They're Cashing In Every Time You File a Claim — Inside the Fraud Machine Draining California Dry

What's in this episode:
Rich Duffy went from landscaping to baby claims adjuster to one of the most respected SIU investigators in the country — the path was anything but straight
Why networking is the #1 weapon in fraud investigation — and why 1,000 LinkedIn connections means nothing if you never use them
The California workers' comp system is its own beast: ancillary service fraud (interpreters, copy services, DME, voucher schools) is where the real money is being stolen
A $6,000 return-to-work voucher sounds small — until data shows one billing code costing $10 million a year with 60-70% of it going to fraud
Attorneys filing workers' comp claims on clients who were just fired — without the client's knowledge — to fund their PI practice on the other side
The SIBTF (Subsequent Injury Benefit Trust Fund) exploded from $5M to $100M in payouts — and almost no one is watching it
Fraudster attorneys get a perpetual cut of SIBTF payments for as long as the claimant lives. Let that sink in.
The AI arms race: insurance carriers operate with guardrails. Fraudsters don't. Rich breaks down exactly why that gap is terrifying
Patients aren't patients anymore — they're widgets. Rich explains the economics behind why some doctors make more on kickbacks than on treatment
Latino and immigrant communities are being specifically targeted by fraud rings — often by members of their own community who know exactly how to exploit cultural trust in licensed professionals
The future SIU investigator is part detective, part data analyst, part AI trainer — and Rich tells you what that actually looks like in practice
Why prosecutors keep losing fraud cases — and what has to change for juries to actually care
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Transcript

SPEAKER_00 0:00

Hey everybody, I'm Tina, your host on Fraudcraft, drinking wine with my good friend Rich Duffy, my very good friend and subject matter expert, special investigator. As this podcast promises, this is a subject matter expert, and we're going to talk all things fraud significates, fraud schemes, and fraud tech. Rich is a guest because he's simply one of the best SIU investigators in the country. That statement is not issued lightly by me. He is the type of investigator who, for one, is a great human first. He's very, very funny. He's very witty. He's heartwarming. You want him for a brother. I have adopted him. You can't have him. He is the he is the guy who you want investigating for you. Whatever it is, you want him investigating it. Or running in the department or drinking a glass of wine, which, cheers, my friend. Cheers. Cheers. We are drinking. This is what I'm drinking. Apothic.

SPEAKER_02 0:55

Same here. Apothic uh red. The winemaker's blend.

SPEAKER_00 1:00

Great wine. My my first and foremost love of wines um comes from Sonata, New Mexico. But second best is apothic. I'll okay, I'll get back on the rich love train. I love the way you can look at one thing from 50 different material angles. You're just amazing. I have really not met anyone else who can do that the way you can do it. And you can do it in it, and it's a way that it all makes sense as well. And the cases that we work in our industry are extremely complex and you do it with ease. The world needs to hear what you have to say about anything related to fraud, solutions, problems, investigations, the issues in our industry, you name it. I want to talk to you about all of this. You're also the future of our industry. You're who is going to save our industry in respect to being that great hybrid investigator that our industry needs, the investigator slash analyst slash AI expert. That's where we're going, right? And we're going to talk to you about all about that because I know you're playing with AI. Let's start with. Can you walk us through what it looked like in your professional world before you became a special investigator?

SPEAKER_02 2:13

Yeah. So first of all, Tina, thanks for having me on. And and you you give me more credit than than I'm probably I probably deserve. A lot of what I am and who I am is from everything that I've learned from people like you and other people in the industry. So first and foremost, I'm gonna say, because I'm I'll I'll kind of jump ahead of myself here, but then I'll come back to it. Is as a fraud investigator, I think one of the greatest tools, skills, or whatever you want to call it is networking. All right. Networking is super, super important because it's not just what you know, but who you know and what they know. Networking with the right people, you know, one mind can be brilliant, but putting together multiple minds on one problem-solving issue or one fraud scheme or whatever, you get multiple angles, multiple diverse backgrounds and diverse ways of thinking about how to tackle that problem. And so that's what I think is one of the most important skill sets, tools, whatever you want to call it in SIU investigating is having a really good, strong network. You can have a thousand people on your LinkedIn, but if you never contact anybody from that LinkedIn account, it's not going to do you any good. You can go to seminars over and over and over again and maybe not learn anything new. But if you make one good connection, like we did a few years ago, that can make the difference when it comes to a different type of complex investigation that you're either never experienced before or have never seen. Yeah, I totally agree. So when when we first connected, I think it was at dinner or something, we just talked and there was that instant connection. I could tell right away that you were one of those investigators that you could put something up here and it stays here. And you probably wake up in the middle of the night and you're making connections. You jump out of the shower and you write something down. I used to be one of those crazy people back in the day, like you know, late 80s, early 90s, where I would have a recorder next to my bed because I would wake up in the middle of the night and I'm like, oh my God, I gotta, I gotta write down this note or I gotta, I gotta, I gotta remember this so I can remember tomorrow to check this because that's the answer.

SPEAKER_00 4:36

Yeah, Siri is pissed at me because often two, three, four o'clock in the morning, Siri, make a note on this case. Or I have this idea, legal theory. Definitely.

SPEAKER_02 4:45

And so um, you know, that when you meet somebody that that is very like-minded, personality-wise, you could tell, you know, there's that instant, you know, attraction, recollection, whatever. I don't know what it was that I saw in you, but I I saw, you know, that that you were very confident about what you talk about. You knew your subject matter, and you could express it and explain it in a way that I understood it. And that connection really worked well.

SPEAKER_00 5:15

You hit something there, is that people like us, and there's not a lot of us, there's not a lot of people like me and you and some of the other heathens that that who we know in our clan. I think what's real that how we stand out is we can take the most complex fraud issues and we know how to articulate them and speak them verbally. That is so hard to do in our line of work. It's so hard to explain what we do. Yeah.

SPEAKER_02 5:37

There's two two women that I really admired early on in my career who did what we do now, you know, these complex multi-entity investigations. And the first one was uh Kathy Mack, and I had met her working on a North Jersey fraud ring where there were 10,000 claimants involved in this fraud ring. And it was all staged accidents. And so we had to sit there, and this is all before computerization. I mean, we were still working on the old black and green screens on the, you know, on the the it wasn't a computer, more so a video monitor or whatever. But we would take police reports from an accident and a piece of paper, and on one side, list everybody in that accident in one car, and on the other side, everybody in that car. And then you do searches on each person, and you find out that the four people in this car and the four people in this car in opposite vehicles, but two accidents later, they're in the same car. And so what was amazing about Kathy was she would just remember these connections. Now, she would see, she would go and take a statement from somebody, and this was all pre-9-11, and she would take a statement from somebody who's like, that's not their real name, and then go back. And we used to take pictures of the claimants when we took their statements, and she would go back through this book and she'd look through the book and look through the book. I mean, we're talking thousands of photographs, and she'd stop and be like, There, that's him, that's him. But wait a minute. I had another statement with me. She'd look through, you know, we'd find the same guy, his same photo, four or five different times with different names and different accidents, sometimes the driver, sometimes the passenger. But she would remember all of those connections of who was in what car. And I just, to me, I thought that was just first of all, impossible. How can anybody make those connections and remember it and then spit it back out? And then the other woman that could do that too, who did more medical investigation stuff, kind of like what I do now, uh, was Donna Hogan. And she could do the same thing where she would be like, This Dr. A is connected to this chiropractor, and that chiropractor is connected to this attorney, and that attorney has this person working for them, and this runner, and this runner knows this guy, and they all met up at this one restaurant, and that's where they would coordinate the fraud. And you know, you'd sit there and listen to her, like, how do you know this off the top of your head? But what happens is for me, and I think you probably find it the same way, is that you get so involved and invested in your investigation that pieces of the investigation become part of your moment in time or moment in life. And you kind of live through that. You're trying to develop a background, identify who you're dealing with, and then from there piece it all together and get as much information as you can about the subjects before you finally go out and talk to them, and then try to see if what you figured out or thought of or made a hypothesis about actually is the truth.

SPEAKER_00 8:43

The word that just came to mind of you saying all this and and why those of us who we know are connected is passion. We are so passionate about this, about what we do. Yeah.

