October 19, 2005 - Texas Mutual Insurance Company reported today that Thomas Whited of Bastrop pleaded guilty to workers’ compensation fraud-related charges. The Travis County 167th District Court sentenced Whited to a one-year suspended jail term with the following conditions: serve thirty days in jail, repay $2,441.25 in benefits to Texas Mutual Insurance Company, perform 160 hours of community service, attend treatment and counseling as recommended by probation, and pay a $250 fine, plus court costs.

Whited reported a job-related injury while working for C.W. Oates Masonry Inc. His doctor placed him in off-work status, and Texas Mutual Insurance Company began paying him temporary income benefits (TIBs).

A C.W. Oates employee contacted the Texas Mutual^® fraud department after observing Whited working as a mason on another construction project. The investigation uncovered evidence that Whited started his new job three days after he reported his alleged injury, and he continued to collect TIBs while working.

Investigators call this sort of scam “double-dipping” because the perpetrator, in effect, gets paid twice: once by his new employer for working, and again by his previous employer’s insurance company for being too injured to work. If allowed to continue, double-dipping scams can lead to a higher workers’ compensation insurance premium for the first employer when the company renews its coverage.

State law allows injured workers to receive TIBs only while they are unable to work. The law also requires injured workers to notify their workers’ compensation insurance company when they begin working again.

The Whited investigation is part of the Texas Mutual^® “Zero Tolerance for Fraud” policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

August 12, 2005 - Texas Mutual Insurance Company announced today that a Dallas federal grand jury indicted Alpha Treatment Centers Inc., doing business as Texas Durable Medical Equipment (TDME), along with two of its employees, Andrew Hillman and Jason White, on 27 counts of fraud-related charges.

Hillman, White and TDME allegedly submitted bogus reimbursement claims to state and federal workers’ compensation insurance carriers. If convicted on all counts, each defendant faces a maximum statutory sentence of 265 years in prison and millions of dollars in fines and restitution.

Texas Mutual Insurance Company, one of the insurance carriers affected by the alleged scam, assisted with the investigation and earned praise from United States Attorney Richard B. Roper for its efforts. Roper also praised the U.S. Postal Service/Office of the Inspector General, the U.S. Department of Labor/Office of the Inspector General, the Texas Workers’ Compensation Commission, and the U.S. Postal Inspection Service.

Texas Mutual’s participation in the TDME investigation was part of its "Zero Tolerance for Fraud" policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

Note: A grand jury indictment is a formal accusation—not a conviction—of criminal conduct.

June 20, 2005 - Texas Mutual Insurance Company reports that, in unrelated cases, Texas grand juries indicted two former prison guards on workers’ compensation fraud-related charges. Both guards were allegedly "double-dipping," a term investigators use for claimants who collect income benefits by saying they are unable to work while they are actively employed.

A Dallas County grand jury indicted Ron L. Dawson for aggregated theft over $1,500. Dawson received temporary income benefits (TIBs) after telling Texas Mutual Insurance Company he was unable to work due to his 2001 workplace injury.

Dawson allegedly hurt his back while working as a security guard for a Dallas homeowners association. He said he was unable to work; however, a Texas Mutual^® investigation discovered that he took a new job as a prison guard for Dawson State Jail from June 27, 2002, through February 13, 2003. During this time, he received over $6,300 in TIBs.

In Austin, a similar case played out when the 299th Judicial District grand jury indicted Lloyd Davis on fraud-related charges. Davis had applied for supplemental income benefits (SIBs) in December 2000, stating that he was not employed and was unable to work due to a workplace injury from his previous job.

Davis had received over $8,600 in SIBs when a claim reviewer noticed some irregularities in his file. The subsequent Texas Mutual^® investigation discovered that Davis had worked since 1999—without any disability—as a prison guard at the T. Don Hutto Correctional Facility, a state jail operated by a private company.

Texas Mutual Insurance Company immediately disputed Davis’ entitlement to further benefits and presented its case to the Travis County District Attorney Office. On May 4, 2005, a grand jury indicted Davis. He was arrested on May 20 and held in custody pending his trial.

"Double-dipping" scams are so-called because the perpetrator, in effect, gets paid twice: once by his new employer for working and again by his previous employer’s insurance company for being too injured to work. If allowed to continue, double-dipping can lead to a higher workers’ comp insurance premium for the first employer when the company renews its coverage.

To help ensure injured workers understand their responsibilities under the law, Texas Mutual Insurance Company includes a statement with every income benefit check reminding the injured worker to contact the adjuster if he or she returns to work. Additionally, Texas Mutual^® adjusters often contact claimants directly to determine their work status.

The Dawson and Davis investigations are part of the Texas Mutual^® "Zero Tolerance for Fraud" policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

July 22, 2004 - Quenton Durrett of Durrett Demolition in Manvel, Texas received a one-year sentence, suspended for four years, for workers’ compensation fraud-related charges. The 167th District Court of Travis County reduced the charges to a misdemeanor, and ordered Durrett to pay a $500 fine and $26,000 in restitution to Texas Mutual Insurance Company.

According to Texas Mutual^® investigators, Durrett repeatedly claimed that his company had no employees and no payroll records. An investigation uncovered evidence showing that Durrett maintained a company bank account from which employees were paid, and he used two payroll companies to pay the Durrett Demolition payroll.

Workers’ compensation insurance premiums are based, in part, on payroll. The fraud allowed Durrett to avoid paying the correct premium for his company, and it left Texas Mutual Insurance Company liable for injuries sustained by his employees.

The Durrett investigation was part of the Texas Mutual^® “Zero Tolerance for Fraud” program. Texas Mutual Insurance Company maintains three teams of fraud investigators permanently assigned to investigate every report of suspected fraud.

JULY 9, 2004—A Travis County grand jury indicted Sergio Garcia on charges related to workers’ compensation fraud. If convicted, Garcia could face fines, restitution, and time in prison.

While working in Houston for Continental Manufacturing, a janitorial and food service products supplier, Garcia allegedly hurt his right shoulder in an on-the-job accident. Texas Mutual Insurance Company began paying Garcia temporary income benefits (TIBs) after his doctor placed him in an off-work status.

Texas Mutual^® investigator Michael Bradley uncovered evidence suggesting that Garcia was working at a new job while continuing to collect TIBs for his alleged injury at Continental Manufacturing. Investigators call this sort of scam “double-dipping” because the claimant is getting paid by his new employer for working and, in effect, getting paid by his previous employer’s insurance company for being too injured to work.

Double-dipping scams, if allowed to continue, can lead to a higher workers’ comp insurance premium for the first employer when the company renews its coverage.

