Tag: 2019 News

The Orange County District Attorney’s Office obtained a $1.6 million judgment in the civil case against a plastics manufacturer for willfully endangering employees by maintaining hazardous work environment.

Beginning in 2007, Solus Industrial Innovations operated a plastics manufacturing plant in Rancho Santa Margarita. Solus willfully, knowingly, and intentionally maintained an unsafe and hazardous work environment for their employees.

When the business relocated certain operations from Pennsylvania to Orange County in 2007, the defendants intentionally discarded a commercial boiler to avoid the cost and permitting requirements of proper installation. Solus instead purchased and installed an inexpensive residential water heater, knowing that it was not equipped to function at a commercial level.

In March 2009, the water heater exploded, senselessly killing two employees.

The Division of Occupational Safety and Health investigated and “determined the explosion had been caused by a failed safety valve and the lack of ‘any other suitable safety features on the heater due to ‘manipulation and misuse’ because Solus used a residential water heater instead of a commercial one.”

In March 2012, the OCDA filed a criminal suit against Solus’s plant manager and its maintenance supervisor for felony violations of Labor Code section 6425 subdivision (a) for knowingly operating an unsafe work environment, which resulted in the death of two employees.

The OCDA also filed the present civil action against Solus and its successor corporations.

The first cause of action “allege[d] that Solus’s failure to comply with workplace safety standards amount[ed] to an unlawful, unfair and fraudulent business practice under Business and Professions Code section 17200, and the district attorney request[ed] imposition of civil penalties as a consequence of that practice, in the amount of up to $2,500 per day, per employee, for the period from November 29, 2007, through March 19, 2009.”

The second was a claim that Solus “made numerous false and misleading representations concerning its commitment to workplace safety and its compliance with all applicable workplace safety standards, and as a result of those false and misleading statements, Solus was allegedly able to retain employees and customers in violation of Business and Professions Code section 17500.” The district attorney requested imposition of civil penalties in the same amount for the same period.

On Jan. 29, 2019, the defendants were ordered to pay $1.6 million, $1.5 million of which will go toward civil penalties and $100,000 for additional victim restitution.

Deputy District Attorney Kelly Ernby of the OCDA’s Environmental Protection Unit is the assigned prosecutor on the case.

A Ventura County man has been sentenced to 168 months in federal prison for participating in a massive fraud scheme that used dozens of nonexistent companies to collect nearly $5 million in unemployment benefits for phony employees who never performed any work at the fake entities.

Jack Benjamin Hessiani, a.k.a. “Jack Herrera,” 40, of Camarillo, was sentenced today by United States District Judge John A. Kronstadt. Hessiani pleaded guilty in August 2018 to one count of mail fraud.

According to court documents, Hessiani created numerous fictitious businesses for the sole purpose of defrauding the Employment Development Department (EDD), the state agency that administers the federal unemployment insurance program in California.

After he and his co-schemers filed documents with EDD that showed made-up earnings for the fictitious workers, Hessiani and the co-schemers submitted claims for unemployment insurance benefits for laid-off “employees.” In fact, many of the “employees” were people who had agreed to provide their personal identifying information in exchange for a portion of the unemployment insurance benefits. Some of the benefit portions would go to drug users who likely used the funds to enable future drug purchases, while others were poor students who later faced criminal exposure as a result of the actions of Hessiani and his co-schemers, court papers state.

The unemployment benefits were sent in the form of checks and debit cards to “mail drops” that Hessiani and the co-schemers established in the names of other individuals, according to court documents. After EDD began issuing unemployment benefits, Hessiani ensured that documents were filed that falsely stated that the laid-off “workers” were still unemployed, and he later sought “extended benefits” to obtain unemployment insurance benefits for the sham workers beyond the normal six-month period. These extended benefits were ultimately funded by the United States Treasury.