SPEAKER_02 8:55

And that I, you know what? I'm glad you brought that up. That is something that everybody that I have ever known who's done something like what we do has always been passionate about their job, passionate about their career, um, and and just passionate about what they're doing. Like we truly believe that what we're doing is the right thing to do and for the right reasons. Now, yeah, sure, we all work for big insurance companies and big insurance companies make lots of money. And really, who are we so? But you know what? At the end of the day, I have this feeling like I know if I tried to do it, I'd never get away with it. Um, why should somebody else do it and get away with it? I don't want them to get away with it if I can stop it. Um, and that might be, I don't know, it might be in my DNA. So my grandfather was a police officer back in the he's a line of duty death down in southern New Jersey. And there's a funny investigation story related to that. But my father always said, You're never gonna be a cop, you're never gonna be a cop. So the thought of going into law enforcement was, you know, something that I knew I wasn't, it wasn't in my path. So what did I do? I went to college and I didn't know what I wanted to do in college. So my first degree was in biology, but who makes money in biology? My grandfather got me talked out of that degree, and then I went into chemistry, and I'm like, yeah, chemistry is not for me. And then I went to computer science. But this is back in the days of you know, learning programming language. I wanted to be on a computer, all right. And in computer class, 10% of your grade was what you actually did on a computer, and 90% was all the other garbage that you had to learn. And I just wanted to sit there and play on a computer. So after a while, I realized that wasn't for me. So I ended up with just a general business degree. And at the time I had a landscaping business in college. So I'm running a landscaping business. I graduate, I sold that business, I went to work for another landscape company, and then I got married. And my wife, who's my ex-wife at the time, was like, you know, you can do so much more with your life than just dig ditches. And I'm like, Yeah, but I owned a business and now I'm working for a big company and, you know, kind of a top dog there. And so um, she said, Well, you know, my brother works for an insurance company. Why don't you go and see if he's hiring? So just for the heck of it, I'm like, all right, fine. I don't know anything about insurance. And uh, yeah, it was a company in New Jersey. It has the name New Jersey in it. And uh, yeah, I went, interviewed, and got the job. And so I started out in the insurance industry, like I like to say, as a baby claims adjuster. So I started on a desk handling auto claims, and it was simple, you know, auto accident claim or a theft claim or a vandalism claim. And then after a while, you get good at that, they throw you some homeowner stuff. And then after a while, you get good at that, they send you out on the road. Well, my job going from a desk adjuster to a road adjuster was nothing really different other than I got to personally hand checks to people and take their title if it was a total lost car. And there was, you know, go out, collect a police report, or maybe do a scene diagram, but nothing fancy. And then after a year or two of that, if you were good, then they started giving you bodily injury claims. Like, all right, here, you got a, you know, simple soft tissue, couldn't settle it for more than $5,000. Go ahead and do your thing. And back then, you know, we would write down all the facts and information on a little index card. And that was it. That was our file, an index card. Like, okay, uh, you got whiplash, you know, you went for treatment for, you know, two months and you're feeling better. All right, we're gonna give you $4,500. And it's like, oh, come on, can't you give me more? All right, you know what? I'll go back to my boss and see what I can get you. But if I can get you $5,000, will you settle? Yeah, definitely. Boom. So, you know, you learn a little negotiation tactic there. You learn how to talk to people. Rapport. One of the things you learn as a claims adjuster is how to develop rapport with people. You got to talk to them, get them to tell your story. Well, I had a habit of questioning people and sometimes not believing their stories as a claims adjuster. And I would go back to my supervisors and say, hey, I don't, I don't, I don't believe this person. And they're like, Well, it doesn't matter. You got to pay the claim because that's what we do here. We pay claims. So in 1989, New Jersey came out with a law that said that if you're an insurance company in New Jersey and an auto carrier and you write more than 10,000 policies, you have to have an SIU. And for every 10,000 policyholders, you have to have that many SIU investigators. So they came to me one day and they said, uh, you like to ask a lot of questions and you don't believe people. We think you would make a good SIU investigator. And I'm like, all right, cool. What do I do? And like, well, figure it out. You're an investigator now. And so the first thing I started doing was just asking other people who I knew were investigators. What do you do? How do you do it? How did you learn what you're doing? Um, and and from there, going to seminars, just absorbing as much as I could and getting all that in and starting small. So I would start with auto theft investigations. At the time, New Jersey, Newark, New Jersey was like the number one auto theft capital of the world. I think between Newark, Patterson, and Camden and Trenton, those four cities were in the top 10 NICB list for, you know, uh auto theft capital. So it was ripe. And I joined a Vehicle Theft Investigators Association and learned all kinds of investigative techniques from these guys. And then from there, just kind of developing that style that I learned as a firefighter and an arson investigator is the scientific method. You know, you have basically a hypothesis and you have to gather the facts and gather the evidence and then look at the evidence, analyze it, test it, and then you can draw your conclusion. And that's kind of the technique I took when I would do my investigations very early on.

SPEAKER_00 15:02

Yeah, I like that. It's interesting that you talk about, and we all know everybody talks about this. Um, and even in law enforcement, they talk about this how that phenomenon of those who who we need to go to, which is in law enforcement, right? The district attorney's offices, the the department of insurance offices, they are staffed and rife with investigators and prosecutors who don't care anything about insurance fraud, who feel like or are treated like going into the insurance fraud unit is a uh is an act of punishment for them, right? Um, I talked to uh a criminal investigating supervisor, Damon Tucker from Orange County the other day, and his episode is going to be coming on, but he talks about how no one wants to be in the insurance fraud unit. And I asked him, like, what's the deal? Because this is really exciting stuff. And that's what I'm trying to get out there on this podcast is the great people in this space, how complex and exciting this is, and it's really fun. But what your thoughts about all that?

SPEAKER_02 16:04

Yeah, it is. I mean, so early on in my career, what people thought of an SIU investigator with an insurance company was the guy who would sit in a van and videotape people who claimed that they couldn't go to work, but they were out cutting the lawn or playing baseball or rock climbing or something where you get great video of a person doing something that they claim they couldn't do. And, you know, while that always sounds great, like the gotcha video, um, the likelihood of getting that was very slim. The romance of that type of investigation, I would tell everybody, I'm like, all right, we live in New Jersey. How cold does it get in the winter? Imagine sitting in a car or a van without the engine running, trying to stay warm, waiting for somebody all day to come out of their house to get maybe five minutes of video. Um, it's not that glamorous when you do it. Or the the the reverse of that is you know, it's the middle of summer, it's a hundred degrees out and 90% humidity, and you're sitting in your car roasting, waiting for this person. And and I've done it, so I know it's not what it's cracked up to be.

SPEAKER_00 17:14

I was gonna say the flip side of that, my experience is that I was a surveillance investigator and field investigator in Texas, and one year it was like in 1999 or 2000, I can't remember, but um one year we had 45 degree, um, 45 days straight of 120 degree heat. And I was the one out there on the street, you know, in my 1500 LT, um, and it would be 120 degrees, and you can't use the AC. You have to sit in there and you're melting. I had leather seats and I'm just melting. And I would try to, I'd get out of my truck and try to like stand in the shade or go off into the tree or something, you know. But yeah, people don't see that part of it. And that's a big part of it. The suffering out there.

SPEAKER_02 17:54

Yeah. And so we're also talking, you know, pre-cell phones. So I can remember my one of my first surveillances that I did that was not work comp related. It was an underwriting case. We had a guy who had 10 cars on his personal auto policy, but we knew he owned a business. And my thought was he's got to be giving these cars out to his employees as sales cars. So I get the brilliant idea. I'm gonna go over to this guy's business, wait out in the parking lot, and when they leave, I'll just identify who's getting into what car. And then over a course of a week or two, I can follow those cars to where they live to show that they're being driven by employees and they're not all the one insured private vehicles. But don't you know? I'm sitting there and it's five o'clock. Nobody's coming out. It's 5.15, nobody's coming out, it's 5.30, it's six o'clock. All right. My wife at the time is expecting me home by 5:30 for dinner. So now I got to go make a phone call to say, hey, I don't know how much longer I'm gonna be here. So I run down the street to a telephone, make a five-second call, come back, every single car is gone. And I'm like, are you kidding me? Are you? I sat there for four hours and I leave for five minutes, come back, and all of the cars are gone that I was watching. Yeah, there was a lot of crazy, crazy things that happened. But then there's other great stories where I was on a surveillance once where I'm watching two different people for two different cases, and they both show up at the same place at the same time, doing physical labor, working for a landscaping company. I'm like, wait, I didn't even know they worked together. There was nothing to say that they work together, but now they're both working at the same place. So I get video on two separate cases for, you know, two separate clients. At that time, I had worked for a um, you know, a private investigator firm. So you get lucky sometimes and then you don't get lucky.

