Grainy video projected onto a screen depicted a man in waders casting with a fly rod while traversing a bank of river rock — his face pixelated to protect his identity. He was receiving workers’ comp benefits at the time for an injured shoulder.
In another scene — projected sideways onto the same screen — a woman in bulky protective gear sparred in a mock sword competition, her face also pixelated.
“This individual, she’s great,” investigator Jennifer Wilch said. “She allegedly hurt her lower back while stepping on a stool at work. She’s also wearing a 25-pound chainmail shirt, and we know this because her husband told our investigator when he was looking at purchasing some chainmail.”
Wilch, who heads the state workers’ comp fraud investigation unit, led a workshop titled “Workers’ Compensation Fraud Red Flags: What every employer should know,” at the annual Wyoming Safety & Workforce Summit last week in Cheyenne. Fraud “Red flags” include workplace injuries that occur on Fridays, Mondays, during lunch breaks, amid layoffs and when there are no witnesses.
There are a lot of red flags, and Wilch has seen them all. So had many of the workers’ comp case workers and human resource managers who attended her workshop.
“My favorite ones [fraudulent claims] are where it’s very obvious, going beyond what their doctor says they can do,” Wilch said.
Investigating fraud can be frustrating, Wilch added, because she is constrained by the need for real evidence and expert analysis. Video that looks like clear-cut goldbricking to her, for example, may be described by a reviewing physician as “really good physical therapy” for a recovering worker.
“And I say, ‘Really?! Really?!’” Wilch said in exasperation.
Others in the room expressed similar incredulity. Their collective disdain for those who would game the system was obvious. Fraud takes money away from the thousands of workers who are legitimately hurt or made ill while trying to earn a paycheck in Wyoming, and from the spouses and children of workers who are killed on the job.
The financial drain of deadbeat employers and crooked medical billers, however, was mentioned only briefly as an aside in the professionals’ discussion last week. Though relatively small compared to other rogue draws on the workers’ comp fund, worker fraud receives the majority of investigative and prosecutorial resources, and carries the most severe penalties.
It may cost the system millions, but unpaid employer premiums are no match for sword fighting malingerers when it comes to investigative excitement.
Short-changing the system
Fraud is a strain on workers’ comp programs nationwide, sapping an estimated annual $7.2 billion, according to federal estimates. In Wyoming, officials say it’s impossible to quantify the actual level of fraud, so they borrow from a popular national estimate and guess that 1 percent to 2 percent of all workers’ comp claims in Wyoming are fraudulent.
Outgoing fraud supervisor Joe Franken said of the state’s approximately 12,000 new workers’ comp claims filed each year, 120 to 200 might be fraudulent, based on the state’s best guess.
Fraud isn’t limited to workers. Employers can commit “premium fraud” by submitting knowingly false information, and the state regularly investigates medical providers suspected of illegitimate services and expenses billed to workers’ comp. But that’s not where the state workers’ comp division has historically focused its fraud surveillance efforts.
Another strain on workers’ comp — one that the state doesn’t have to guess at in order to quantify — are unpaid premiums by employers.
The state has failed to collect $2.7 million in unpaid workers’ comp premiums owed by 822 employers — now out of business — since 1995, leaving other premium payers to pick up the tab. The worker’s comp division is going after another $604,000 in past-due premiums from 171 employers still in business.
Thanks to the state’s successful investment returns, employers may have barely noticed the added burden. Since 2008, returns on investment added $513 million to the workers’ comp fund, helping boost the fund’s total to $1.8 billion today. A couple of years ago, employers got a 3.5 percent reduction in their base premium, due to the strong investment returns and the declining number of workers’ comp claims.
Those companies delinquent in paying their full premiums employ some 1,872 workers across the state, and despite not paying their dues, workers’ comp still covers their employees. However, those employers, while delinquent, do not enjoy legal immunity when their own negligence results in injuries and death to their employees.
Though not a criminal matter and more a reality of business, the state does pursue those delinquent companies. John Ysebaert, administrator for Wyoming Workforce Services’ Office of Standards and Compliance, said the state typically works with employers to get caught up on their overdue premiums. If that doesn’t work, the state will file liens against their property. If a company owes $6,000 or less in overdue premiums, the state may take it to small claims court.
“The difficult part is just because you get a judgement doesn’t mean you get money,” Ysebaert said.
The state hired a collection agency for the first time this year, Collection Center, Inc., of Rawlins, which will work with the Attorney General’s office to go after delinquent employers, earning a percentage of overdue premiums recovered. Ysebaert said the division will meet with a contractor in July that specializes in targeting fraud among medical providers.
