3-10-2011; The “Ax Man” cometh and now may be going to jail--our readers keep asking, so here is our recommended legal path(s) in dealing with or “axing” WC fraud by an Illinois worker

We were recently saddened by the national news media who reported Jimmy Smith, one of the principals on the TV reality show Ax Men was busted and may be going to jail for workers’ comp fraud. Take a look at this report at:  http://www.joepaduda.com/archives/002028.html. You keep asking about WC fraud by a worker and we have now had at least four different conference calls on the issue so we thought we would lay it out for your future reference.


First, let’s try to define it – what is WC fraud by a worker?


Before you can deal with it, it makes some sense to define it. Please understand you will hear lots of misinformation and misdirection about the topic on the web and at the Commission. The claimant bar considers the concept of workers’ compensation fraud by workers to be very, very bad for their business. We feel this may be due to the fact they quietly see or learn of more WC fraud than risk managers and the defense bar. Please also understand they tread a fine ethical line when a claimant discloses WC fraud—the attorney cannot ethically disclose it but they also cannot suborn perjury; they cannot put a witness on to provide sworn testimony which the attorney knows is a lie. But the problem is when is a claimant clearly lying to receive benefits. Please remember the main workers’ comp benefits are three-fold, medical treatment, compensation for lost time and permanency or “the settlement.”


More to the point, we define workers’ comp fraud by a worker to be the worker receiving workers’ compensation benefits via fraud or deceit. The main two paths to receive workers’ comp benefits by fraud or deceit are to intentionally mislead doctors and/or adjusters and claims managers about their accident, physical status, medical needs or ability to work. We feel there are two clear situations in which an employer can and should be able to “counterattack” when you have evidence a claimant is committing WC fraud. The first is the “phony accident.” The second is when you have evidence claimant is working or very active while claiming to be totally disabled and receiving TTD.


Fight a phony accident with investigation and documentation


Getting your arms around a phony accident claim starts with detailed and thorough accident investigation. Our advice to clients is to have claimant relate what happened or more simply tell the story time and time again—the more red flags you have in your investigation, the more you should keep asking for the story both orally and in writing. If you need our accident investigation form or webcam questions, send a reply.


What are obvious red flags? We feel they include but are not limited to:


·         Late reporting;

·         Lack of first aid, emergency or other medical attention on the date of an acute injury;

·         Inconsistent reporting—telling you the event occurred on a day they weren’t present at work;

·         More inconsistent reporting—telling one story to the supervisor and another story to the adjuster in three-point contact;

·         Hiding the event—accidents being reported after a layoff or termination for cause.


Our vote when you start to smell limburger cheese during an accident investigation is to get webcam statements from everyone involved; claimant, co-workers, supervisors, onlookers. Try to first authenticate and second, if you cannot authenticate, prove the lie. Please always remember the employer has a difficult standard to meet in defending a phony accident—you have to prove something didn’t happen. If the matter is controverted and has to be tried, you can be sure you will face a claimant who will try to make the lie fit into a package acceptable to the arbitrator.


A much tougher WC fraud issue – what if claimant with an accepted claim is hiding his abilities and recovery?


The other and much more difficult analysis is dealing with a claimant who has recovered from the accepted injury but whom you later “catch” either working or physically active in a fashion which indicates to you they are misleading you and their treating physicians. Please memorize one concept—you cannot normally rely on “one good day” of surveillance or a single report claimant is active and outwardly normal. Be assured you will almost always face the assertion claimant was using lots of drugs and toughed out the one time you catch him/her. We do feel you have a much stronger chance of cutting off a claim and taking the fraud-busting steps we outline below if you can show a pattern of regular physical activity—someone who is working every day or attending a regularly scheduled physical activity which would lead the finder of fact to believe it is a regular occurrence. We urge you to spend the money in a major claim and use a solid surveillance operative to get quality videotape documenting the activity.