SPEAKER_00 19:47

I love that I had a similar scenario where I was working this major capping ring, and it just so happened that they were kind of related in some way, and they would they live close to each other on the same street. So there would be Capra A, who was down on the left hand side, and then Capra B, who was over on the right hand side in different apartment buildings. And I was able to sit on a part of the street where I could watch both, and I would just be lucky where okay, Capra A would leave at this time of the day, and I would go follow her and I'd come back, and then Capra B would leave like later on. So I'd sit there all day on the street and watch both houses.

SPEAKER_01 20:19

Yeah.

SPEAKER_00 20:20

There's there's something that you mentioned that really um piqued my interest, and this is something that I love talking about. You talked about the scientific method. Would you take it one step further? I like to talk to people about the science, but also the art of what we do. Yeah.

SPEAKER_02 20:33

You know, it's funny. I just watched a show on Prime the other night called Mercy, and it's with uh Chris Chris Pine. And I, you know, I saw the trailer for it, and I'm like, okay, here's another one of these movies based on now AI and how AI is gonna either prove or disprove and all this stuff. But I watched it and it was really, really good. I liked the concept. I liked the show. You had like 90 minutes to prove your innocence. You were already presumed guilty. So it was it was a pretty cool concept. And and one of the things that hit me in there was when he was doing his thing, um, AI worked alongside him and it asked his choice for investigating something at the moment. He says, It's a gut. You don't get that because you're a machine. But sometimes what we do is is there's no way to describe it. It's a combination of experience, it's a combination of a feeling, and it's just a combination of what you think could be a possibility that you want to just kind of follow that through. Now I refer to as rabbit holes sometimes. I'll go down rabbit holes when I'm doing some of my multi state major case investigations. But sometimes you you just have to have a little bit of a curiosity about something. Like, wait a minute, this doesn't make sense. But in order to do that, you also have to have a pretty good understanding of what the fraud is. Know, and you gotta almost think like the bad guy at the same time as thinking like, How can I catch this person? So, why is this person doing this? You know, I'm gonna say nine times out of ten, all the fraud is is for financial reasons. People looking to make money, you know, insurance companies are ripe for fraud because, like we used to joke years ago, and it's so true, you know, you go to try to rob a bank, you know, if you only get a hundred bucks, you're going to jail. Yeah. You're going to jail no matter what. So you rob an insurance company, nine times out of ten, nobody's going to jail. And even if you get caught, usually you don't have to pay all the money back, only some of it, because that money's hard to find. Right. So, yeah, so so there is a science to what we do. There is a bit of a, you know, knowledge base, experience, and sometimes a gut feeling. And you follow those guts or instincts wherever you can.

SPEAKER_00 22:55

Yeah. And what would you, what would the rich today say to the rich back when you were first walking into the SIU ring that would help anybody coming into the SIU world for the first time?

SPEAKER_02 23:08

Man, that's a tough question. I mean, you know, when I was first doing fraud work, medical scared me because I thought medical was so complex. You know, you deal with doctors, they're smart people. You deal with, you know, medical terminology, you know, and what I learned over the years is that not all doctors are smart. They might know medical, but they don't know everything. And medical terminology is is fine when a doctor is writing that on his report. But when I talk to a claimant, I like to talk in simple terms. You know, I'm not gonna say you've got a subluxation or whatever. Hey, did your neck neck hurt? Yeah. Where does it hurt? Uh, right about here. All right. I'm not gonna ask him which vertebrae, you know, that's on the on the medical report. But I'm gonna ask him, is it your neck? Is it your back? Point to me what part of your body hurts. That was always a good one, especially when the person, you know, on a medical report says they can't move a certain way. It's this thing over here, you know, and they're they're bending like gumby to show you where they're hurting. Well, obviously you got a pretty good range of motion there. So don't be afraid of the medical. It's not as complex as you think it is. The terminology, you can get past that. The other thing, too, was I had a fear of attorneys. When I was a claims adjuster, I was afraid that if I had a conversation with an attorney and I said something wrong, that I would be the person that would be dragged into court and that anything I said would be used against me, you know. So kind of understanding at that point, you know, when you talk to an attorney, you're just talking. If it's a negotiation, you negotiate, you know, and and always do things in good faith. Um, and it's also there's a lot to say about your integrity, too. Always keep your integrity super, super clean, whatever you're doing within your investigations.

SPEAKER_00 25:01

Very interesting what you just said about being scared of attorneys. I think a lot of people feel that way with doctors as well, but with attorneys, especially. First, when I first hit a major organized crime ring that involved attorneys, which is typical in California with the litigated claims, because you need the attorney to litigate that claim and be able to have all that other fraud that follows. I had decided at that point, you know, how am I going to approach this with innovation? You know, what hasn't been done before? And I had decided that what no one has had done was pick up the phone and start calling attorneys that weren't involved in the organized crime ring and ask them, like, how does your world look normally? And well, how do you feel about these fraudsters and and what can you teach me? And I remember, I remember deciding to go that route. I made a list of attorney associations and and attorneys, and I just started calling one after another and I was scared shitless. I mean, I was I was shaking because I'm like, no one's done this before. A, you know, I don't know if they're bad attorneys or not, you know, who I'm about to call. You know, maybe they're all in on it. I don't know. But it just so happens the first few that I that I reached out to were actually really great applicant attorneys and were just as equally pissed off as at the fraudster attorneys who I was because they were creating that, you know, that um unfair business practice landscape, you know, in California workcom. And um, so and we collaborated and we did really great work. And if I had sat in my fear and never made those phone calls, I wouldn't have become this the subject matter expert that I am today in all of this and in, you know, attorney fraud, illegal provider fraud, that sort of thing. So it's really interesting that you said that. And then at one point I became a public speaker, and I remember one of my first conferences on the defense side was with the California Applicant Association um conference in Palm Springs. And I didn't know what I was walking into. They invited me to come speak about attorney fraud. So I had to sit there in front of, and it ended up being like 3,500 attorneys, all sitting there in this massive ballroom staring at me. And if anybody knows our industry, they know that it's been very adversarial for many, many, many years. It still is. And so I'm looked at the as the bad guy. You know, I'm sitting there on top of the stage looking at all these attorneys, and I'm like, and I'm about to tell them, you know, what they're doing wrong, you know, and and how they're being part of the fraud and what the fraud looks like and that sort of thing. So I'm glad that you that you mentioned that.

SPEAKER_02 27:34

Yeah. You know, and and I did something like that early on in my career. We found a chiropractor that was a really cool guy that was a friend of another investigator's. And we're like, hey, can we pick his brains? I want to know what happens in a chiropractic clinic, what happens in the physical therapy, what should happen so that when I go to a clinic, now I know, okay, here's the right way it should be done, and here's the way that they're doing it. Something's not right. And that helped a lot, very similar to talking to an attorney. And I did that just recently too. So when I moved from the East Coast to California eight years ago, I had to learn all about California work comp fraud.

SPEAKER_01 28:17

Yeah, I want to ask you about that. Yeah.

SPEAKER_02 28:19

So back east, it was all the fraud in New Jersey, New York, Pennsylvania area was all no-fault. In the in the insurance industry, no-fault fraud was was where the money was. But out here in California, we don't have no-fault pip. So it's all work comp fraud driven, at least the major fraud and the organized fraud. So, and there was something that I had learned about in one of my first AFA conferences, and it was voucher fraud. I had no idea what a voucher was. I'm like, what the heck is a voucher? And then I learned it. And through our mutual friend Karen, holy cow, talk about networking, talk about, you know, getting together with the right person who knows the stuff and learning from them. I learned from her, but then I connected with a counselor who I kind of felt was a little bit on the truthful, believable side. And I had some conversations about, all right, how do you do this and how do you do that and why do you do this? And learned again from somebody that I believe to be a truthful and honest resource, so that then I could go back and say, all right, this person's doing this, that's not what they should be doing, and had a better understanding of what the control or the real way it should be done versus the bad way.