According to court documents, Hessiani and his co-schemers submitted approximately 725 unemployment insurance claims – including 521 original claims and 204 claims for extended benefits – in the names of 384 “employees.” The investigation identified 43 fictitious companies based in Ventura County that were used to further the scheme, which caused EDD to suffer actual losses of $3.96 million and the United States Treasury to suffer actual losses of approximately $900,000. Hessiani enlarged his scheme by inducing the people whose names were already being used to obtain fraudulent benefits to “recruit” others who would be identified as additional false employees at the fictitious companies, and he paid referral fees for each new fake worker brought into the scheme.

Three other defendants in the case have pleaded guilty to criminal charges and are pending sentencing. They are Hessiani’s brother, James Manuel Herrera, 30, of Camarillo; Eduardo Josue Garcia, 27, of Camarillo; and Daniel Ayala-Mora, 29, formerly of Camarillo.

The Division of Workers’ Compensation has posted the 2018 DWC Audit Unit annual report on its website. The annual report provides information on how claims administrators audited by the DWC performed and includes the Administrative Director’s ranking report for audits conducted in calendar year 2017.

The 2018 Audit Unit annual report details the results of audits conducted in 2017 and provides the name and location of each insurer, self-insured employer, and third-party administrator audited during that time.

The DWC Audit & Enforcement Unit completed 41 profile audit reviews (PAR audits). Of the PAR audits, 40 were routinely selected and there was 1 target audit, which would have been conducted based upon failure of a prior audit. The total number of PAR audit subjects included 5 insurance companies, 11 self-administered / self-insured employers, 21 third-party administrators (TPA), and 4 insurance companies / third-party administrators combined claims adjustinglocations.

Thirty-seven audit subjects (90%) met or exceeded the PAR 2017 performance standard and therefore had no penalty citations assessed in accordance with Labor Code section 129.5(c) and CCR, Title 8, Section 10107.1(c)(4). These audit subjects were, however, ordered to pay all unpaid compensation.

Four audit subjects (10%) failed to meet or exceed the PAR standard and their audits expanded into a full compliance audit of indemnity claims (FCA stage 1). One of these audit subjects (25% of those failing to meet or exceed the PAR standard) met or exceeded the FCA 2017 performance standard and therefore had penalty citations assessed for unpaid and late payment of indemnity in accordance pursuant to Labor Code section 129.5(c)(2) and CCR, Title 8, Sections 10107.1(d).

The remaining three of the four audit subjects (75% of those failing to meet or exceed the PAR standard) failed to meet or exceed the FCA 2017 performance standard and their audits expanded into full compliance audit of indemnity claims (FCA stage 2) and added a sample of denied claims to be audited. These audit subjects were assessed administrative penalties for all penalty citations in accordance with Labor Code section 129.5(c) and CCR, Title 8, Section 10107.1(d) and 10107.1(e).

The audit findings, by law, must detail the number of files audited, the number and type of violations cited, and the amount of an undisputed compensation found due and unpaid to the injured worker. The audit findings presented in this report are statistical and do not identify any individual injured worker. The Labor Code provides that contents of the claim files and the Audit Unit working papers are confidential.

The DWC Administrative Director’s 2017 Audit Ranking Report is part of this annual report. The Ranking Report provides the performance ratings for the 41 audit subjects listed in order, from the best to worst performer.

Congratulations to Zenith Insurance Company – Pleasanton for having the best score in the Ranking Report.  The ranking of the remaining 40 organizations are listed by name on the Ranking Report.

Performance of insurers, self-insured employers, and third party administrators subject to profile audit review and full compliance audit is rated in accordance with the performance standards set annually by the Administrative Director. The DWC Administrative Director’s 2018 Audit Ranking Report lists, in ascending order by performance rating, the administrators audited in calendar year 2017.

Sunrise Lee, an ex-stripper who became a regional sales director at Insys Therapeutics, gave a doctor a lap dance at a Chicago club as part of her marketing plan to convince the doctor to prescribe its addictive fentanyl spray.