State law allows injured workers to receive TIBs—up to 75 percent of their weekly salary—only while they are unable to work. The law also requires injured workers to notify the workers’ compensation insurance company when they begin working again.

With every TIBs check, Texas Mutual Insurance Company includes a statement reminding the claimant that he or she must contact the adjuster if he or she returns to full-time or part-time work. Additionally, Texas Mutual^® adjusters often contact claimants directly to determine their work status.

The Garcia investigation was part of the Texas Mutual^® “Zero Tolerance for Fraud” policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.

JUNE 9, 2004 - A Travis County district court accepted an Odessa man’s plea bargain to reduce his workers’ compensation fraud case from a State Jail Felony to a Class A Misdemeanor today. William Scott Anderson received deferred adjudication probation for 180 days confinement, and he must pay court costs and make restitution of $1,530 to Texas Mutual Insurance Company.

Anderson allegedly suffered an on-the-job injury while working as a derrick man for Mattlock Drilling LTD of Midland. He claimed he was unable to return to work because of the injury, and Texas Mutual Insurance Company began paying temporary income benefits (TIBs).

When another drilling company called to check Anderson’s references, Mattlock Drilling alerted Texas Mutual Insurance Company. The ensuing Texas Mutual^® investigation uncovered evidence showing that Anderson had taken a new job, despite telling his Texas Mutual^® adjuster that he was unable to work.

Investigators call this sort of scam “double-dipping” because, in effect, the perpetrator is getting paid twice: once for working at his new job and again for being too hurt to work at his old job. If allowed to continue, double-dipping scams can lead to a higher workers’ comp insurance premium for the first employer when the company renews its coverage.

Texas Mutual Insurance Company includes a statement with every TIBs check reminding the claimant to contact the adjuster if he or she returns to full-time or part-time work. Additionally, Texas Mutual^® adjusters often contact claimants directly to determine their work status.

The investigation was part of the Texas Mutual^® Zero Tolerance for Fraud program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

APRIL 23, 2004 – Texas Mutual Insurance Company reported today that Enrique Rodriguez of Houston pleaded guilty to workers’ compensation fraud-related charges. The 390th District Court of Travis County sentenced Rodriguez to two years deferred probation and 100 hours of community service. The court also ordered Rodriguez to pay back the $1,600 in benefits he fraudulently obtained from Texas Mutual Insurance Company.

Rodriguez allegedly hurt his knee in an on-the-job injury in November 1999. His employer became suspicious after hearing conflicting descriptions of the alleged incident. A Texas Mutual^® investigation obtained surveillance video and medical records that aided the prosecution of Rodriguez.

The video showed Rodriquez working in his yard, carrying large landscaping timbers, and jumping in and out of the bed of his truck as he unloaded dirt from the truck. The medical records, along with information from his treating doctor, helped the prosecution prove that Rodriguez was feigning his disability.

The Rodriguez investigation was part of the Texas Mutual^® “Zero Tolerance for Fraud” policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

April 8, 2004 — Texas Mutual Insurance Company reported today that Doze Construction Co. Inc. of Gun Barrel City pleaded guilty to workers’ compensation fraud-related charges. Judge Julie Kocurek of the 390th Travis County District Court ordered the company to pay a $100 fine to the state, plus $17,000 in restitution to Texas Mutual Insurance Company.

Doze Construction illegally transferred employee payroll into an uninsured second company, a scheme investigators call using a “shadow company.” Doze Construction then applied for workers’ compensation insurance through Texas Mutual Insurance Company, but it reported only a fraction of its true payroll.

Because insurance companies use payroll as part of their premium calculations for workers’ comp coverage, the scam allowed Doze Construction to receive a much lower premium than it actually owed.

“Premium fraud is a serious crime,” said Elliot Flood, Texas Mutual^® vice president of special investigations. “It’s bad for honest competition in the marketplace, and it’s bad for the company’s workers, who are entitled to workers’ comp benefits, a fact often hidden from them when an employer uses a shadow company scam.”

When Texas Mutual^® investigator Sandra Milburn uncovered evidence against Doze Construction, she contacted Assistant District Attorney Elizabeth Andrus, who prosecuted the case on behalf of the Travis County District Attorney office. In October 2002, a Travis County Grand Jury indicted owners Stanley and Cynthia Doze on charges of “Securing Execution of a Document by Deception,” a state jail felony.

Judge Kocurek dismissed the cases against Stanley and Cynthia Doze, as recommended by the State, in return for the company’s guilty plea and immediate restitution.

The Doze Construction investigation is part of the Texas Mutual^® “Zero Tolerance of Fraud” program. Texas Mutual Insurance maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

April 6, 2004 — Texas Mutual Insurance Company announced Terre Tomblin is the new supervisor for its Organized Fraud Unit. Ms. Tomblin brings over 20 years experience in fraud investigation supervision for the United States Air Force’s Office of Special Investigations (OSI).

The OSI is the civilian agency that investigates major fraud against the Air Force.

Elliott Flood, Texas Mutual^® vice president of special investigations, says that the types of cases Tomblin handled for the Air Force have a lot of similarities to organized workers’ compensation fraud. Unlike an isolated fraud crime committed by an individual, organized fraud cases usually require detailed investigations, intense record reviews, and an in-depth understanding of Texas Workers’ Compensation Commission rules.

“We are very excited about adding Terre to our fraud-fighting team,” said Flood. “We brought in several of our investigators to share their favorite fraud cases with her to help her learn some of the nuances of investigating workers’ compensation insurance fraud, and she has already demonstrated a quick grasp of the key elements.”

MARCH 18, 2004 - A Travis County grand jury indicted Minerva Davila today for workers’ compensation fraud-related charges. If convicted, Davila could face fines, restitution, and time in prison.

While working at Comal County Child Emergency, Davila allegedly hurt her head, neck, shoulder and back in an on-the-job accident. Texas Mutual Insurance Company began paying Davila approximately $158 per week in temporary income benefits (TIBs) after her doctor placed her in an off-work status in August 2002.

A Texas Mutual_SM investigation uncovered evidence alleging that Davila had worked as a housekeeper at a New Braunfels conference center beginning September 9, 2002, less than one month after her alleged injury. The investigation found that Davila performed her duties at the center without any indication or complaint of pain or physical limitation.

Meanwhile, Davila continued to tell Texas Mutual Insurance Company that she could not work, and she continued to collect TIBs.

State law allows injured workers to receive TIBs only while they are unable to work. The law also requires injured workers to notify the workers’ compensation insurance company when they begin working again.