SPEAKER_00 29:36

I think that's a great instruct for new SIU investigators coming on the scene is to reach out to the experts in the industry and collaborate with them and network with them and learn from them. That's a that's a great piece of advice, Rich. Definitely. So next I would like to ask you about no, wait, let me back up for a second because you started hitting on it. So what I like to impart to the whole freaking world is that there is insurance fraud, then there's workers' compensation insurance fraud, and then there's this massive beast, California workers' compensation and workers' compensation insurance fraud. So you are a great person to ask. I want to know everything that went through your mind when you stepped into the California workers' compensation insurance world. I'd like to hear your thoughts, your opinions, and all the all the dirty because it's it's a whole entire own beast. Yeah.

SPEAKER_02 30:29

Yeah. So so the the real contrast was coming from New Jersey, New Jersey work comp is very controlled. So it's controlled by the employers, hence the insurance company. So in a lot of states, the the employer, the insurance company steps into the shoes of the employer. So the employer gets to pick the doctors, pick the medical network, and you have to go to those doctors. Once you're being treated, then it's a question of, you know, is this a compensable injury? Is it related to the, you know, the loss? And then from that point, you know, whatever is deemed necessary for the medical treatment is covered. All right. So in that situation, like in New Jersey, it's rare that you question, you know, the medical necessity of what a doctor is doing, because these are doctors that you pretty much hire or get through, you know, whatever network service you have. And you don't have a lot of the ancillary services that California has. So copy service, you're not paying, you know, copy services, translations. You know, at the time that I was doing it back in the 90s and early 2000s, you needed a translator, you found a family member. You know, you went to an office, you know, a medical clinic. Usually somebody in the medical clinic spoke the language of the claimant and you could just find somebody, all right? Nobody was getting paid for that. The only time you paid for a translator or an interpreter was if you were going to court in a deposition, EUO, or for some legal purpose where you need to make sure the person understood the questions that were being asked and you could get a reasonable, truthful translation. But you've got translation services, you've got copy services. So the first thing I would always ask about the California Work Comp fraud is how? How are they doing this? How are they allowed to do this? Why don't they realize that all of this stuff just adds to the cost of doing business out here from, you know, a work comp premium service, but then, you know, everything associated with it. So and it's interesting, a lot of people start asking me, like, what is the big driver of the fraud out here in California? And and I don't believe it's as much the medical piece of it, although that's different too, is you can go outside of the the medical network and go treat with any doctor you want under a lien. And then that's a whole different beast lean, lean treatment.

SPEAKER_00 32:55

But then not just doctors can file liens and workers' comp, it's all the other service providers as well, which is absolutely ridiculous. The copy services, the interpreting, all that baloney. That's ridiculous.

SPEAKER_02 33:06

So ancillary services are the big, I believe, is the big driver of fraud out here in California. So that's anything that's not really controlled or has to be owned by a doctor. You know, you've got DME services, you've got billing companies, you've got copy services, you've got counselors on the voucher program, you've got voucher schools that, you know, are offering return to work training. You've got all these services outside of the doctor's treatment that people can make money off of and benefit from and do a lot of fraud with. And that's where I think there's a big problem within the California work comp system.

SPEAKER_00 33:50

Yeah, I totally agree. And have you also considered the other issue? And does this exist outside of California, where there are other state benefits that are non-work comp benefits require or necessitate a work comp claim to be filed to access those benefits, like SIBTF, which is the subsequent injury benefit trust fund, that requires that a work comp claim be filed in order to access those benefits. And those are very, very, very generous benefits. And then, like the counseling school benefits, return to work stuff, you know, you have to have that work comp claim attached to it first to be able to access those benefits. And then there's other, there's other um, you get that five, I forgot what it's called, but it's attached to the work comp benefit that it that a uh, you know, an injured worker can receive. I mean, do you see that outside of California? And what is your opinion on on those benefits?

SPEAKER_02 34:40

Yeah, no. So when I first started looking and and researching and learning about that, let's just talk of the voucher fraud. So it's a return to work voucher fraud. The concept is, you know, you get injured, you have a permanent injury, you can't go back to the job that you once did. Now you have to either retrain for a new career to get back into the workforce. What do you do? All right, they'll give you a voucher for a certain amount of money. All right. And that amount of money now is currently $6,000. But that $6,000 can be broken up into a bunch of pieces, like some fees, $600 for a counseling service. Now, the counseling service is supposed to help you identify potential, you know, uh skills that you could retrain and get back into the workforce. I mean, in theory, it is a great idea, but in practicality, what's happening is there are scam schools that are, you know, claiming to sign people up for training. And what they give them is, you know, here's a free Microsoft course. Now we're gonna give you a certificate after you sit on your computer for one hour and you're now certified Microsoft trained. And they collect $5,000, and $600 goes to the counselor for just referring you over to that school.

SPEAKER_00 35:56

And by the way, you know what really ticks me off is that insurance carriers are required to pay for that school up front before the student even goes. And then there's no change balances after to see if that that patient actually went to that school, graduated from that school, got a certificate, and it's very hard for that insurance carrier to audit that and then get that money back. It's like they have to pay for this arbitrary phantom thing before it even occurs, and not being able to get their money back after if the claimant doesn't even go.

SPEAKER_02 36:25

Yeah. So it's funny, when I first learned about this benefit, we get, you know, people telling me, oh, it's only six thousand dollars. And then when you break out the counseling piece, oh, that's only six hundred dollars. So think that six thousand dollars anymore, right? You do some data analytics and you find out on that one code you're paying ten million dollars a year. Yeah. Right. Is that ten thousand dollars or ten million dollars a year uh um, you know, legit? How much of that is fraud? You know, at one point, if you asked me how much of that ten million dollars is fraud, I would say 60 to 70 percent of it. Okay. So three quarters of what you're spending out the door is going to fraud. Yep. No, the question then is why do we pay this benefit? Well, it's a state-mandated benefit, so it's in the regs, you have to pay it. That's the other excuse I got was hey, I want to investigate this. Oh, well, you're not gonna be able to do anything. The state requires you to pay it. Wait a minute. The state doesn't require us to pay fraud, the state requires us to pay legitimate benefits. How do we pay this if it's not legitimate? So, yeah. So then I started to look into this. And when you, you know, you you start looking at the total amount spent to one school or to one counselor, and you realize that they're making, you know, a couple hundred thousand dollars a year from just you, one carrier, add up 10 other carriers that are probably as big as you. Next thing you know, this person's, you know, company is making five, $10 million a year from the industry. And you talk to injured workers and they're like, Yeah, I didn't really take any training. They gave me a, you know, a hundred dollar gift card, and all I had to do is turn over my signature on this document. And, you know, uh, they gave me a phone. What kind of phone? Well, they gave me a cell phone. Okay, well, well, you know, was it an iPhone? Yeah, it's the lowest priced iPhone. Okay, so maybe that's another $500. So they get $600 to turn over a $6,000 benefit, and that's what the insurance company has to pay. You hit on, there's an additional $5,000 on top of that that the state pays, that all you got to do is show that signature, and the person gets $5,000. So I found that there were some schools and some counselors that were using that as bait. Like, look, give me your signature. You don't have to go to school if you don't want to. You can just give me that piece of paper with your signature, and they'll send you $5,000, and you know, you can go about your day. Because I would call people up and they'd be back to work at the same company, doing the same job, working somewhere else, doing the same job. So they didn't do any retraining, they didn't do anything, but they got $5,000 from the state, and you know, the school got $5,000 from us, and a counselor got $600. It was crazy.

SPEAKER_00 39:13

So one thing that I've come to believe, and I'd like to get your comment on this, but this isn't a system, and this is what I want people to know in California Workers' Comp, especially, is that a lot of laypersons and even licensed persons wake up one day and they go, I can if I create a business, I can make a lot of money committing fraud in California Work Comp. I don't care about this business. I don't, you know, I happen to be bilingual. I can make a lot of money being a fraudster interpreting agency. So I don't care about interpreting. I don't care about the injured workers, I don't care about any of that. But I know that I can make serious bank off of committing uh fraud in California Workers' Comp. So I'm gonna create this company, I'm gonna act like an interpreting agency, or I'm gonna act like a copy service, and then I'm gonna start committing fraud. What are your thoughts on that? Because I feel like people don't realize that that is that is a lot of service providers in California Work Comp. They didn't start out because they had this altruistic approach, like, I'm a medical doctor, I'm an attorney, I'm gonna do right in California Work Comp. I want to help injured workers. It's like, no, I see a spot in this, I see a play in this, I can I can commit fraud, probably not get caught, and make a whole bunch of money. What do you think about that?

