SJDB Benefit Fraud – A Growing Problem
Article originally featured in Workers’ Comp Executive
By Brad Cain
Experienced fraud investigators say a new scam is growing in the state’s workers’ comp system. It’s targeting the Supplemental Job Displacement Benefit program and the linked $120 million Return-to-Work supplement fund administered by the Department of Industrial Relations.
It’s not such a new scam after all to those who have been around long enough to remember the old vocational rehab scams before they were removed as part of a long-ago reform. Legislators were warned about the dangers, but institutional memory is short in California.
The problem is not just a Southern California issue, as so much of the fraud has been, with one case pending in a Northern California court and other active investigations around the state. Investigators say they expect several criminal cases to be filed in 2019.
Investigators say the fraud is being perpetrated by disreputable vocational schools with some “voc rehab counselors” working as “cappers” to bring in eligible claimants.
Of course, suspicions are high that applicant’s attorneys are also in the mix. It seems they may be selling information about clients who qualify for the $6,000 SJDB voucher to the schools and counselors. No cases alleging that aspect of the scam have been filed as of yet, but sources expect that they will be in the not too distant future.
The SJDB program provides permanently disabled workers with funding for retraining if their at-injury employer does not offer them other work. Up to $6,000 in benefits are available through a non-transferable voucher.
One supervisor for an insurance carrier’s special investigative unit (SIU) says she has referred around 30 of these suspect vocational schools to district attorneys for prosecution and another senior investigator at a different carrier says they have made at least that many referrals. Both note that they are aware of many, active investigations at this time, but could not disclose any details that might jeopardize the operations.
One case that has come to light is Santa Clara County’s prosecution of Career Advancement Solutions and its owner Virgilio Abad. CAS allegedly provided online computer courses in word processing, database operations, and computerized accounting among others. Also caught up in the case is Ronda Tapper, a vocational counselor and the owner of Tapper Inc. She also did business as RFT Vocational Services. Prosecutors say Tapper received payments through the school for bringing ineligible claimants – an arrangement not unlike the capping schemes employed by medical mills. Tapper allegedly received between $600 and $1,700 per referral to CAS.
The felony complaint includes 14 counts including a criminal referral under Labor Code section 3215, making false statements under Insurance Code section 1871.4 and concealing events that affected rights to an insurance benefit under Penal Code section 550. A plea hearing in the case has been continued twice since the indictment was originally filed nearly a year ago and the latest hearing was pending as of deadline. The charges are only allegations, and the defendants are innocent until proven guilty.
Suspect Bills
Tracy Crates, SIU supervisor for ICW Group, says bills from the school raised red flags and lead to an investigation. She suggests employers and other claims adjusters watch out for similar clues in the voucher demands they receive.
“CAS would submit a voucher and an invoice allegedly signed by the injured worker, and they would request the full amount of the voucher which was $6,000,” says Crates in an interview with Workers’ Comp Executive. “Typically, when you get a voucher it’s not for the full $6,000 because the injured worker is entitled to other payments such as reimbursement for a computer and they can ask for a $500 advance which almost everyone does.”
Crates notes that the CAS invoices included $1,000 for a computer, but says only the injured worker can seek reimbursement for a computer – not the school. Additionally, she notes that at least one invoice showed the school paying Tapper directly out of the SJDB voucher funds.
“Here, the school was collecting the full $6,000 and then giving her a portion of that money – it looked like a kickback,” says Crates. “That’s what kicked off the investigation. Why is she getting paid a portion of the voucher instead of collecting the money herself? Why is she not invoicing us?”
$5,000 RTW Supplement
The SJDB voucher program has been around in one form or another for years and was never considered a center for fraud, but investigators say that changed with the creation of the $120 million Return-to-Work supplement. The employer-funded program was a last-minute sweetener to the SB 863 negotiations demanded by former Senate Pro Tem Darrel Steinberg (now Sacramento Mayor) to get a vote on the bill in the Senate. Steinberg is a longtime friend of the lawyers and labor.
The Legislature created the fund but left it up to the Department of Industrial Relations to determine who would be eligible for payment and to implement the program. Eligibility is linked to the SJDB program. If an injured worker gets a voucher, then they can get a $5,000 check. All they have to do is fill out a form and send it in to get the check from the RTW fund.
“The RTW fund was the trigger for what is going on now,” says a senior investigator who agreed to speak on background. “Once that became available, attorneys began selling client information to voc rehab schools. If they have a client that is eligible for a voucher, the attorneys get paid for that information.
The investigator says schools and counselors will “help” the injured worker collect the $5,000 from the RTW fund. At the same time and often without the knowledge of the injured worker, the school or counselor will also sign the claimant up for their school and bill the carrier under the SJDB voucher program. The schemes are allegedly being helped along with the use by the government of electronic signatures.
“People are knocking on their door and saying you’ve got this voucher, let’s sit down and get you that $5,000, just sign this screen,” says the investigator. “Then they just take that signature and put it on the admission papers to their school. We’ve interviewed numerous injured workers who had no idea they had signed up for school.”
Like many of the scams that have run rampant in California workers’ comp system, this one is also targeting low wage workers with limited education and limited English language skills.
“Mostly it’s laborers and farm workers – that’s the bulk of them. Usually you don’t see vouchers come in for the younger workers – usually, it’s about age 40 and above,” says ICW’s Crates. “Occasionally, we’ll see a voucher for the truck driver who’s 65 and allegedly looking to get online computer training.”
To be eligible for the training, the injured workers must meet minimal education standards – they have to have a high school diploma or equivalent – or be able to pass what is called an “ability to benefit test” or ABT.
Here too though games are being played. “We have one school that submitted maybe 40 fraudulent ABT results,” says the senior investigator. “They were just completely made up.”
There is a growing sentiment in the community that the best fix may be to do away with the voucher system and to just give the money directly to the injured worker.
“What should be done is to do away with the program. Let’s give the injured workers the $6,000 and say you should use this to retrain yourself,” noted the investigator. The comment echoed those made by Commissioners – both labor and employer representatives – during a recent meeting of the Commission on Health, Safety and Workers’ Compensation. Currently, however, there are no formal proposals to implement this sentiment.