Davila received over $4,500 in TIBs, according to Texas Mutual Insurance Company.

Investigators call this sort of scam “double-dipping” because the claimant is getting paid by her new employer for working and, in effect, getting paid by her previous employer’s insurance company for being too hurt to work.

Double-dipping scams, if allowed to continue, can lead to a higher workers’ comp insurance premium for the first employer when the company renews its coverage.

With every TIBs check, Texas Mutual Insurance Company includes a statement reminding the claimant to contact the adjuster if he or she returns to full-time or part-time work. Additionally, Texas Mutual_SM adjusters often contact claimants directly to determine their work status.

The Davila investigation was part of the Texas Mutual_SM “Zero Tolerance for Fraud” policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.

MARCH 5, 2004 – Texas Mutual Insurance Company reported today that Roger Gilbreth pleaded guilty to workers’ compensation fraud-related charges.

The 390th District Court sentenced Gilbreth to two years deferred probation and 120 hours of community service. The court also ordered Gilbreth to pay a $200 fine and pay back the $8,974.68 in benefits he fraudulently obtained from Texas Mutual Insurance Company.

Gilbreth allegedly suffered an on-the-job injury while working for Fabstar, Inc. Texas Mutual Insurance Company began paying him supplemental income benefits (SIBs) because he claimed the injury prevented him from returning to work.

The Texas Workers’ Compensation Commission requires injured workers applying for SIBs to complete and sign form TWCC-52 attesting that they are earning less than 80 percent of the wages they earned before their injuries. Gilbreth signed the form upon his initial application for SIBs, and then once a quarter thereafter, as the law requires. Each time, he claimed he was earning no wages.

Meanwhile, Texas Mutual Insurance Company received information that Gilbreth accepted a job in Arkansas. He did not notify Texas Mutual Insurance Company of the change in his employment status, as state law requires. He continued to sign the TWCC-52 and collect SIBs.

The Texas Mutual_SM fraud division presented the signed TWCC-52 forms, along with other evidence, to the Travis County District Attorney office, which prosecuted the case. Texas Mutual Insurance Company estimates that Gilbreth could have fraudulently obtained around $68,000 in benefits had he gotten away with his scam.

The Gilbreth investigation was part of the Texas Mutual_SM Zero Tolerance for Fraud policy. The company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

February 13, 2004 — Texas Mutual Insurance Company reports that Dr. Catherine Delaney, a Ph.D. therapist from Houston, entered a corporate plea agreement (Delaney and Associates) with the Travis County District Attorney’s office related to charges of workers’ compensation insurance fraud. Dr. Delaney pleaded guilty on January 20 and paid $9,652 in restitution to Texas Mutual Insurance Company.

The plea agreement followed a months-long joint investigation by the Travis County District Attorney office and Texas Mutual Insurance Company, including some unplanned surveillance work by Texas Mutual_SM investigator Kathleen Kennedy.

In her spare time, Ms. Kennedy works as a volunteer with substance abusers in the Houston area. While attending an alcohol education seminar presented by the Houston Council on Alcohol and Drug Abuse, Ms. Kennedy noticed that Dr. Delaney was seated directly in front of her.

Dr. Delaney had filed for workers’ compensation temporary income benefits (TIBs) when she claimed she was unable to work after allegedly injuring her left knee in her employer’s parking lot. She continued to collect TIBs even after going to work for another employer, Alief Independent School District, a few months later.

State law allows injured workers to receive TIBs only while they are unable to return to work. The law also requires injured workers to notify their workers’ compensation carriers when they return to work.

Delaney failed to notify Texas Mutual Insurance Company that she had returned to work. She also repeatedly told Texas Mutual_SM staff that she was still unable to work so she could continue to receive TIBs of $508 per week.

Investigators call this sort of scam “double-dipping” because the claimant is getting paid by her employer for working and, in effect, getting paid by the insurance company for being too injured to work.

At the seminar, Ms. Kennedy observed that Dr. Delaney “moved freely and without obvious pain” and that her movements did not match the complaints of physical pain and restrictions she had told her health care providers. Ms. Kennedy contacted Assistant District Attorney Donna Crosby, who prosecuted the case on behalf of the Travis County District Attorney office.

The Delaney investigation was part of Texas Mutual Insurance Company’s “Zero Tolerance for Fraud” program. The company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

JANUARY 29, 2004 — Elliott Flood, vice president of special investigations for Texas Mutual Insurance Company, addressed the Texas Committee on Insurance Fraud (TCIF) yesterday. Flood discussed workers’ compensation fraud, one of several types of insurance fraud covered at the meeting.

“Of course, we need to strengthen existing laws, but we also need the means to enforce the law,” said Flood. “To do that, we need three things: money, resources and expertise.”

Flood noted that one of the biggest stumbling blocks to enforcement is that some district attorneys are reluctant to prosecute insurance fraud. This is especially true when the case involves health care provider fraud or premium fraud, the two most costly types of fraud in the workers’ compensation system.

“To be fair to these district attorneys, they often don’t have the technical knowledge to handle white-collar crimes,” said Flood. “Unlike so-called regular crimes, prosecuting insurance fraud, especially premium fraud or health care provider fraud, may require intensive record reviews and an in-depth understanding of [Texas Workers’ Compensation] Commission fee guidelines and rules. We need prosecutors who are dedicated to fighting insurance fraud.”

Reps. Jack Stick and Larry Taylor also attended the meeting. Both men said they supported TCIF’s efforts.

“The continuation of insurance reform will be a critical element in the next session,” said Stick. “Insurance fraud is a priority.”

Taylor agreed with Stick and added that a big part of TCIF’s mission will be educating the public and his fellow legislators on the high cost of insurance fraud. TCIF Chairman Craig Sparks said insurance fraud costs an estimated $120 billion per year, nationally.

Other TCIF speakers included Insurance Commissioner José Montemayor, Dennis Pompa of the Texas Department of Insurance, Dave Hennings of the National Health Care Anti-Fraud Association, Beverly Boone of the Automobile Insurance Agents of Texas, Thomas Dixon of the National Insurance Crime Bureau, Howard Goldblatt of the Coalition Against Insurance Fraud, Jay Thompson of the Association of Fire & Casualty Companies of Texas, and Mark Hanna of the Insurance Council of Texas.

TCIF began as an informal discussion between the Insurance Council of Texas and the fraud unit of the Texas Department of Insurance. The committee hopes to lead a more coordinated assault on insurance fraud at every level by working with insurance carriers, state and county agencies, and national organizations.

TCIF will meet again on April 21 at the Texas Department of Insurance in Austin.