Reuters reports that the testimony in federal court in Boston came in the first criminal trial of painkiller manufacturer executives over conduct that authorities say contributed to a U.S. opioid abuse epidemic that has killed tens of thousands of people a year.

Former Insys sales representative Holly Brown told jurors the incident with her boss, Sunrise Lee, took place after Insys began rewarding the doctor for prescribing its opioid product by paying him to speak at educational events about the drug.

That Illinois doctor, Paul Madison, is one of several whom prosecutors say Lee and four other former Insys executives and managers including wealthy founder and ex-chairman John Kapoor conspired to bribe to boost sales of the spray, Subsys.

Lee, Kapoor, Michael Gurry, Richard Simon and Joseph Rowan deny wrongdoing and have pleaded not guilty to racketeering conspiracy.

Drugmakers often retain doctors to speak at events with other clinicians about the benefits of their drugs, and defense lawyers argue the events were legal compensation for the doctors’ educational work.

Yet Brown said Madison’s events, held at a Chicago restaurant Kapoor owned, were attended by his friends instead of clinicians.

“The idea was these weren’t really meant to be educational programs but were meant to be rewards to physicians.” Brown said.

After one dinner in mid-2012, Brown said she, Lee and Madison went to a club, where she witnessed Lee “sitting on his lap, kind of bouncing around.”

Brown testified that at the time, Madison ran a “notorious” medical practice, which in a 2012 email shown to jurors she described as a “shady pill mill.”

Prosecutors say Insys paid Madison at least $70,800 in speaker fees.

Madison was convicted in November of unrelated charges that he defrauded insurers into paying for unperformed chiropractic procedures. His lawyer did not respond to Reuters requests for comment.

In three separate California state civil lawsuits, performers in the pornographic film industry sued Cybernet Entertainment, LLC for negligence, negligence per se, breach of the implied covenant of good faith and fair dealing, negligent supervision, and negligent hiring and/or retention.

They alleged, in essence, that Cybernet did not take adequate steps to protect its performers and prevent the spread of sexually transmitted diseases and HIV during pornographic shoots, causing injury. The plaintiffs alleged that Cybernet did not provide adequate personal protective equipment, such as condoms, to performers; did not test certain performers; and otherwise violated California regulations meant to prevent the spread of STDs and HIV in pornographic shoots.

The state-court plaintiffs’ causes of action for intentional/fraudulent misrepresentation and conspiracy to commit fraud alleged that Cybernet and others made various false representations concerning the safety of Cybernet shoots (e.g., that protection could be used on request) to the plaintiffs to induce them to participate in those shoots.

Cybernet Entertainment filed a third-party complaint in federal court against State Compensation Insurance Fund seeking a declaration that State Fund had a duty to defend Cybernet in the three state court actions filed against Cybernet under a Workers’ Compensation and Employer’s Liability Insurance Policy.

The district court held that State Fund did not have a duty to defend Cybernet. Cybernet appealed. The ruling was affirmed in the unpublished case of Seneca Insurance Company Inc. v State Compensation Insurance Fund.

The court considered whether two policy exclusions bar coverage under the Employer’s Liability portion of the Policy for the claims asserted in the State Court Actions.

Exclusion 4 provides that coverage under the Employer’s Liability portion of the Policy does not extend to “any obligation imposed by a workers’ compensation . . . law.” Exclusion 5 provides that coverage under the Employer’s Liability portion of the Policy does not extend to “damages or bodily injury intentionally caused or aggravated by” Cybernet.

The acts and injuries alleged in the negligence causes of action fall within the compensation bargain because the gravamen of each is that Cybernet did not maintain a safe workplace. The remedy for such workplace-safety claims is workers’ compensation.

Exclusion 5 bars coverage for the intentional tort claims.

Because either Exclusion 4 or Exclusion 5 bars coverage under the Employer’s Liability portion of the Policy for each of the causes of action alleged against Cybernet in the state court actions, State Fund did not have a duty to defend Cybernet in those actions.