Down the hall from the workers comp division at Wyoming Workforce Services is the state’s Occupational Safety and Health Administration. There, many employers each year are issued citations for moderate and serious violations of safety regulations — some of which resulted in serious injury and/or death. And each year, some OSHA citations go unpaid, yet few of those employers face prosecution.
Since 2009, unpaid OSHA penalties totaled $139,000, according to state figures. Whether a company faces prosecution for not paying its OSHA fine is left to individual county attorneys across the state, according to OSHA officials.
While employers that fail to pay workers’ comp premiums or OSHA fines seldom face prosecution, workers may find themselves facing felony charges for even a single fraudulent claim.
“I half-jokingly say our best referrals are ex-wives and ex-girlfriends,” Ysebaert said.
So how common is fraud among Wyoming workers?
There are 200,000 to more than 300,000 employees under Wyoming’s workers’ comp program at any one time. There were 70 referrals (or tips regarding suspected fraud) in 2014, resulting in 20 actual cases of fraud. There were 97 referrals in 2015, 38 of which were found to be fraudulent. There were 25 referrals as of May this year, resulting in seven active cases of fraud by an employee, according to workers’ comp officials.
“Since August of 2015, working with Wyoming’s district and county attorneys, the [workers’ comp fraud] unit has recovered $80,491.03 in total restitution,” the division stated recently.
At that rate, workers might defraud Wyoming workers’ comp at $96,588 annually — or, at most, about $2 million in the past 20 years compared to the $3.3 million ($165,000 annually) in known delinquent workers’ comp payments among employers since 1995. Fraud investigator Wilch said there’s no way to confidently extrapolate the level of fraud among workers from year to year, as calculated here.
Asked what is a bigger strain on workers’ compensation — fraudulent claims by workers or fraud and delinquency on behalf of employers — Wilch said she doesn’t know.
“I don’t have any data, so I couldn’t answer that question.”
Eight years ago, officials said the state spent an annual average $230,000 to investigate and pursue fraudulent workers’ compensation claims. Ysebaert said the annual cost has increased since, but noted that it varies depending on the number of cases investigated and how many investigators it contracts for each year.
Here are some recent convictions:
° Delaine Davis of Pinedale was convicted of workers’ comp fraud and ordered to pay $11,072 in restitution. Davis was sentenced to 4-6 years in the Wyoming Women’s Prison in Lusk.
° Tara Lofink of Thermopolis was convicted of workers’ comp fraud and was ordered to pay $47,389 in restitution. Lofink was also sentenced to 5-7 years in the Wyoming Women’s Prison in Lusk.
° Victor Rodriguez of Sheridan was convicted in February of workers’ comp fraud. His sentencing has not been completed yet, and is expected to include full restitution and potential incarceration.
° Andrew Jivelekas of Worland was convicted of workers’ comp fraud and ordered to pay $25,781 in restitution. Jivelekas was sentenced to one year in federal prison. This case was a collaborative effort with the U.S. Secret Service as it involved federal violations as well as state.
° Michael Roth of Wheatland was convicted of workers’ comp fraud and was ordered to pay full restitution of $5,401.
“We don’t have any prosecutions currently in the state of Wyoming for provider fraud or for employer fraud,” Wilch said. However, she added, the state recently began strategizing how it will step up efforts to hold employers and medical providers accountable to workers’ comp.
Ysebaert said he can recall maybe two instances of employer premium fraud and two instances of medical provider fraud that he knows of in the recent history of Wyoming workers’ comp. He said the reason the state seems to be focused on fraud among workers is because the state receives more tips about workers.
“I agree, there is undetected fraud on the provider side and undetected fraud on the employer side. But it is much more difficult to identify,” he said.
— This story is part of a six-topic series addressing issues of importance to Wyoming sponsored by the Wyoming Humanities Council as part of the Pulitzer Prizes Centennial Campfires Initiative, a joint venture of the Pulitzer Prizes Board and the Federation of State Humanities Councils in celebration of the 2016 centennial of the Prizes. The initiative seeks to illuminate the impact of journalism and the humanities on American life today, to imagine their future and to inspire new generations to consider the values represented by the body of Pulitzer Prize-winning work. For their generous support for the Campfires Initiative, we thank the Andrew W. Mellon Foundation, the Ford Foundation, Carnegie Corporation of New York, the John S. and James L. Knight Foundation, the Pulitzer Prizes Board, and Columbia University — Ed