NOVEMBER 10, 2003—Jimmy L. Jones of Victoria pleaded guilty to workers’ compensation fraud-related charges today. The court sentenced Jones to two years in a state jail facility, probated for three years.

The court also ordered Jones to pay $3,825 in restitution to Texas Mutual Insurance Company, serve 60 hours of community service, pay the court costs, and complete any counseling recommended by his probation officer.

The Jones case began when he belatedly reported an alleged job-related injury from his job at Jen’s Oilfield Service in Edinburg. After reviewing the injury report, Texas Mutual Insurance Company disputed the claim.

At a Texas Workers’ Compensation Commission (TWCC) benefit review conference, Jones testified that he had been disabled and unable to work between August 15, 2001 and December 3, 2001. TWCC ordered Texas Mutual Insurance Company to pay Jones $3,825 in back income benefits for the period of his alleged disability.

A Texas Mutual_SM investigation later revealed that, in fact, Jones was gainfully employed during the period of his alleged disability. Therefore, he was not entitled to temporary income benefits for his alleged injury.

The Jones investigation was part of the Texas Mutual_SM “Zero Tolerance for Fraud” program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate reports of suspected fraud.

NOVEMBER 7, 2003—Ruben Perez of Dallas pleaded guilty to workers’ compensation fraud-related charges today. Perez received a two-year deferred adjudication sentence and must pay $6,000 in restitution to Texas Mutual Insurance Company. The court also sentenced him to serve 160 hours of community service.

Perez’s scam was not an uncommon one. He was injured on-the-job and began to collect temporary income benefits (TIBs) from Texas Mutual Insurance Company. After he returned to work, he repeatedly lied to a Texas Mutual_SM claim adjuster by saying that he was still unable to work so he could continue to receive $356 per week in TIBs.

Investigators call this sort of scam “double-dipping” because the claimant is getting paid by his employer for working and, in effect, getting paid by the insurance company for being too injured to work.

State law allows injured workers to receive TIBs only while they are unable to return to work. The law also requires injured workers to notify their workers’ compensation carriers when they return to work.

When Texas Mutual_SM investigator Sandra Milburn uncovered evidence against Perez, she contacted Assistant District Attorney Donna Crosby, who prosecuted the case on behalf of the Travis County District Attorney office.

Three years ago, Milburn had investigated Perez’s employer for premium fraud, and Crosby prosecuted that case, too. Ultimately, the court ordered the employer to pay $200,000 in restitution to Texas Mutual Insurance Company, and the owner received a five-year probated sentence.

Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate reports of suspected fraud.

October 24, 2003 – Texas Home Exteriors Inc. of Austin pleaded guilty to a third-degree felony in a workers’ compensation fraud case. The 331st Travis County District Court ordered the company to pay $20,000 in restitution to Texas Mutual Insurance Company.

Texas Home Exteriors reported that it only employed company officers and clerical staff. Texas Mutual Insurance Company opened an investigation after its underwriting department noticed that the company filed a claim for a worker who was injured while installing siding. Texas Mutual_SM investigator Sandra Milburn uncovered evidence that the injured worker was actually employed by an uninsured subcontractor who was not covered on Texas Home Exteriors’ policy.

The investigation was part of the Texas Mutual_SM Zero Tolerance for Fraud policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud. Assistant District Attorney Donna Crosby prosecuted the case for the Travis County District Attorney Office.

OCTOBER 15, 2003 – Raymond Hicks of Del Valle, Texas pleaded guilty to workers’ compensation fraud before the 147th Travis County District Court. Hicks’ sentence included $8,212.60 in restitution to Texas Mutual Insurance Company, a $500 fine, court costs, the costs of any counseling or treatment required by the Travis County Community Supervision Department, two years of deferred adjudication, and 80 hours of community service.

Hicks claimed he suffered an on-the-job injury while working for Cook Mail Service in Austin, Texas. He told Texas Mutual Insurance Company and his treating doctor that he was unable to work due to the injury.

Texas Mutual Insurance Company investigators got suspicious when they received an anonymous tip through their Fraud Stoppers_SM program. The tipster claimed that Hicks was working while continuing to collect benefits for his alleged work-related injury. State law requires injured workers to notify their carriers of any change in their work status.

The investigation revealed that Hicks was in fact working as a truck driver for Libre Trucking Inc., based out of Austin, Texas. The investigators shot surveillance video of Hicks on the job and asked the Travis County District Attorney office to prosecute the case.

OCTOBER 15, 2003 – A Houston landscaping company pleaded guilty to workers’ compensation fraud before the 131st Travis County District Court. The court ordered the company to pay $325,000 in restitution to Texas Mutual Insurance Company.

An investigation by Texas Mutual Insurance Company uncovered evidence that the landscaping company intentionally hid its overtime and extra compensation in a second company, Dynamic Metro Services Inc., which was a company in name only. Since workers’ compensation premiums are based in part on payroll, the scam enabled the landscaping company to unfairly lower its premium.

Texas Mutual Insurance Company got suspicious when one of the landscaping company’s employees disputed his temporary income benefits, which are based in part on income. The employee claimed he made more money than his employer reported to Texas Mutual Insurance Company.

The investigation was part of the Texas Mutual_SM Zero Tolerance for Fraud program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

OCTOBER 6, 2003— U.S. District Judge Terry R. Means sentenced former Arlington residents Dr. James Mark Murphy and Mr. Joseph Robert Kirkham to 87 months imprisonment and 120 months imprisonment, respectively, for defrauding several insurance companies. Judge Means also ordered Dr. Murphy to pay $732,061 in restitution and Mr. Kirkham to pay $2,751,270 in restitution.

Following a seven-day trial in May, a federal jury convicted Dr. Murphy, an anesthesiologist, and Mr. Kirkham, a businessman, of submitting fraudulent medical claims from 1996 to 2000 using various medical doctors’ names and credentials. Texas Mutual Insurance Company, along with other insurance carriers, provided federal authorities with records of the fraudulent claims the defendants used.

“The entire scheme not only defrauded insurance companies of millions of dollars, but deprived patients of the full, honest medical care they thought they were receiving,” reported a written statement from the U.S. Department of Justice.

During the trial, patients testified that they never saw Dr. Murphy, but were billed for medical services that he did not provide or supervise. Witnesses also testified that the clinics billed for medically unnecessary treatments and that Dr. Murphy and Mr. Kirkham were both aware of the fraudulent billings and knowingly participated in the scam.