SPEAKER_02 40:23

First of all, I don't even think the people think that or admit that they're doing it to make fraud. They justify it as, hey, it's a business. I can go into this business and make this money because the insurance companies will pay you to do this. Yeah. All right. So it's no different than a 10-year-old sitting out on the street corner saying, hey, you know what? There's a lot of people that walk by this corner here. Maybe I can sell some lemonade. I'll sell some lemonade and then make money doing that. I think that, you know, some of these individuals, you know, great, they they have great ways of justifying in their head why they're doing something. If I'm bilingual, then I can help my fellow neighbor be able to navigate the workcomb system better. And I get paid for it and it's not coming out of their pocket. Somebody else is paying for it. And so that creates an opportunity where people with a little bit of skill or a certain skill that thinks that they can go and do this without any kind of licensing, without any kind of oversight, who's checking on it, who's confirming whether they're licensed or not. Again, let's just talk interpreters. You've got court report licensed or court-approved interpreters, and then you got everybody else who's just, you know, submitting a bill for interpreting because somebody was at the doctor's office. I was at a doctor's office one time down in Southern California. And while I'm waiting to talk to the doctor, I'm just watching people coming in the door, looking through sheets of paper, writing down information, going to the copy machine, copying stuff, putting those sheets of paper back in a bin, and walking out the door. And I went over and I asked the person behind the desk. I'm like, who is that guy? Like, oh, that's one of our interpreting services.

SPEAKER_00 42:11

Let me guess what they were doing. They were making copies of the patient demographic or the schedule for that day. Yes. Yes. So all they did.

SPEAKER_02 42:18

Yeah, because now all they do is they got all the information they need. They can go and submit to the insurance company that they perform translation service for that claimant in that doctor's office on that day when no translation was done. And if somebody did need it, most likely they grab somebody from the front desk who might also be working for the interpreting service. So now you've got a person working behind the desk at the doctor's office who's basically the receptionist or maybe doing some other clerical work, but they also work for an interpreter agency who also gets to bill for, hey, I'm here, I'm gonna bill. And guess what? Now you've got uh a doctor's office either sharing work comp payments for that individual and payroll for that individual. And then can you say kickback? Yeah, because they're getting a benefit for somebody in their office who's not really employed by them, but employed by somebody else doing work for them while they're there.

SPEAKER_00 43:18

I'm so glad that you brought this up because Don Marshall and I had a very big tiff about this, because his opinion is he feels that he's pragmatic in his thoughts that it's okay for an interpreting agency to have a business agreement with that clinic and even pay, um, I think he said that, even pay for the right to be at that clinic to do business out of the clinic. I'm like, you don't get it. I don't think he understood the fraud behind it. And we kind of went round and round about this, and I totally disagree because what I want everybody to know is what's happening is there's a whole lot of fraud packed into that. One is the interpreting agency is almost always paying that doctor cash. And it's it's between like five to ten to. $15,000 a month, depending on volume. They actually hand them a cash envelope with about $15,000 for the right to copy, either have their own access to that patient scheduling and patient demographic, or like you said, go in and make you know paper copies. What's normally happening now is that they just give them the access to their patient records, which is freaking ridiculous. I mean, that's such a major HIPAA violation. You don't know who the frick that is having access to our personal private records. And there's monetization behind it. There's kickbacks, and they're not even doing the interpreting nine times out of ten because that clinic already has their own Spanish-speaking staff. So there's so many crimes behind that. I get all riled up.

SPEAKER_02 44:43

Yeah, you get unjust enrichment. You get billing for services not rendered. You don't even know if it's going on. And like I said, when I saw that guy come in, all he did was he went through the the list of you know patient demographic sheets that are sitting in a bin and then went and copied a bunch of them, put them back in the bin, and walked out. You know right away that every single one of those is getting billed for trans.

SPEAKER_00 45:05

I'm getting all hot under the collar because the other thing is that think about that freaking medical clinic. If they're willing to do that, they're selling your information right in front of you, right under your nose, is is what they're doing. You know, and what else are they doing? So probably that same clinic director or anyone in that clinic is probably getting kickbacks to push meds on you, push unnecessary, unreasonable DME or medication or or anything else. They don't care about you. If they're doing that, they're doing other things. It's always that way.

SPEAKER_02 45:32

You know, one of the one of the things that I'm looking into now is uh pharmaceutical fraud. And I'm not talking oxycotin and all that stuff that, you know, uh went on years ago and might still be going on now, but I'm talking about, you know, these are over-the-counter, basically over-the-counter medications that are being priced out at ridiculous amounts. And I can tell, you know, this is one of the products. Okay. I got this, okay. You know what I got this for? I had shingles, all right, and they prescribed this to me $200 for a 30-day supply.

SPEAKER_00 46:09

You gotta put that directly on your shingle blister or whatever?

SPEAKER_02 46:12

Yeah, you put it right on the spot, and it'll help. Well, it's not so much the blister itself, but afterwards you get a neuropathy, and that is worse than the actual pain from the blister. The blisters, you get that? You don't want to touch it. So you hear all kinds of stories about people with shingles walking around the house naked for two weeks because literally you put any skin, you know, any clothing, anything that touches your skin, and it feels like it's on fire. Now, when we're talking work comp, that's not out of pocket. So that's the cool thing about work comp. So you were asking before, why would you want to go and do this for the work comp system? Well, work comp is a guaranteed payer. Somebody's hurt and it's a legitimate injury and it's a compensated injury, you're gonna get paid for whatever treatment you go through. So technically they try to do it where there's no out-of-pocket to you. All right. But if you do have to spend money out of your own pocket, you're gonna get reimbursed immediately. Mileage, transportation costs, you know, any out-of-pockets for over-the-counter stuff. So that that should never be in the work comp industry. And the same thing on the no fault side, you know, no fault might have like a, you know, a copay and deductible, but after that, everything's covered under your whatever your limits are and no fault. New Jersey was $250,000. Is that ridiculous? Every accident, no matter how how minor the injury is, you have a potential of collecting or or having $250,000 of medical treatment without it costing you a dime, other than your copay and and deductible, which is like maybe a thousand bucks.

SPEAKER_00 47:40

Right. And you just inadvertently opened up discussion about a whole nother fraud aspect because in California, it's written in the code where an injured worker cannot pay for their own treatment, that a an insurance carrier is required to pay 100% of all reasonable and necessary medical and legal bills, medical and legal, legal meaning, all the attorney fees, the um the copy service fees, the interpreting fees. And when we say copy service, we're talking about subpoenas, medical records, go getting that sort of thing. So I wanted to open this up to you because uh that is what actually kicks off all this other fraud, is because like if you talk about a law firm, a law firm that deals mainly in PI, they have realized, and there's a lot of law firms doing this right now, where they have one law firm for all PI stuff, general liability, auto, you know, and then they have like an offshoot of their law office that's not managed by any attorneys because they don't have to in California Work Comp, but they deal in work comp because and that that section of their law office funds all the other stuff in their other part of the law office because they know that if they need interpreting on the PI side or general and uh liability side, or if they need copy records, they're responsible for that, or their client is responsible to pay that. However, if they file a work comp claim on behalf of that client, they can get that insurance carrier on the work comp side to pay for everything that they would normally have to pay for on the PI side. So can you talk about that? And and uh what is your, you know, what is your experience in seeing that happen in California WorkComp?

