JUNE 24, 2003 - Texas Mutual Insurance Company held its second annual policyholder meeting today to elect James D. Ross and Charles H. Whiteside, Ph.D. to the board of directors.

Ross is the vice president of finance for Hy-Bon Engineering Company Inc. in Midland, Texas. He has been a Texas Mutual_SM board member since April 1997.

Whiteside is the president of Ana-Lab Corporation in Kilgore, Texas. He has been a Texas Mutual_SM board member since December 1996.

“Mr. Ross and Dr. Whiteside have been great assets to the company and to the people of Texas,” said Texas Mutual_SM President Russ Oliver. “They are successful Texas businessmen who understand the value of a strong workers’ compensation system and our role in the system. I look forward to continuing to serve with them.”

Both men will serve terms set to expire on July 1, 2009.

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 7, 2003 - The Texas Workers' Compensation Commission (TWCC) 2002 medical fee guideline is valid, and it reflects TWCC’s judgment as to what are fair and reasonable fees for medical treatments and services. That’s the ruling from Travis County Judge John Dietz, according to his court-issued advisory letter.

Last year, TWCC adopted the new guideline in response to House Bill 2600. The guideline adopted Medicare billing, coding and payment policies, and it set the reimbursement rate for physician services at 125 percent of Medicare.

The Texas AFL-CIO and the Texas Medical Association (TMA) subsequently filed suit challenging the guideline’s legality. Judge Dietz’s letter left no doubt that the guideline:

• Was not arbitrary,
• Does not violate the statute about rule promulgation,
• Does not violate Texas law concerning reimbursement guidelines, and
• Does not unlawfully sub-delegate TWCC’s power to set fees.

The ruling paves the way for the guideline’s implementation; however, TWCC will have to wait until Judge Dietz officially rescinds the temporary injunction he issued in August 2002. Until then, the 1996 medical fee guideline remains in effect.

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.

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.