Dr. Murphy and Mr. Kirkham were the last to be sentenced out of several convicted defendants in the scheme. Other health care providers convicted in earlier trials related to the case included: Dr. Victor McCall, M.D., a board-certified licensed radiologist; Dr. Mark Allen Darner, D.C., a licensed chiropractor; and Dr. Alvin Lostetter, M.D., an anesthesiologist.

Dr. McCall received a sentence of six months imprisonment to be followed by six months home confinement. Dr. Darner is presently serving a five-year prison sentence, and he must pay $2,748,881 in restitution. Dr. Lostetter was sentenced to five years probation and must pay all outstanding taxes to the IRS.

Assistant United States Attorneys Ronald C.H. Eddins and Doug Allen prosecuted the cases.

July 23, 2003—The Texas State Bar has permanently disbarred Bernardo Eureste, a Houston attorney and former San Antonio city councilman. Eureste has not practiced law since June 2002, when he was sentenced to three years’ probation for workers’ compensation fraud-related charges.

Eureste’s legal problems began when Texas Mutual Insurance Company (then called the Texas Workers’ Compensation Insurance Fund) uncovered billing irregularities by Eureste’s law firm. The investigators shared their findings with the Texas Workers’ Compensation Commission (TWCC) and the FBI.

The investigation revealed that Eureste had devised a scheme to defraud his clients by submitting false claims and often billing identical hours on different clients without any variation. “Eureste used a computer software program to fly under the radar, so to speak, and bill for an average of 90 hours per day, seven days per week, including weekends and holidays,” explained Elliott Flood, vice president of Special Investigations for Texas Mutual Insurance Company. The scheme allowed Eureste to receive up to 25 percent of his clients’ temporary income benefits (TIBs) after TWCC approved his bills for file reviews.

At last week’s hearing, Assistant Disciplinary Counsel Michael E. McClendon said Eureste had stolen from his clients, many of whom were poorly educated, lower income injured workers. McClendon used Flood’s testimony to support his call for disbarment. Responding to McClendon’s questions, Flood estimated that Eureste had over-billed his clients by as much as $1.4 million in a one-year period.

“This case was unique in my experience,” said Flood, after the hearing. “As a carrier, we were not damaged by Eureste’s actions, but some of our policyholders’ injured workers were. We pay the same amount of TIBs regardless of whether the injured worker retains an attorney. The attorney’s fee is deducted from the injured employee’s TIBs check. So really, Eureste wasn’t bilking Texas Mutual; he was cheating his own clients, injured workers who could least afford it.”

July 10, 2003 –Thanks to a recent anonymous tip, Texas Mutual Insurance Company will recover over $8,200 in restitution and save over $26,000 in estimated future income benefits. Additionally, the confidential informant will receive a $1,000 reward.

Without the tip, Texas Mutual Insurance Company might still be paying income benefits to an Austin company's worker who claimed he could not work, but secretly was working at a new job.

State law requires injured workers to report any change in work status to the insurance carrier. Despite being asked several times, the worker continued to claim to his doctor and to Texas Mutual Insurance Company that he could not work or participate in any physical activity.

The worker’s manager reported his suspicions about the claim last year. He requested a review by Texas Mutual_SM fraud investigators. Although the investigation supported the employer’s concerns, the investigators could not establish enough evidence to prove fraud.

About two months later, the manager received new information on the claim. A confidential informant told the manager that the worker was working a new job while still collecting temporary income benefits.

Based on the tip, a new Texas Mutual_SM investigation uncovered clear evidence that the claimant was physically active and working at another job. Texas Mutual Insurance Company discontinued the worker’s income benefits and asked the Travis County District Attorney’s Office to prosecute the case.

JUNE 23, 2003 - A San Antonio janitorial company lied about its payroll to get workers’ compensation coverage so it could pursue lucrative government contracts. That was the case presented at the June 23 civil trial of Miguel Delgado, owner of San Antonio’s Border Maintenance Services Inc.

Travis County District Judge Patrick Keel found that Delgado and his co-conspirator, Linda Delgado, committed fraud and ordered them to pay over $1.6 million in restitution to Texas Mutual Insurance Company.

During the one-day civil trial, the evidence showed that the Delgados bought workers’ compensation insurance for Border Maintenance Services Inc, doing business as Del-Kleen Inc. The Delgados paid a premium covering five employees, and they used the company’s certificates of insurance to get government contracts, which required workers’ compensation coverage.

When Texas Mutual_SM auditors asked to review Border Maintenance Services records, Mr. Delgado refused. He claimed that Border Maintenance Services was covered separately under an occupational accident policy and that most of its 450 employees should not be included in the workers’ comp premium calculation. He offered to include some Border Maintenance Services employees in the premium.

A Texas Mutual_SM fraud investigation discovered that Del-Kleen was a company in name only, with no employees and no payroll. The Delgados tried to invent a Del-Kleen payroll by moving some employee names over from the Border Maintenance Services books.

When confronted with these improprieties, Mr. Delgado refused to pay the additional $868,162 in premium. Judge Keel found that the two companies were operating as a single business enterprise and awarded Texas Mutual Insurance Company its premium due, plus interest and attorney’s fees, totaling $1,643,029.

June 6, 2003 - Judge Bill Bender in the 403rd Judicial District Court found Thomas O’Laughlin guilty of workers’ compensation fraud after O’Laughlin pleaded no contest. The judgment marked the end of a long legal battle that began with months of proceedings at the Texas Workers’ Compensation Commission (TWCC), where O’Laughlin and his doctor argued against the admission of video evidence showing O’Laughlin moving a 500-pound entertainment center.

O’Laughlin contended he suffered a shoulder injury while working for Heart Employee Leasing Inc., and as a result, was unable to work. Texas Mutual Insurance Company, Heart Employee Leasing’s insurance carrier, challenged the validity of the claim. Just days after recording the videotape, a Texas Mutual_SM investigator also recorded O’Laughlin denying any activity at all.

Texas Mutual Insurance Company submitted the video evidence at a TWCC contested case hearing. After reviewing the tape, two doctors offered their opinions that O’Laughlin’s injury could not be as serious as he claimed. The TWCC hearing officer agreed and ordered O’Laughlin’s income benefits canceled, stating in his ruling that the video evidence “showed conclusively that the claimant did not have any disability.”

On August 15, 2001, a Travis County grand jury indicted O’Laughlin on workers’ compensation fraud-related charges. Assistant District Attorney Donna Crosby handled the prosecution.