SPEAKER_02 49:22

Yeah, so I only recently became aware of that. Somebody that we have as a mutual friend and cohort said, hey, check out this case. Um and it was a situation where a woman had been, I think, let go from a company. And so she went and hired an attorney just to represent her for that wrongful dismissal. And as a result of going to that attorney for the wrongful dismissal, she was called up and told, Hey, by the way, we're putting in a work comp claim for you. And she's like, I don't have a work comp claim. They let me go. I don't believe they were right to do that. I don't want to have anything to do with a work comp claim. Then later on, found out that there was all kinds of billing for work comm treatment that she never went to. So apparently, like you said, there are certain law firms that are looking to put in a work comp claim to generate some billing or have something paid for that they can then use on the other side of the aisle for whatever other litigation they might be involved in. And I think that's partly because one of the things that that that I also realized in California was this whole concept of, you know, hey, I got fired from my company, let me go put in a work comp claim. And I'm gonna put in a claim for cumulative trauma. All right. So cumulative trauma now becomes, you know, the big money grab when you get fired. I'm gonna go after not only the insurance company for the company that just fired me, but this has been bothering me for the last 10 years. And I work for five different carriers. So now all five carriers, five companies, all five companies' carriers get pulled in, and now everybody's got to figure out who's got the lion share of this cumulative trauma. And that's a crazy concept. I got carpal tunnel syndrome from working on my computer, but I didn't tell anybody about it until after you fired me.

SPEAKER_00 51:05

I want to really want to press down on what you just said, and I like to what I've learned over the years is how to make this matter to people who normally don't care about this stuff and don't understand why it affects their lives. And I want so I want to explain what you're saying and why it's so relevant to anyone listening, is because when you're 25 years old, and this this happens a lot in California, if you're 25 years old, you work for an employer, and let's say you get wrongfully terminated or you have a workplace harassment issue or or anything of that sort. You go to an attorney and you and uh they they file a claim against your employer. And then unbeknownst to you or something, maybe been maybe known to you, uh, is the fact that that's a fraudster attorney filing a workcom claim on your behalf without you having an industrial injury, without you having a work-related injury. That attorney is doing that because they have kickback situations going on with the service providers that they're gonna pull in. Those service providers are gonna bill the insurance carrier. Let's say you're Spanish speaking, it's gonna be interpreting, or you're Vietnamese speaking, whatever, and they're gonna, they're gonna bill on your head. Why that's so relevant, and that's why why everybody needs to pay attention to this, is because they're gonna file the strongest work comp claim that they can and get as many service providers kickbacks paid on that. So they're going to, they're gonna say you have got you've got all these injuries, you need all this treatment, whether you get that treatment or not. Um, they're gonna say you need interpreting, we need all these copy service records, yada, yada, yada. And by the way, you have upper extremity injuries, you have lower extremity issues, you've got sleep, sex, psych, you name it, right? So why do you care about that? Because you're gonna settle out, you're gonna get a few thousand dollars for that, all the service providers are gonna make serious bank on your head. And now that work comp claim follows you for the rest of your life. Now, in the future, if you are truly injured and you truly need medical treatment, that insurance carrier is not required to make you 100% whole. They're only required to make you as whole as what you settled on previously. So if you had a PD rating of like 80% and you actually didn't get any treatment and you weren't injured, and then you're injured further on down the road, which if you're 25, 26 years old, they don't, the fraudsters don't care. They're gonna file whatever on you, you're screwed. You know, forget about it. And that that's gonna haunt you for the rest of your life.

SPEAKER_02 53:31

Unless your sharp applicant attorney also submits a claim under the supplemental injury treatment fund. And then next thing you know, you get some money for the rest of your life. Oh, and by the way, so does that attorney. So if you collect on one of those supplemental injury funds, your attorney gets to collect on that supplemental injury fund for as long as you live. Absolutely. Tell me about that scam. You want to know if if you ever want to know how that's a scam, look at what that fund paid out five years ago versus what it's paying out now. Yeah, more and more applicant attorneys are finding out about this, and there are copy services that will educate the applicant attorneys about this, and they will send people into your attorney office to look at your files to identify those files that would qualify. And then, oh, hey, guess what? That copy service gets to make money off of copying the files from all the other claims that go into making that supplemental injury benefit happen. So they benefit. And oh, by the way, if you know a good doctor who does QMEs, that doctor gets to make money off of the QME that qualifies you to be eligible for that benefit. And now you wonder why that benefit only paid out maybe $5 million five, six years ago, and now it's paying out $100 million.

SPEAKER_00 54:55

You got me all revved up again. You got me going again. Because the SIBTF program has skyrocketed for two reasons. One, the copy service companies, because they can bill on both sides on the on the state SIBTF side and on the work comp side. They get paid from the insurance carriers and they get all the records on the SIBTF side and the QME aggregators, these companies that act like QME agencies that do the QME on the SIBTF side and get paid on the work comp side. Um and I've I've talked to a lot of insiders with those QME companies, and they said it's a fraud platform. It's a fraud-driven platform. That's that's them saying it. My gosh, yeah, I get so excited about that.

SPEAKER_02 55:41

I looked into that. So when I first learned about that, I thought that was going to be another area of investigation like the voucher fraud.

SPEAKER_00 55:49

You can't do it because the state, this, the state is um, for one thing, they'll fight you on trying to ask for the data. They claim HIPAA when actually HIPAA doesn't apply because all those those invoices are submitted by third party. They don't, the state just and the state has told me directly. The DIR and the DWC, they say that we just receive paper invoices and we click and pay. And that's it. They don't, there's no oversight, you know, whatsoever. They don't care.

SPEAKER_02 56:16

The problem I had was selling it to my my company of, hey, this is fraud. The problem was there was no exposure to the insurance company. However, there is a fee that is charged to every employer in the state of California that helps fund that program. So while it doesn't cost the insurance company anything, it's a fee that's tacked on to the work comp premium that gets baked into the cost of doing business in the state of California. So the people who should be really upset about this are all the employers in the state of California allowing this benefit to just run rampant. And everybody's looking at hospice fraud down in Southern California right now. That's the big topic out on the mainstream news. But this thing could be just as hot. You know, this this supplemental benefits program, which is a state-funded program from fees that are collected from employers.

SPEAKER_00 57:12

And don't forget everybody, it's connected to work comp benefits. You have to have a work comp claim to be able to collect the SIBTF or file the SIBTF claim. It's all interconnected. And by the way, those same California businesses that are paying into the SIBTF are also paying to directly to district attorneys and California Department of Insurance to fight this fraud, to educate and fight this fraud. The California businesses are getting screwed left and right.

SPEAKER_02 57:39

Yeah, yeah. But they don't know about it because how how many of them really look at all those different fees and what they, you know, what they mean and and yeah.

SPEAKER_00 57:50

I mean, I'm hoping that they start listening to this podcast and start listening to us and start caring and start going to the legislators and saying we need we need major, major change in California Workers Comp. The other thing that I've learned about from an applicant attorney friend, and he actually was on this podcast, is that the laypersons out there or whoever, I don't know who it is, probably some applicant attorneys, maybe some QME doctors, but there are actually agencies now created. They're SIBTF agencies. And what they do is they get all the data from EAMS on all the workers' compensation claims filed, and they contact the applicant attorney offices directly and they say, Oh, hey, by the way, that WorkComp claim, we can do an SIBTF claim for you. And he was like, No, you know what, this doesn't meet the threshold, you know, yada, yada. And they're like, Oh, don't worry about that. We'll take care of it all for you. That's what's happening right now.

SPEAKER_02 58:41

Well, yeah, yeah, definitely. I I could, you know, when I started looking into that, I could see where that thing is ripe for fraud. And then again, like I used to say, is who are the people that are gonna benefit from that? Well, number one, the attorney, claimant will make some money off of it. So hey, now they're gonna get a phone call saying, hey, guess what? You're gonna get another, you know, $200 a month for the rest of your life. Oh, hey, great, sure, whatever you need. I'll go, you know, for another exam with a QME doctor. I don't care.

SPEAKER_00 59:06

Did you know it's in perpetuity for the applicant attorney as well?

SPEAKER_02 59:09

Yes, yes. That's so for as long as the as long as the claimant lives, they get that money. As long as the attorney, as long as that claimant lives, the attorney also gets a portion. I forget what the percentage is. It's like a 10% or 20%.

SPEAKER_00 59:22

Yeah, I believe the attorney not only everybody needs to know this as well. Not only is that attorney getting about 10% on the SIBTF claim in perpetuity, that claimant or that applicant attorney who files that work comp claim on behalf of their client also gets about 18 to 2% of that work comp claim settlement benefits. Because that claim has to settle.

SPEAKER_02 59:42

It has to settle. Yeah. Yeah. Now the copying service makes money because they have to collect all the records in order to support that. And the QME doctor and the QME management service also makes money off of that whole program. So yeah, it's it's you know, not including the kickbacks too.

