Thursday, January 10, 2013

Fraud Money - Perception Is Reality

“The referrals speak for themselves,” Jiles Smith told attendees at Wednesday's meeting of the California Fraud Assessment Commission. “(They’re) about the same, but you want more money. How does that work?”

Indeed - how does that work?

Smith, who was re-elected as vice-chairman of the commission during Wednesday’s meeting, told members that he's looking for "outside-the-box" thinking.

And what Commission chairman Don Marshall pointed out is not surprising - that many district attorneys submit grant requests each year that ask for a 20% increase in funding over the previous year’s allocation, but they don’t always show how the money will be used to fight fraud.

“Every time a prosecutor comes in asking for more and more and more funds, knowing that there’s no more funds available, it’s going to push us into that situation every year where we are trying to do our best, reading thousands of pages to determine whether or not the District Attorney’s Office does, in fact, grasp what it is they’re supposed to be doing with these funds to impact the workers’ compensation fraud problem in the state and those cost drivers that continue to make workers’ compensation (in) California one of, if not the most expensive in the country,” he said.

The district attorney offices though complain that the application process is not intuitive and there are no stated criteria in how the commission evaluates the applications.

"If there was some way to work to streamline that or get better direction to make the process more efficient for the review panel and for the prosecutors I think that would be a worthwhile activity,” Gary Fagan, chief deputy of special units at the San Bernardino District Attorney’s Office and co-chairman of the California District Attorney Association Insurance Fraud subcommittee, told the commission.

The public statement from the commission is that the lengthy applications for fraud assessment distributions to district attorneys offices must show well a rounded understanding of how fraud is investigated and prosecuted - and of course must demonstrate claimant fraud prosecution because, as Mashall told the audience, it's "personal."

Personal to employers who hate paying workers' compensation premiums because they believe that everyone is a fake...

While Fagan has a point, it seems to me that what the commission is really looking for is just plain ol' good marketing. District attorney offices that want more money not only have to open more investigations and close more prosecutions, but need to market those efforts more effectively.

We all know how that works. Numbers. Lots of numbers. And the only way to get lots of numbers is to go after the smaller cases because there are a lot more small fraud cases than there are big fraud cases and they are way easier to prove.

And there needs to be publicity concerning these fraud investigations and prosecutions.

District attorneys really need to invest in their marketing departments with more press releases, more press conferences, more posters about fraud, more community outreach - to demonstrate to the commission that they are serious about claimant fraud.

Whether that is a smart use of money is up for debate - but at least in the eyes of this commission there is no debate.

Workers' compensation is a volume business. And so is the business of investigating and prosecuting fraud.

Want more money for your district attorney's office?

Commissioner John Riggs said be creative and identify ways to use the grant money to get ahead of the curve through collaborative efforts and new methods to investigate and prosecute fraud.

But while Riggs said the district attorneys need to focus more on what they’re doing to fight fraud – as opposed to talking about successful prosecutions in the past – and what their plans are for the upcoming year, the reality is that last year's prosecution numbers demonstrate the level of commitment a DA's office has, and the dedicated use of grant funds.

This is why it is so important for a district attorneys office to master the use of the media - because the employers will talk to their politicians who will talk to commission members who will decide how that money is divvied up. While the public statement is that the commission wants to see innovation and creativity, the reality is that prosecutorial success is what demonstrates a district attorney's commitment to the program.

My word of advise to the district attorneys is hire a really good marketing person to put together a solid plan. Next, execution of that plan with press releases, commercials, posters, community outreach, dinners with politicians and insurance company executives, fraud prosecution golf tournaments - heck, the ways of marketing workers' compensation fraud are endless.

We'll see who's most interested in fraud grant money this coming year by seeing who issues the most press releases about claimant fraud arrests and prosecutions.

It's kind of a shame because small dollar claimant fraud is not significant in the big picture, but this is the reality of public perception.

And perception is reality.


  1. If a person enters into a secret deal where they support prop 30 in exchange for legislation that increases the profit of the company they work for, and that person owns and trades stock in that company based on this information, is that fraud? Is conspiracy to commit 10b 5 violations a fraud? Did the Safeway, Grimmway Farms, or Safeway representitive report their holdings and trades to the SEC before drafting SB 863?