The O’Laughlin investigation was part of the Texas Mutual_SM “Zero Tolerance for Fraud” program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

MAY 29, 2003 – Mary Lou Mott, owner of Zaval-Tex Construction Company, and her office manager, Louise Humberson, are facing felony charges following a Travis County grand jury indictment. Mott and Humberson allegedly committed fraud by filing workers’ compensation claims for employees not covered by their company’s policy.

According to Texas Mutual_SM fraud investigators, Mott and Humberson allegedly filed claims for employees who worked for another commonly owned company, Zavalla Associates. Zavalla Associates provides labor for Zaval-Tex Construction. By using Zavalla Associates in this manner, Mott and Humberson were able to substantially lower Zaval-Tex’s premium while leaving Texas Mutual Insurance Company liable for any injuries sustained by Zavalla Associates workers.

Mott and Humberson allegedly hid this exposure from Texas Mutual Insurance Company to obtain a lower premium, inconsistent with the amount of risk for that many workers. During two policy years, Mott and Humberson filed 83 claims with Texas Mutual Insurance Company, totaling $1,942,794.

The Zaval-Tex investigation is part of the Texas Mutual_SM “Zero Tolerance for Fraud” program. Texas Mutual Insurance Company maintains three teams of fraud investigators permanently assigned to investigate every report of suspected fraud.

Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.

MAY 2, 2003 - Travis County District Judge Brenda Kennedy found South Texas Well Service Inc. guilty of insurance fraud. She ordered Michael W. Harvey’s Rockport-based company to pay over $7,000 in restitution to Texas Mutual Insurance Company.

Donna Crosby, the assistant Travis County district attorney prosecuting the case, filed information alleging that South Texas Well Service persuaded Purdy Boat Company to file its workers’ compensation claims on Purdy Boat Company’s policy. The scheme allegedly defrauded Texas Mutual Insurance Company of approximately $7,379; however, Texas Mutual_SM investigators stated that the claims could have easily exceeded $1 million if left unchecked.

South Texas Well Service pleaded no contest to reduced misdemeanor charges.

The investigation began as part of the Texas Mutual_SM “Zero Tolerance for Fraud” program. Texas Mutual Insurance Company maintains three teams of fraud investigators permanently assigned to investigate every report of suspected fraud.

Editor’s note: In October 2003, the government's case against Dr. Ghadially went to jury trial. On October 9, 2003, after the prosecution rested its case, U.S. District Court Judge Kenneth M. Hoyt granted the defense's motion for judgment of acquittal, and in dismissing all charges against Dr. Ghadially, the court found: "..the evidence is insufficient to establish the crimes charged."

MAY 2, 2003 - Dr. James A. Ghadially, owner and operator of Gulf Coast Orthopaedic & Spine Associates, was indicted on 21 counts of fraud. Each count carries a maximum of five years in federal prison and a $250,000 fine.

Federal agents arrested Ghadially and brought him before U.S. Magistrate Judge Frances Stacy yesterday for arraignment. According to U.S. Attorney Michael Shelby, Ghadially’s clinic specialized in work-related injuries, and Ghadially knowingly inflated his bills by charging for the services of an assistant surgeon.

The Texas Workers’ Compensation Commission (TWCC) Medical Fee Guideline states that surgeries that require an assistant surgeon are eligible for an extra 25 percent reimbursement. To qualify for the additional money, assistant surgeons must be licensed to perform the surgical procedure, and they must assist with at least 70 percent of the procedure.

Ghadially allegedly used a podiatrist, Dr. Joseph Mechanik, to assist him with surgeries to the spine, neck, back and shoulders. Mechanik did not have privileges as an assistant surgeon at the medical facilities where the surgeries occurred, and his medical license limited his practice to surgeries of the foot and ankle.

Of the 21 counts of alleged fraud, 13 involved bills that Ghadially sent to Texas Mutual Insurance Company, the state’s leading provider of workers’ compensation coverage. Texas Mutual_SM fraud investigators worked with TWCC, the FBI, the Office of Inspector General for the U.S. Postal Service, and the Department of Labor in the joint investigation.

Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.

APRIL 22, 2003 - The Lubbock County grand jury indicted Mark W. Smith of Alvin, Texas on insurance fraud charges today. Smith allegedly defrauded Texas Mutual Insurance Company out of $5,934.27 in workers’ compensation benefits.

During his second day on the job with Crites Enterprises Inc. in Lubbock, Smith claimed he injured his right wrist while building oilfield pontoons. Smith began collecting temporary income benefits (TIBs) after his doctor took him off work.

Ten months later, Smith told another doctor that he had not worked since the alleged injury. According to Texas Mutual_SM investigator Tommy Jones, Smith had been working full-time at a Wal-Mart deli for several months at the time of that doctor appointment.

State law requires injured workers to notify their carrier when they return to work in any capacity. Smith did not notify Texas Mutual Insurance Company when he returned to work, despite receiving numerous reminders of this legal requirement.

The electronic claim diary kept by Texas Mutual_SM adjustor Jan Keene was a crucial piece of the evidence against Smith. The diary showed that Keene had twice asked Smith to call her if he returned to work.

The Smith investigation was part of the Texas Mutual_SM “Zero Tolerance of Fraud” program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

Note: A grand jury indictment is a formal accusation--not a conviction--of criminal conduct.

MARCH 25, 2003 - The 132nd District Court in Scurry County sentenced Jake V. Silva to two years imprisonment (probated to five years on probation) and 160 hours of community service after finding him guilty of fraudulently obtaining workers’ compensation benefits. The court also ordered him to pay:

• $1,000 in fines,
• $283 in court cost,
• $4,855 in restitution (payable at $110 per month), and
• $40 per month in probation fees.

Thanks to evidence gathered by Texas Mutual_SM investigator Tommy Jones and Texas Mutual_SM workers’ compensation specialist Danny Gentry, the prosecution was able to present a clear-cut case demonstrating that Silva deliberately committed fraud. Silva continued to collect temporary income benefits (TIBs) checks after he returned to work at a different company.

During the course of his claim, Silva received regular notices with each TIBs check reminding him that Texas Workers’ Compensation Commission Rule 129.3 requires injured workers to tell their insurance carrier if they return to work, earn wages, or receive an offer of employment. The prosecution presented the notices as evidence.

To prove fraud, however, the prosecution had to show that Silva knowingly lied in order to receive benefits. The prosecution’s strongest evidence was a recorded conversation between Gentry and Silva, in which Gentry informed Silva of his obligation to notify Texas Mutual Insurance Company if he began working while collecting TIBs.