SPEAKER_00 1:00:00

Not they also get cash kickbacks between each other, too. It's sure that goes on.

SPEAKER_02 1:00:04

Yeah, I'm sure that goes on. Hey, you know what? I forgot to say something at the beginning of this podcast, and I just want to say it now. You can put it out uh in wherever you want. Don't tell me you've got to do a disclaimer. I just want to say, hey, these are the opinions of myself and no insurance company that I currently or have ever worked for. These are all my opinions, and based on my experience and my knowledge and my tribal knowledge.

SPEAKER_00 1:00:28

So I like to talk about the future. I'm kind of going back again on what we just talked about, a new investigator coming into the SIU. You know, what do they need to know? What skill sets, you know, we talked about networking, we talked about passion, we kind of even talked about the ability to talk to people, right? Relate and and uh, you know, talk to people out there. What special skill sets does a person need to do our job?

SPEAKER_02 1:00:52

I believe that a good SIU investigator has a good working knowledge of claims. Okay. Right. And maybe I'm biased because I was a claims adjuster first and then an SIU investigator. What that did was that gave me the ability to understand the behind the scenes of what it goes into paying a claim, what's covered under a claim, you know, what you need in order to prove that claim and to pay that claim. From there, I also learned about underwriting. So in New Jersey, that's in New Jersey. They've got great case law that happened from a case, it was a Longobardi versus Chubb. And it goes back to I think the late 80s, early 90s, where they identified that the person misrepresented information about their policy, but it wasn't found out until the claim. So as a result of that, the insurance company went back and said, wait a minute, if we knew about that at the inception of the policy, we'd never would have written this policy to begin with. The claim itself was a house fire, and nobody disputed the house fire. What started coming into question was there was a collection of Hummels that they were putting in, you know, a lost claim for. And then there was a question of whether they ever had those Hummels appraised previously or not. And so what happened was during the course of the claim investigation, they found out that the person lied on their policy application. And so that case law went all the way up to the New Jersey Supreme Court. And it was basically ruled that if you commit fraud at the policy level and that policy would not have been written, then the claim is, you know, null and void. And it also came up with the concept of fraud on one is fraud on all, because in that claim, they also wanted to throw out the contents. All right, let's, you know, hey, let's just forget about the contents portion of this claim. Let's just focus on the house. The house was a total loss. I need my house rebuilt. Pay my house and don't worry about the contents. And the judge came back and ruled, and the Supreme Court also uh confirmed that no, sorry, once you once you lie about something in the claim, we don't we don't know if we can believe anything else that you said in that claim. So fraud on one, fraud on all, the whole claim was denied. They didn't have to pay a thing, and good case law that came out, where now you got to worry about any lie that you might have made, not only on the claim, but at the policy application level. So when I learned about that case, because that was going around a lot with claim denials, I started looking at the underwriting piece of it and said, hey, when in New Jersey, when you've got somebody who lies about how many people are in the household driving, that has a major impact on the premium because no fault in New Jersey follows the household. So if you're a family member but you don't have a car and you don't drive, but you're in a car and that car gets into an accident, you're covered under the household coverage. But if the insurance company didn't know that you had five people living in your house and three people had, you know, suspended driver's licenses for three DUIs, they would have never written that policy to begin with. So that gives them an out. So learning claims, learning about underwriting, just the understanding. Now, when I was a claims adjuster and then it spilled into being an SIU investigator, I took associate in claims. So it's a it's basically uh an associate degree level claim adjuster training that you get a certificate for. I think it's the American Institute of Insurance or something like that. But that was a really good course. It was a it was a one-year course, two years maybe, where you take a training course on work comp, a training course on liability, medical, and like general insurance. And that gave me a great basis and understanding of insurance. And then when it came to investigating, it was just learning the different techniques. And the most important, I think the most important tool as an SIU investigator is taking a good statement. All right. And it's not, I've got a script here and I'm gonna follow it because that would drive me crazy when my supervisors would say, Hey, you're not sticking to the script. Yeah, it's because this person, I asked them a question, they gave me an answer that didn't follow the script. I'm following what they told me to find out what's going on there. And next thing you know, active learning, taking good statements. And then I found also taking some, if you get the opportunity to take any kind of training on interrogation and interview techniques, or how to read behavioral study of how to read somebody when they're telling you their story or given a statement, looking at that statement and understanding when somebody is lying, when somebody is misrepresenting, when somebody is deflecting, all of that stuff. Yeah. I mean, it would drive me crazy when I would be sitting there in a deposition and I've got an attorney asking questions, and I'm just there as an observer. And the attorney asks a question and the person doesn't answer it. They give some gobbledygook or a deflected. Answer. And then the attorney just goes on to the next question. And I'm like writing on a notepad, he didn't answer the question. Ask it again. And they're looking at me like, Why? Because they're not paying attention. They're there. All right. What injury did you get? How did it happen? Who are you treating with? What do you, you know, what's what's your current condition? That's all they want.

SPEAKER_00 1:06:18

Yeah. Yeah, that's a good point. If you care about your case, be present at a deposition. Yes. Because almost always that attorney is not going to ask the right questions that that you need. Well, I will get a little you just disappeared. Did you have too much wine?

SPEAKER_02 1:06:32

No, I have to plug in my phone. I'm using up all my battery here.

SPEAKER_00 1:06:36

So I'm one of those who came into the fraud investigation commercial insurance industry as from law enforcement as a police officer. And I'm just going to be, I'm going to be a little bit spicy here. I'm going to say that, you know, when I first came into the industry and I was with a very big insurance company, they sent me to two weeks of claims examiner school down in Tampa, Florida. And I just wanted to hang myself in the hotel shower. I was so freaking bored. I couldn't stand it. And I'm just going to admit it. I'm one of those. And there'll there'll be some of these out there that are going to come into SIU. They're coming they're going to come in from law enforcement or from some other source. But, you know, I do want to talk about other things because I get what you're saying. And I do, there are some really great claims examiners who have come into the special investigations unit and they've done really great work. And there are some who have not. But there are some of us out here who I've insurance, I can't stand insurance. I really can't. It's boring to me. I was in that two-week school, I just I literally was like waiting to just get the hell out of there and never look at claims examining again. Now, with that being said, I have the complete utmost, utmost respect for every claim examiner out there because I don't know how they can do that work. It is hard. That is really hard work. They don't get the the recognition, the recognition that they deserve. So I'm saying all that just to be a little controversial, but I no, I never, ever, ever want to examine a claim ever. I had enough with that two weeks. Um insurance is boring to me. I can't, you know, like and I've studied insurance and I actually I actually got my uh I actually got an adjuster license way back in the day because I I just I want I knew I wanted to come into insurance. But so for those who are like me who are never ever ever want to be a claim examiner and kind of don't care about insurance, but has an incredible passion for like me chasing after the bad guy, fraud, really loving puzzles, because that's what this is, what we do. It's really complex, it's all a puzzle game, it's all it's all rabbit rabbit holes and discipline and knowing what is really material or not. That takes a long time to really understand fraud laws. So if you do get in our business, you do have to understand materiality, fraud law. When I figured out that I really wanted to go down that road of chasing after fraudster attorneys and copy service and interpreters and legal provider fraud, I had to understand what precipitates all that, which is the capping. The capping crimes, that's what kicks it all off. The kickbacks, that's what, that's how they generate their, you know, their their income, their revenue. That's really complicated. I had to study all those laws. And there's like 23 of them, the the codes and regulations. I carried, I printed them all out and I carry them everywhere I went. I even went into Mexico to, you know, to root out the source of the capping organ organizations in Mexico and the call centers, because that's where they were at the time, past you know, 10 years. Um and then they branched off into the Philippines and El Salvador and you know, you name it all over the place now, but because of AI and and technology. So let's take it, okay, we talked about claims, is a great background, whatever. Yada yada. And what else are your thoughts? Because what I'd like to talk about is the future, technology, data. I feel like you can't just be an investigator. You kind of have to have an analyst perspective in what we do too. Because would you talk to the people about what it looks like in terms of on a spreadsheet with what we do, how complex that is. I did some speaking engagements recently where I put a slide on the wall and I show them the Excel spreadsheet of it, of what we do and how complicated that is. We could be dealing with hundreds of claims, thousands of dates of service, different levels of fraud and different directions, and what that all looks like on a on a data sheet, on an Excel spreadsheet. I feel like to be a really great and special investigator in what we do is that you have to be a little bit of a robot too, a techie, an analyst. So, what has been your experience with that?

