MICHAEL A. HESTRIN DISTRICT ATTORNEY COUNTY OF RIVERSIDE DISTRICT ATTORNEY WORKERS' COMPENSATION INSURANCE FRAUD APPLICATION FOR GRANT FUNDS Fiscal Year 2015-16 Submitted: April 28,2015 Workers' Compensation RPA - Fiscal Year 2015-16 Riverside County District Attorney TABLE OF CONTENTS COUNTY PLAN FOR RIVERSIDE COUNTY WORKERS' COMPENSATION INSURANCE FRAUD FISCAL YEAR 2015-2016 COVER SHEET GRANT APPLICATION CHECKLIST AND SEQUENCE (FORM 01) GRANT TRANSMITTAL PAGE (FORM 02) PROGRAM CONTACT FORM (FORM 03) BOARD of SUPERVISORS' RESOLUTION (Original submitted October 2013 in effect until June 20,2016) (FORM 04) QUALIFICATIONS 1. Areas of Success (Form 05) (FORMS 05-07) 1 2. Unfunded Contributions (Form 05) 18 3. Turnover or Continuity of Personnel (Form 05) 19 4. Governmental Agencies Worked With (Form 05) 20 5. Distribution of Frozen Assets (Form 05) 21 6. Qualifications (Form 06a) 23 7. Organization Chart (Form 06b) 24 8. Program Report (Form 07) 25 PROBLEM STATEMENT 1. Types and Magnitude of Workers' Compensation Insurance Fraud in Riverside County PROGRAM STRATEGY 1. Riverside County's Plan to Resolve Workers' Compensation Insurance Fraud in Riverside County 2. (FORM 08) 26 (FORM 09) 33 Plans to Meet the Goals of Insurance Commissioner and the Fraud Assessment Commission 3. Goals Requiring More than One Year 37 39 Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney PROGRAM STRATEGY (CONT'D.) (FORM 09) 4. Training and Outreach 39 5. Obtaining Restitution and Fines 43 6. Specific Performance Objectives for FY 15-16 44 7. Asking for Budget Increase 45 8. County's Effort to Address the "Uninsured Employer" 45 BUDGET (FORMS 10-13) 1. Personnel Services (Form 10) 47 2. Operating Expenses (Form 11) 50 3. Equipment (Form 12) 51 4. Equipment Log (Form 13) 52 JOINT PLAN/APPENDIX OF CASES PENDING PROSECUTION Attachment A: Attachment B: Attachment C: Joint Investigative Plan Confidential Cases Pending Prosecution Program Report (DAR/Form 07) EXHIBITS Exhibit 5(a) Exhibit 5(b) Exhibit 5(c) Exhibit 5(d) Exhibit 9(a) September 4,2014 Press Release Re: People v. Heidaiy, et al. Confidential Investigation Summary Inland Empire Premium Fraud Task Force MOU October 25,2013 Press Release Re: People v. Evans Publication of Convictions in the Press Enterprise Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 01 WORKERS' COMPENSATION INSURANCE FRAUD INVESTIGATION/PROSECUTION PROGRAMS FISCAL YEAR 2015-2016 GRANTS Grant Application Checklist and Sequence The Application MUST include thefollowing: YES NO 1. Is the Grant Application Transmittal sheet (Form 02) completed and signed by the district attorney? • 2. Table of Contents • 3. Is the Program Contact Form (Form 03) completed? • 4. Is an original or certified copy of the Board Resolution (Form 04) included? If NOT, the cover letter must • indicate the submission date. 5. The County Plan includes: a) b) c) d) e) f) County Plan Qualifications (Form 05) Staff Qualifications (Form 06(a)) Organizational Chart (Form 06(b)) Program Report (DAR or Form 07) County Plan Problem Statement (Form 08) County Plan Program Strategy (Form 09) 6. Is the projected Budget (Forms 10-12) included? a) Are line-item totals verified? lEI • • • • • • • • 7. Is the Equipment Log (Form 13) completed and signed? • 8. Joint Plan (Attachment A) • 9. Case Descriptions (Attachment B) • Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 02 DEPARTMENT OF INSURANCE GRANT APPLICATION TRANSMITTAL Office of the District Attorney, County of Riverside, hereby makes application for funds under the Workers' Compensation Insurance Fraud Program pursuant to Section 1872.83 of the California Insurance Code. Contact: Vicki Hightower Address: 3960 Orange Street. Riverside. CA 92501 Telephone: (951)955-5472 (1) Program Title Elaina Bentlev (5) Program Director (2) Grant Period (3) New Funds Being Requested: $2,174,984 (4) Estimated Carryover Funds: $ Rodney Tethal (6) Financial Officer (7) District\Attorney's Signature Name: Michael A. Hestrin Title: District Attorney County: Riverside Address: 3960 Orange Street. Riverside. CA 92501 Telephone: (951) 955-5400 Date: 04/28/15 0.00 Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 03 DEPARTMENT OF INSURANCE PROGRAM CONTACT FORM Provide the name, title, address and telephone number of the person having dayto-day operational responsibility for the program, and who can be contacted with questions regarding the program. Name: Vicki Hightower Title: Chief Deputv District Attomev Address: 3960 Orange Street. Riverside. CA 92501 E-mail: vhightower@rivcoda.org Telephone: (9511955-5472 Fax: (9511955-5470 Provide the name, title, address and telephone number of the District Attorney's Financial Officer. Name: RodnevTethal Title: Supervising Deputv District Attomev Address: 3960 Orange Street. Riverside. CA 92501 E-mail: rtethal@jivcoda.org Telephone: (9511955-0265 Fax: (9511955-9455 Provide the name, title, address and telephone number of the person who may be contacted for questions regarding data collection/reporting for the applicant agency. Name: Sam Taloa Title: Paralegal Address: 3960 Orange Street. Riverside. CA 92501 E-mail: samtaloa@rivcoda.org Telephone: (9511955-5485 Fax: (9511955-5470 Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 03 DEPARTMENT OF INSURANCE PROGRAM CONTACT FORM Additional Contacts Additional Program Contact for questions regarding day to day program activities. 