The Silva investigation was part of the Texas Mutual_SM “Zero Tolerance of Fraud” program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

MARCH 13, 2003 - The 90th Judicial District Court sentenced Eric Beaver to a two-year prison sentence after he pleaded guilty to fraudulently obtaining workers’ compensation benefits. Beaver must also pay a $1,000 fine, $253 in court costs, $300 for attorney fees, and $4,686.98 in restitution to Texas Mutual Insurance Company.

Beaver allegedly suffered an on-the-job injury while working for Orbit Plastic Pipe Inc. He started collecting temporary income benefits (TIBs) checks from Texas Mutual Insurance Company when his doctor declared that Beaver was unable to return to work because of the injury.

About two months later, he took a job as a handyman at Breckenridge Minit Mart, but hid the fact that he was working again so he could continue to collect TIBs. State law specifies that an injured worker must inform the insurance carrier if he or she returns to work in any capacity.

Texas Mutual_SM investigators presented the case to District Attorney Stephen Bristow. The Stephens County Grand Jury indicted Beaver on April 17, 2002.

Beaver received a credit of 253 days for the time he spent in the Stephens County Jail. Beaver will serve the remainder of his sentence in the Texas Department of Criminal Justice.

The Beaver investigation was part of the Texas Mutual_SM “Zero Tolerance for Fraud” policy. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

MARCH 3, 2003 - Houston truck driver Shirley Martinez pleaded guilty to workers’ compensation insurance fraud today. She received a five-year sentence under the Deferred Adjudication statutes, and the court ordered her to perform 300 hours of community service. The court also fined Martinez $500 and ordered her to pay $6,874.06 in restitution to Texas Mutual Insurance Company.

Martinez had claimed that she went to a local food bank every day because she couldn’t survive on her workers’ compensation benefits. A Travis County grand jury found that Martinez was receiving income benefits and earning wages by driving an 18-wheel truck for a vendor company.

State law requires injured workers to notify their carrier when they return to work. Not only did Martinez fail to notify Texas Mutual Insurance Company of her return to work, she also didn’t tell her previous employer, Chrismand Inc., that she had taken another job.

Texas Mutual Insurance Company began checking on Martinez after receiving a tip from a Chrismand supervisor, who noticed that Martinez was never home during the day. Texas Mutual Insurance Company initiated an investigation, which revealed that Martinez worked for the vendor company while still collecting income benefits. Investigators videotaped Martinez parking her personal vehicle at the food bank and departing in the vendor company’s truck. The tape also showed Martinez making daylong runs in the vendor company’s truck.

When Martinez took the job at the vendor company, she warned her new employer not to release any information about her or her employment. Texas Mutual Insurance Company took the case to Travis County prosecutor Jim Young, who issued subpoenas for the information. The evidence led to a grand jury indictment.

The Martinez investigation was part of the Texas Mutual_SM “Zero Tolerance for Fraud” program. Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud.

FEBRUARY 13, 2003 – Armando M. Villesca Sr. of Fort Stockton pleaded guilty to charges of workers’ compensation insurance fraud. A Travis County District Court judge ordered Villesca to submit to three years of community supervision, perform 180 hours of community service, pay a $2,000 fine, and repay $2,965.30 in benefits he fraudulently obtained from Texas Mutual Insurance Company.

Villesca allegedly injured his right knee while working as a delivery driver for the Fort Stockton branch of Abtex Beverage Corporation. Villesca claimed that he was unable to return to work because his injury prevented him from climbing in and out of his delivery truck. Texas Mutual Insurance Company began paying temporary income benefits (TIBs) to Villesca.

Texas Mutual Insurance Company received information that Villesca was working as a contractor repairing homes and businesses while collecting TIBs for his alleged injury. Under state law, an injured worker who collects benefits must notify the insurance carrier if he or she returns to work in any capacity.

Texas Mutual_SM investigator Tommy Jones obtained statements, cancelled checks, and other documents that proved Villesca was working while collecting TIBs. In order to prove fraud, however, Texas Mutual Insurance Company had to show that Villesca knowingly collected benefits he was not entitled to.

Jones called Villesca and recorded a conversation in which the man denied working. Texas Mutual Insurance Company then presented the evidence to Assistant District Attorney James Young, who prosecuted the case.

Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud. The investigation was part of the company’s Zero Tolerance for Fraud program.

DECEMBER 23, 2002—After a woman’s car rear-ended a trash trailer on the side of the road in Houston, an ambulance arrived on the scene to find Ronald J. Dawson sprawled nearby in the grass. He claimed that the trailer had knocked him some 20 feet away when the woman’s car rear-ended it.

Dawson had been employed with On Our Own Services Inc. in Houston picking up trash bags on the side of the road. He filed for workers’ compensation benefits for an alleged injured knee, and Texas Mutual Insurance Company began paying on the claim.

Eight months later, On Our Own Services owner Shawn Quigley complained to a Texas Mutual_SM claim adjuster that Dawson was trying to “drag out the claim” to get more money from a pending third-party lawsuit. The adjuster referred the case to the special investigation department.

Eileen Cook, a Texas Mutual_SM fraud investigator, contacted Quigley and discovered that Dawson’s co-worker had reported the incident to the company’s safety director, who had taken photos of the accident scene. The photos clearly showed that the car pushed the trailer straight into the back of the van that was towing it, not to the side. Therefore, the trailer could not have struck Dawson as he had claimed.

Cook continued her investigation and obtained a statement from Dawson’s co-worker, the driver of the van, stating that the trailer did not touch Dawson. According to the co-worker, Dawson walked to a grassy area, smoked a cigarette, and laid down to wait for the ambulance. When the ambulance arrived, Dawson told the co-worker that the next time they met, he would be driving a Cadillac.

Dawson later sued the woman for the alleged injury to his knee.

Cook discovered that Dawson’s knee injury was inconsistent with damage resulting from a collision. In fact, the medical x-rays showed Dawson’s knee to be full of shotgun pellets. Further investigation revealed that Dawson, a two-time convicted felon, had received regular treatment for the shotgun pellets in his knee during his first prison sentence.

Based on Cook’s investigation, a Travis County Grand Jury indicted Dawson. Assistant District Attorney Donna Crosby prosecuted the case and reached a plea-bargain agreement with Dawson.

Texas Mutual Insurance Company maintains three teams of investigators permanently assigned to investigate every report of suspected fraud. The Dawson investigation is part of the company’s Zero Tolerance for Fraud program.

JULY 26, 2002—A Houston company changed its name several times while trying to avoid prosecution for premium fraud, according to a Travis County District Court finding. A.C. Lath & Plastering Inc., owned and operated by Martin Geserick and Kevin Ball of Houston, must pay $450,000 in restitution to Texas Mutual Insurance Company as part of a plea bargain agreement.