Please also remember this is a delicate and demanding state in which to counterattack WC fraud. We consider Illinois arbitrators to be liberal but honest and decent folks—they do not want to be made fools of by a phony, like the Ax Man outlined above. We urge you to consult with outside defense counsel early and often when you smell a rat in your claim pile. With respect to risk managers and claims adjusters, you need the perspective of a veteran trial lawyer to provide you a sense of how evidence will be presented at either the IWCC or in a Circuit Court hearing.


Four Paths to Handling WC Fraud by a Worker


After you have completed your investigation and you have consulted with counsel and you are confident you have what is needed, there are four issues to decide upon:


A.    Cut off the claim and fight when you are sure of WC Fraud--You need to ascertain you have enough evidence in your quiver to cut off WC benefits at all levels and fight. Assume most non-represented claimants are going to immediately “lawyer-up.” If they do, be prepared to let the claimant attorney know you have lots and lots of investigation and claimant is a bad person. Many times claimant attorneys may drop a difficult and fully disputed claim if you have the documentation needed to point them toward honest clients. Please also understand if you keep paying benefits, you are buying into the fraud and most Arbitrators are going to point that out in any hearing. Please also remember the Arbitrators cannot give you a refund of benefits paid following clear evidence of fraud because they don’t have the legal ability to do so; you have to sue claimant in Circuit Court for replevin or fraud to get your money back.


B.    Termination is the next major issue--You need to analyze whether it is enough information to terminate claimant and fight to make the termination stick. In a union environment, you may get a labor grievance from the terminated worker and their union. In such a setting, we recommend you meet with the union reps and let them know what you have and tell them they may not want to aggressively represent a miscreant. In non-union settings, please simply terminate and prepare for a possible retaliatory discharge action. For all of our readers who are concerned about the unusual ruling in Interstate Scaffolding, please remember claimant in that ruling lost his job and didn’t get it back. In that setting, the battle may not be about reinstatement, it is going to be over TTD. Again, if you don’t pull the trigger and terminate TTD, you are in a contradictory legal position.


C.    Start the criminal investigation and prosecution process--Next, have a veteran defense attorney, like the troops at Keefe, Campbell & Associates prepare a letter and forward documentation to the Illinois Department of Financial and Professional Regulation seeking a workers’ comp fraud investigation. You can directly contact Francis "Buzz" Walsh or his staff at the Illinois Department of Insurance by calling 312/636-9457 or toll-free 877/923-8648. If you give him enough evidence, he will start and finish his review and make a decision to


a.     Drop the investigation;

b.    Seek additional documentation or

c.     Refer the matter to the local county state’s attorney for criminal prosecution.


Convictions resulting from their hard work are outlined on the web at: http://www.insurance.illinois.gov/wcfu/condata.asp. Please remember such a criminal action is like any other—it is done by state and county officials at no further cost to you, other than your time. The prosecutors can decide how much or little time and effort they want to put into the criminal charges and prosecution. They can also settle or drop the charges for a variety of reasons.


D.    Last but not least, Sue!!!--Finally, you can sue claimant in a civil action for common law fraud and/or insurance fraud. If you bring a civil action, the costs and fees are like any other litigation—you need to get a budget and plan to manage what you are doing. You may also be countersued by claimant for retaliatory discharge. You control the claim—it can’t be dropped or settled without your agreement like the criminal action above. We have seen some judges “stay” civil actions requiring a ruling from the Workers’ Compensation Commission denying the underlying WC claim—we completely disagree with that approach but you have to remember this is Illinois and judges sometimes do odd things.


All in all, we feel these are your options in countering clear evidence of WC fraud by a worker. One other thought, please note if you are represented by captive or “house” counsel in handling your WC claim, there is almost no chance they will take any of the actions above other than to try to deny and win the WC claim at the IWCC—they work for the insurance carrier and we are certain insurance carriers aren’t going to let their attorneys take active roles in fraud-busting.


We hope this covers your concerns on this complex topic. We look forward to your further thoughts and comments. Please do not hesitate to post them on our award-winning blog.