5. Name: Deborah Luckv Title: Supervising Deputv District Attomev Address: 3960 Orange Street. Riverside. CA 92501 E-mail: dluckv@rivcoda.org Telephone: (951) 955-5478 Fax: (951) 955-5470 Additional Program Contact for questions regarding grant application and budget. Name: Claire Wallace Title: Grants Analvst Address: 3960 Orange Street. Riverside. CA 92501 E-mail: clairewallace@rivcoda.org Telephone: (951) 955-5579 Fax: (951)955-0175 1 Board of Supervisors Workers' Compensation RPA - Fiscal Year 2015-16 Riverside County District Attorney FORM 04 FORM 04 County of Riverside 2 THE WORKERS' COMPENSATION INSURANCE FRAUD PROGRAM 6 COUNTY OF RIVERSIDE. STATE OF CALIFORNIA. REGARDING 5 RESOLUTION OF THE BOARD OF SUPERVISORS OF THE 4 RESOLUTION NO. 2013-254 3 7 administered by the California Department of Insurance (hereinafter referred to as "DOI'); now therefore, 10 Workers' Compensation insurance Fraud Program to be funded by funds made available through and 9 WHEREAS, the County of Riverside desires to undertake a certain program designated the S 11 BE IT RESOLVED AND ORDERED by the Board of Supervisors of the County of Riverside, State period beginning July 1, 2013 and ending June 30,2016. 16 that do not significantly change the grant or contract. This resolution shall be in effect for a three-year 15 to sign the Grant Award Agreement as well as related contracts, amendments, or extensions with DOI 14 the County of Riverside, State of Californiaand/or his designee is authorized, on its behalf, to submit and 13 of California, in regular session assembled on 12 October 22 , 2013, that District Attorney of State of California and DOI disclaim responsibility of any such liability. 19 actions for damages, shall be the responsibility of the grant redpient and the authorizing agency. The 18 IT IS AGREED that any liability arising out of the performance of this contract, including civil court 17 ii^o i, BE IT FURTHER RESOLVED that grant funds received hereunder shall not be used to supplant local expenditures controlled by this body. ROLL CALL: None Absent: None Nays: Jeffries, Tavaglione, Stone, Benolt and Ashley Ayes: The foregoing is certified to be a true copy of a resolution duly adopted by said Board of Supervisors on the date therein set forth. KECI. Clerk i e r a of said Board By De 10.22.13 3-14 Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 05 WORKERS' COMPENSATION INSURANCE FRAUD QUALIFICATIONS Answer the following questions to describe your experience in investigating and prosecuting workers' compensation insurance fraud cases during the last two (2) fiscal years as specified in the California Code of Regulations, Title 10, section 2698.55. 1. What areas of your workers' compensation insurance fraud operation were successful and why? The Riverside County District Attorney's (RCDA) Workers' Compensation Insurance Fraud program demonstrated tremendous success in the last two fiscal years in key areas. First, and foremost, is our notable achievement in the investigation and prosecution of medical provider fraud. We adjusted our program to accommodate the large-scale investigations that are the hallmark of medical provider fraud. In doing so, RCDA and its partners were able to make a significant positive impact by shutting down a medical mill that was costing the system millions of dollars. Second, our program continued to successfully investigate and prosecute the other core forms of workers' compensation insurance fraud that are problematic for our commxinity and the system as a whole - namely, premium fraud and underground economy activities, claimant fraud cases and the willfully uninsured. Third, our program continued to protect victim rights by securing restitution through the consistent use of the freeze and seize provisions of Penal Code section 186.11 whenever possible. The details of why each of these areas were successful is explained in-depth below. However, a critical component to the overall success of the program is firmly rooted in our continued commitment to work closely with the California Department of Insurance (CDI), our sister prosecution agencies, law enforcement partners and