According to the prosecution, Geserick and Ball transferred employees from one company to another and deliberately misrepresented its payroll to Texas Mutual Insurance Company in order to gain workers’ compensation coverage at a lower premium. The company originally applied for workers’ compensation coverage under the name Atlantic Partners L&P Trust. In subsequent years, Geserick and Ball changed the company name to Atlantic Partners, then to Atlantic Contractors Inc.

When Texas Mutual_SM auditors attempted to review the companies’ payrolls, Geserick and Ball refused to provide the necessary records. Texas Mutual_SM investigator Marti Rickard ultimately discovered two other companies, Stone Cast Inc. and A.C. Lath & Plastering Inc., during her investigation. The evidence suggested that Geserick and Ball were trying to develop other entities to avoid prosecution of premium fraud.

Rickard credits the “excellent work of the Travis County DA’s office” for securing the restitution. Travis County Assistant District Attorney Donna Crosby handled the prosecution.

JUNE 27, 2002—U.S. District Court Judge Lee H. Rosenthal sentenced Houston attorney Bernardo Eureste Tuesday to three years probation for workers’ compensation fraud-related charges. Eureste, a former member of the San Antonio City Council, must also pay $108,486 in restitution to Texas Mutual Insurance Company and pay restitution to three former clients (injured workers), in amounts ranging from approximately $975 to $2,067.

The Texas State Bar had already found Eureste guilty of fee violations in December 2000. The Bar suspended his license to practice law for two years to be followed by a one-year probation. The three-year sentence will run concurrently with the three-year probation imposed by the district court.

Texas Mutual Insurance Company (then called the Texas Workers’ Compensation Insurance Fund), the Texas Workers’ Compensation Commission (TWCC), and the FBI conducted investigations that uncovered billing irregularities by Eureste. The investigations revealed that Eureste had devised a scheme to defraud his injured worker clients by submitting false claims, primarily for work that he did not personally perform.

The investigations also revealed that Eureste often billed identical hours on different clients without any variation. According to TWCC records, Eureste billed for an average of 90 hours per day, seven days per week, including weekends and holidays.

As part of the scheme, Eureste used a computer software program to generate claims on a monthly basis. Eureste regularly submitted charges for file reviews each month.

At the time in question, TWCC procedures automatically approved file reviews for 2.5 hours at $150 per hour per claimant per month. Eureste routinely submitted charges for the full amount despite the fact that his regional files were housed in their respective regional offices and were not sent to Houston, where Eureste conducted his work.

Eureste’s clients, workers suffering from on-the-job injuries, paid Eureste’s fees.

According to TWCC rules, an injured employee’s attorney may receive up to 25 percent of the injured employee’s weekly income check (known as TIBs, for temporary income benefits). The workers’ compensation insurance carrier pays the benefits, but the injured employee pays the attorney fees.

“As a carrier, we pay the same amount of TIBs regardless of whether the injured worker retains an attorney,” explained Elliott Flood, vice president of special investigations. “The difference is how much goes to the injured worker because the attorney’s fee is deducted from the injured employee’s check. When lawyers misrepresent their billable hours and services, they aren’t stealing from the insurance company, they’re stealing from the injured worker, who can least afford it.”

Sandra Garcia led the investigation for Texas Mutual Insurance Company. Assistant U.S. Attorney Cedric L. Joubert handled the prosecution.

JUNE 13, 2002—A federal bankruptcy court has ruled that Dallas businessman Aharon Chen and his now-bankrupt company, A.C. Painting Inc., defrauded Texas Mutual Insurance Company for over $3 million.

The court ordered Chen to pay approximately $1.3 million, plus attorney’s fees, to Texas Mutual Insurance Company. The court also upheld a Texas Mutual_SM claim against the bankruptcy estate for Chen’s business for approximately $2.5 million, plus attorney’s fees, plus interest.

Chen had classified over 100 workers on A.C. Painting’s payroll as “independent contractors,” but they were actually employees. Texas Mutual_SM investigators got suspicious when A.C. Painting started to file claims for laborers whom they did not report at audit. A.C. Painting paid the unreported employees out of a hidden account called the “blue account.” Texas Mutual_SM attorneys were able to access the company’s computer hard drive and reconstruct its payroll to uncover the hidden blue account and prove fraud.

Since workers’ comp premiums are based in part on a company’s total number of employees, A.C. Painting was able to pay lower premiums by reporting a smaller staff to Texas Mutual Insurance Company.

During the bankruptcy proceedings, Texas Mutual Insurance Company presented evidence of more unreported “independent contractors” who actually qualified as A.C. Painting employees. Judge Steven A. Felsenthal, U. S. Bankruptcy Judge for the Northern District of Texas, Dallas Division, found that the “independent contractor” designation was not appropriate for workers’ compensation purposes. He cited the Texas Insurance Code, which requires a policyholder to “make full disclosure to its insurance company of information concerning its true ownership, change of ownership, operations, or payroll and any of its records pertaining to workers' compensation insurance.”

MAY 6, 2002—Dallas County has reached its first plea agreement with a corporation accused of health care insurance fraud. Recovery Analysis Inc. entered into a plea agreement to the second-degree felony charge of Aggravated Theft Over $100,000. Recovery Analysis will pay a $10,000 fine and $168,346 in restitution to Texas Mutual Insurance Company and 16 other participants in the federal and state workers’ comp systems.

A 1998 Texas Mutual_SM investigation led to a March 1999 audit of Recovery Analysis by the Texas Workers’ Compensation Commission (TWCC). The audit uncovered deceptive business practices by the company. Afterwards, Texas Mutual Insurance Company, TWCC, the FBI, the U.S. Postal Service Office of the Inspector General, and the U.S. Department of Labor Office of the Inspector General began investigating Recovery Analysis in a joint-operation.

The investigation revealed that between September 1, 1994 and May 31, 1998, Recovery Analysis billed for 60 minutes of treatment for state and federal workers’ compensation cases when, in fact, the patients were eating lunch at various restaurants. Recovery Analysis paid for lunches, provided transportation, and billed $64 per hour, per patient for treatment and/or training it never rendered. Additionally, Recovery Analysis provided group aquatic therapy for patients, but billed for the more expensive individual aquatic therapy.

A federal judge issued four federal search warrants in December 1999. The U.S. Attorney Office in Dallas initially accepted the case, but later transferred it to the Dallas County District Attorney Office. Dallas County Criminal District Attorney Bill Hill negotiated the plea agreement, which Recovery Analysis accepted on April 12, 2002.

Recovery Analysis has offices in Dallas and De Soto.