suggested the $1 million could go to a foundation headed by Lopey. Lopey notified the FBI.

At one of the subsequent meetings Laitinen allegedly sought assurances about what their payments would buy: “Are we talking about protection from being raided?” she asked the sheriff, according to a DEA agent’s affidavit attached to the criminal charging document. The pair allegedly paid Lopey $10,500, including four $500 cash bonuses, before they were arrested, according to court records.

That case is just one of several that have involved cannabis sellers and growers allegedly bribing or trying to bribe government officials, or public officials acting illegally to get rich from marijuana.

Last year, Jermaine Wright, then the mayor pro tem of Adelanto, was charged with agreeing to accept a bribe to fast-track a marijuana business. Wright’s trial is scheduled for August. In May, FBI agents served search warrants at the home of Rich Kerr, who was mayor of Adelanto at the time, as well as at City Hall and a marijuana retailer.

Also in May, Humboldt County building inspector Patrick Mctigue was arrested and charged with accepting $100,000 in bribes from marijuana businesses seeking expedited help on county permits, according to the Humboldt County Sheriff’s Office.

Last March, a federal jury reached guilty verdicts to bribery and extortion charges against Michael Kimbrew, who was a field representative to then-Rep. Janice Hahn when he accepted cash from an undercover FBI agent while pledging his “undying support” to protect a marijuana dispensary that the city of Compton was trying to close.

This March, developer Dorian Gray was held to answer by a judge in a preliminary hearing on charges of offering bribes to then-Oakland City Council President Larry Reid and Assistant City Administrator Greg Minor, according to court records. Gray allegedly offered the councilman cash to help obtain a cannabis dispensary permit, and Reid reported the offer to authorities. Gray is charged with offering Minor, who oversees marijuana permitting for Oakland, a free trip to Spain.

Not all of the recent cases involve elected officials. Los Angeles County Sheriff’s Deputy Marc Antrim pleaded guilty two weeks ago to federal charges stemming from his arrest for robbing a warehouse of a half-ton of marijuana in October.

California was the first state to legalize the sale of marijuana for medical use two decades ago. The former mayor of the city of Cudahy was sentenced to one year in federal prison in 2013 for taking cash bribes in exchange for supporting the opening of a “medical marijuana” store in the city.

The head of the city’s code enforcement division and a city councilman were also convicted of taking part in the corruption scheme.

Law enforcement agencies are currently investigating possible corruption in other Southern California cities, according to Ed Muramoto, a private attorney for medical pot dispensaries that have complained about cities locking them out of competition for permits.

Sam Clauder, the former congressional aide and San Bernardino County Democratic Party official pleaded guilty in 2017 to charges in Texas of possessing 130 pounds of cannabis that he was transporting back east from California.

Two brothers who owned a West Los Angeles pharmacy and were convicted of illegally selling prescription opioids and other narcotics to black market customers across the United States were sentenced late Wednesday, with each man being ordered to serve 121 months in federal prison.

Berry Kabov, 48, and his brother Dalibor “Dabo” Kabov, 35, both residents of Brentwood, were sentenced by United States District Judge Dolly M. Gee. The Kabov brothers operated Global Compounding Pharmacy, a pharmacy that was located in West Los Angeles.

Following a three-week jury trial in early 2017, the brothers were convicted of illegally selling the opioid narcotics oxycodone, hydromorphone and hydrocodone. The wide-ranging conspiracy, which also illegally imported anabolic steroids, resulted in the Kabov brothers earning more than $3 million and cheating the Internal Revenue Service by failing to report $1.5 million on their federal tax returns.

Prosecutors argued in court documents that the Kabovs orchestrated a “years-long scheme to exploit the nation’s epidemic-level addiction to powerful prescription opioids,” and that the brothers “rose from mail-order drug dealers – sending drug parcels to Ohio for cash – to owners of a Los Angeles pharmacy that sold millions of dollars of oxycodone, hydromorphone, and hydrocodone on the black market.”

The Kabov brothers used Global Compounding to sell bulk quantities of oxycodone to customers across the country. During the investigation, authorities seized shipments containing thousands of oxycodone pills sent by the Kabov brothers to customers in and around Columbus, Ohio. These customers in turn made cash deposits into Kabov-controlled bank accounts or simply shipped bulk cash to the brothers in Southern California.

The evidence also included recorded calls between Berry Kabov and a cooperating informant, during which Berry Kabov described oxycodone pills as “gold” selling for as much as “50 bucks a pill” in areas like New York. Berry Kabov offered to ship as many as 4,000 oxycodone pills per week to the informant, bragging that “we have a thing that we can move easy.”

After drug wholesalers cut off Global Compounding, the Kabovs began manufacturing their own opioid pills after obtaining a $20,000 pill press from China and acquiring enough bulk powder to make 100,000 maximum-strength pills. “In total, from the wholesale orders and on-site manufacturing, the Kabovs disseminated over 300,000 pills of opiates to the black market during the conspiracy, which accounts only for what they sold after opening Global Compounding,” prosecutors wrote in their sentencing brief.

To conceal the black market drug sales that brought them approximately $3 million, the Kabovs conspired with a doctor to create fraudulent prescriptions in the names of identity theft victims. The Kabovs also reported false information to California authorities making it appear that drugs had been dispensed to those identity theft victims. Prosecutors said in court documents that planting that fraudulent information “ma[de] the victims falsely appear to be narcotic addicts,” thus putting them at risk of being denied necessary treatment from a legitimate physician checking their prescription histories. Global Compounding also failed to report sales of 98,000 pills of opiates to California authorities who track prescription drug sales.

As part of the scheme, the brothers also used the names of other identity theft victims – members of a longshoremen labor union’s health insurance plan – to submit fraudulent claims that generated another $2.6 million from the plan, prosecutors said in court papers. In October 2017, the owner of a Long Beach “medi-spa” involved in the fraud scheme, Erica Carey, pleaded guilty to a federal wire fraud charge and admitted conspiring with the Kabovs in exchange for more than $300,000 in kickbacks.

The investigation into the Kabov brothers and Global Compounding was conducted by the Drug Enforcement Administration, IRS Criminal Investigation, the United States Postal Inspection Service, the Los Angeles Police Department, and the California Board of Pharmacy.

The case is being prosecuted by Assistant United States Attorney Benjamin R. Barron of the Organized Crime Drug Enforcement Task Force, and Assistant United States Attorney Matthew O’Brien of the Environmental and Community Safety Crimes Section.