stakeholders. We believe that by developing cooperation among agencies and exemplifying a commitment to teamwork, our program is not only more productive individually but facilitates a greater impact statewide in the fight against workers' compensation insurance fraud. Medical Provider Fraud Recognizing that medical provider fraud is the most costly and serious challenge facing the workers' compensation insurance system today, addressing that problem is at the forefront of our program objectives. To that end, RCDA refocused its program over the past two fiscal years and committed significant resources to investigating and prosecuting these types of offenders. The investment paid tremendous dividends this year as illustrated in the shutting down of a wide spread medical/legal provider fraud conspiracy and the filing of felony charges on July 24, 2014 against four defendants: Peyman Heidary, Carey Abramowitz, Erica Torres, and Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 05 Michael Tuosto in People v. Peyman Heidary, et al (RIF1409778). The Heidary case to date involves a suspected $122 million' in fraudulent billings to the workers' compensation insurance system with over $18 million in actual payouts by multiple insurance companies. The Heidary investigation began in August of 2012, when the State Compensation Insurance Fund (SCIF) submitted a sizeable documented referral alleging a suspected multi-jurisdictional fraud scheme spanning Riverside, San Bernardino, Los Angeles, and Orange Counties. After meeting with SCIF representatives, a team was formed to investigate the matter. In order to most effectively pursue this investigation, co-case agents were designated at RCDA and CDI-Inland Empire Regional Office (CDI-IERO). The team also included representatives from the California State Bar, the California State Medical Board, the California Board of Chiropractic Examiners, and the California Franchise Tax Board. From the outset, the investigative team worked closely with the assigned RCDA attorneys to help achieve a focused and prosecutable case. Peyman Heidary A Michael Tuosto Carey Abramowitz Erica Torres ' At the time the case was initially filed, the fraudulent billing was estimated at $50million. Further developments in the case revealed the number to be over double. Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 05 The investigation exposed a large criminal enterprise in which the primary suspect, Peyman Heidary, illegally owned, managed and controlled seven medical clinics and a law firm (California Injury Lawyer/Orange County Law Group, Inc.) as well as several controlling corporate entities throughout four Southern California counties. He used this enterprise to perpetrate an immense scheme that ran the gambit of provider fi*aud crimes: fraudulent workers' compensation claims through mill-style billing, capping, kickbacks, fee splitting, and the unlicensed practice of medicine. Heidary utilized constantly changing corporate structures and entities, a host of paralegals and attorneys, as well as at least twenty-two different medical providers in an effort to further the fraud and avoid detection. The other three charged defendants played central roles in the fi^aud and include the attorney "straw man" for California Injury Lawyer (Abramowitz); the law office supervisor (Torres); and a capper (Tuosto). To date, twenty-four different insurance companies have been named as victims. The initial phases of the investigation encompassed document and intelligence gathering, surveillance, interviews and search warrants for Heidary's financial records. The first set of financial records warrants covered over 26 bank accounts producing nearly 14 boxes of documents that totaled tens of thousands of pages. Due to the size and scope of the investigation, an outside auditor was contracted to complete a forensic audit of the records On July 23, 2014, RCDA and CDI investigators took the investigation to the next level and served multiple search warrants covering eight separate locations throughout four different counties. The warrants included searches of the office of California Injury Lawyer, Heidary's corporate headquarters, several post office boxes, and the homes and vehicles of Peyman Heidary, Carey Abramowitz, Erica Torres, and Michael Tuosto. Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 05 During the service of the warrants, several employees were interviewed and thousands of documents were seized. Based upon the information gathered to that point, Heidary was arrested and charged. (See Exhibit 5a for sample press coverage.) Concurrent with the filing of criminal charges, freeze and seize orders pursuant Penal Code 186.11 were obtained and directed at any and all known assets of Peyman Heidary in order to preserve assets for restitution purposes. A preliminary injunction was issued on February 27, 2015, freezing one physical property, 69 different bank accounts worth over $2.3 million dollars, and over $200,000 worth of pending accounts receivables. Beginning in August 2014, shortly after Heidary's arrest, additional search warrants were executed on each of the seven clinics Heidary operated. Telling of the depth of the fraud present here, many of the clinics had been abandoned. The date the clinics were abandoned seemed to coincide exactly with the day of the July 23, 2014 search warrants and arrest of Heidary. Although criminal charges have been filed, the Heidary case remains one that voraciously consumes investigative and legal resources as it proceeds to preliminary hearing and trial. Investigators continue to comb through and organize the paper evidence seized as the attorneys prepare for interviews and court hearings. 190 ORANGE COUNTY LAW GROUP, INC. While the Heidary case alone may be enough to call this aspect of our program successful, it does not stand alone in our fight against medical provider fraud. RCDA understands that achieving excellence in this complex field requires an innovative approach that incorporates efficient use of resources. In addition to working closely with CDI, we are also working cooperatively with our sister prosecutorial agencies to share best practice ideas and to combine resources in an effort to tackle offenders whose fraud schemes cross county lines. In June 2013, RCDA reached out to representatives from each of the other Southem California county District Attomey offices in an effort to cultivate open communication and information Workers' Compensation RFA - Fiscal Year 2015-16 Riverside County District Attorney FORM 05 sharing. As a result, Riverside, Los Angeles, Orange and San Bernardino counties have come together and formed the Southern California Counties Workers' Compensation Consortium (SCCWCC). The SCCWCC meets at least quarterly to discuss a host of topics including: best practices, program viewpoints and performance, successful program techniques and tools, fraud schemes and suspects that cross county lines, potential legislative proposals, and different methods for handling the various types of workers' compensation insurance fraud we encounter. During this fiscal year, members of the SCCWCC began its first joint medical provider fraud investigation. Each county has dedicated a deputy district attorney and an investigator to this investigation in order to efficiently and effectively complete this investigation and anticipated prosecution. The details of the investigation are confidential and have been included as Confidential Exhibit 5b. Our efforts to combat multiple entity medical provider fraud have been truly successful this year. In addition to the two cases mentioned above, we have several potentially large cases that are in the initial investigation phase. As resources become available, especially investigator time, we anticipate additional success stories like the Heidary case. RCDA, through these cases and efforts, has demonstrated a strong commitment to fighting medical provider fraud. Premium Fraud. Combating The Underground Economy And Protecting Workers The investigation and prosecution of premium fraud continues to be a central component of our workers' compensation insurance fraud program. During the last two fiscal years we have uncovered and prosecuted millions of dollars in premium fraud. We are able to achieve sustained results due to several factors: (1) a strong continued commitment to the investigation and prosecution of premium fraud cases; (2) cooperative efforts with allied agencies, industry stakeholders, and business organizations; (3) innovative programs, such as the Inland Empire Premium Fraud Task Force (lEPFTF); and (4) the years of experience of key members in our program. A major contributing factor to our accomplishments in tackling the problem of premium fraud in Riverside County is the lEPFTF. The task force was formed in late 2011 when we joined together with the Fraud Division and San Bemardino County District Attomey's to share resources and perform these labor-intensive investigations in an innovative and collaborative way. At the outset, the Riverside County District Attomey's office committed the time and talents of its longest standing and most prolific investigator, Susan Nila, to the lEPFTF. Since the inception of lEPFTF, Investigator Nila has been stationed full-time at CDI-IERO in order to work side by side on a daily basis with her task force counterparts. lEPFTF now also includes members from the Employment Development Department (EDD) and the Califomia Franchise Tax Board (FTB). (See Exhibit 5c - lEPFTF MOU.)