SPEAKER_02 1:10:44

Yeah. Okay, so first I'm gonna I'm gonna also give a disclaimer. While I say that's what all these disclaimers tonight. Well, I I just wanna I want to clarify something. Well, you know, are you being shown?

SPEAKER_00 1:10:55

Are you being followed?

SPEAKER_02 1:10:56

Are you being watched? No, no, but I I don't wanna I don't want to appear. Somebody's always watching. No, I don't wanna I don't want to make it sound like uh somebody coming out of law enforcement would make a good SIU investigator either. You can learn just enough. Yeah, so you can learn just enough about insurance. I've worked with until, you know, and I've been in leadership roles, I've been in admin roles. We need to talk about that new. Yeah, I've had great law enforcement, prior law enforcement investigators that were now really super SIU investigators. I've also had law enforcement investigators who retired, you know, they got to that age where they could retire and thought, I'll just go put in another 10 years with an SIU in an insurance company. Yeah, and and ride out my my, you know, my twilight years into real retirement when I'm, you know, maybe Medicare or Social Security uh eligible. But no, I I can remember this one guy, he came to work for me at a company and he couldn't make the switch from beyond uh preponderance of evidence to beyond a reasonable doubt to clear and convincing cause and probable cause and all of that stuff.

SPEAKER_00 1:12:11

Sufficient lease for probable cause. It's simple, it's not that challenging.

SPEAKER_02 1:12:14

Yeah, though, you know, again, and and the concept of materiality that was like so foreign to him. It's like, well, how do I know if it's material to the claim? I said, that's the point of knowing a little bit about claims. If if I lie about, you know, my wife uh shopping at Woolworth versus shopping at Macy's or where there's no Woolworths anymore, you know, you just dating yourself severely. I know, I know. Is that material to the theft of my car? Well, it might be if the car was last seen at Macy's or last seen at Sears or wherever. But if it's not material, so the person lied, but it doesn't, it the lie isn't material to the claim itself.

SPEAKER_00 1:12:57

Yeah, change the direction of the claim. If not, discussion over. Yeah.

SPEAKER_02 1:13:01

So I've had I've had guys that, you know, and gals that that that kind of stumbled over understanding, you know, that level of proof you need for a criminal case versus the level of proof for either fraud or denial. Sometimes we're just denying.

SPEAKER_00 1:13:18

Rich, I do want to clarify that that would be more related to a claimant fraud level claim, right? Not provider fraud. I just want to clarify that.

SPEAKER_02 1:13:25

Yeah, yeah, yeah. This is this is at claimant fraud level and maybe even at provider fraud. So you might have some provider fraud abuse, you know, that that might be all right, it's not fraud, but it's definitely abuse. You know, they're within the regulation of what they're doing, but what they're doing is taking advantage of the system, you know, it's kind of a gray area.

SPEAKER_00 1:13:46

So, you know, yeah, you're segueing into what I wanted to ask you. My my next follow-up question to that is talking about fraud, waste, and abuse and that whole discussion. Because that discussion kind of drives me nuts because fraud is fraud, fraud is a legal concept. Waste and abuse, what is that? Are we talking regulatory? You know, that doesn't rise to the criminal element, you know? So please please keep talking, but I did want to ask you about the fraud, waste, and abuse that everybody likes to talk about because that's a good tagline, but what does it really mean?

SPEAKER_02 1:14:16

Yeah. So, you know, getting back to you know, law enforcement and all that, yeah. Law enforcement is great. I like a mix. So if if let's say, for example, I get to go and run an SIU operation, you know, given carte blanche, I want half of that SIU to be law enforcement, half to be from claims, and maybe somebody from, you know, data analytics, definitely now with AI and everything that's going on. So I want somebody that just can be a real crazy computer worm that can go into a data warehouse and write code and pull information out and then put it all together. And then I want somebody from claims who gets the claims side, and I want somebody from law enforcement who's got contacts and the the skill and the knowledge and blend them together and have them work together.

SPEAKER_00 1:15:02

Okay, let me hit you with something. Would you need someone from the claim side if we're talking provider fraud? And if so, what would be an example of that?

SPEAKER_02 1:15:10

Yeah. So a good example of that would be somebody that is working at a level of dealing with maybe nurse case managers or somebody that might even have gone from being a claims adjuster to say a vendor manager. Now that vendor manager is working with your PBM, your um pharmaceutical benefits management company. So now they've got an understanding of, let's just say we're comp, all right, what involves, you know, prescribing drugs and paying for drugs and what's fee scheduled and what's not fee scheduled and all that. They've got that knowledge of claims, but now they've got the knowledge of working with their provider network or their prescription or pharmaceutical vendor network. So somebody like that would have good industry knowledge now. If I'm looking at a pharmaceutical fraud case, if I've got, you know, a company that is billing, you know, patches and creams, paying patches and creams at ridiculous prices, do they understand, you know, the process? Like when I started looking at at pharmaceutical stuff, I didn't know what an AWP was. That's the average wholesale price. Well, what's that based on? That's based on whatever the company selling that drug decides they're going to say that drug is worth.

SPEAKER_01 1:16:26

Yeah.

SPEAKER_02 1:16:26

So if I'm tweaking a formulary for a pain patch and going from a 5%, which is generic over-the-counter, $200 for 30 patches, and I tweak it a little, it's basically the same thing. But now I get to come out and say, well, this thing's worth $4,000 for 30-day supply. So understanding that, yeah, I mean, it took me a while to figure that out, but I talked to those people. I talked to claim adjusters, I talked to our vendor manager who understood that so that I could get a knowledge of it. I mean, you know, now could I be a subject matter expert on that piece of it? Yeah, but I still don't always get the claim piece. Like, when do we pay up front? When do we get a request for authorization? When do we have to have utilization review, which is a California thing, versus, you know, what other states do we have to worry about how it's regulated and all that? What I always like to say is good SIU investigator is a jack of all trades. We, like you were saying before, we have to know a little bit about law, we have to know a little bit about claims, we have to know a little bit about underwriting, we have to know how to investigate. So you've got to, you've got a lot of hats to wear as an SIU investigator. Now throw in AI. AI can help, but also you got to make sure that what AI is giving you is something you can rely on. I have come across a lot of hallucinations using AI. I had a case where it was all contained within Colorado, but when I had it go through and analyze a whole bunch of claims and said, where should I go and talk to these people and which doctors would be the best ones? They were sending me to Wichita, Kansas. And I'm like, where did you come up? And I'm asking AI, how did you come up with Wichita, Kansas? And it's like, well, let me check. I don't know how, let me let me figure that out. Yeah. And and finally, AI came back and said, Yeah, no, sorry, that was a mistake. Nothing is in Wichita, Kansas. And I'm like, man, what else are what else am I not going to trust you on?

SPEAKER_00 1:18:28

The insurance carriers are going AI like mad. I mean, they're trying to turn over all operations over to AI. Almost all insurance carriers are doing that right now. And in terms of on the fraud side, my thoughts are at some point what we're going to see is the new special investigations unit being maybe one subject matter expert in premium fraud, one in claimant fraud, one in provider fraud, and then everything else is AI.

SPEAKER_02 1:18:51

Um, I heard this at a seminar. I don't know if it was last year or the year before. And and and I truly believe it. While we're using AI in the industry, in the insurance industry, we are using it with guardrails. You can't use PII in your AI tool if your AI tool is not a closed system where it goes out into the open net. So PII is your personal information. You know, that would be your social security number, your medical information, HIPAA, all of that stuff. You know, anything that is personal to you, you got to be very careful of how you're using that in an open AI platform. If you've got a closed AI platform, you should be pretty safe there. But in an open AI platform, like let's say, you know, Grok or Copilot or, you know, ChatGPT, you've got to be careful because whatever you're putting out there is out there. And if it's somebody else's personal identifying information, PII, that person's information is now going out into the you know open um AI network or the internet. So you've we have to play within these guardrails. The bad guys, they got no guardrails. So imagine, imagine if you're given a tool that can do anything and you're told you can do whatever you want with it. There's no rules and no restrictions. Man, I'm gonna teach that AI tool everything, whether it's legal or not legal or whatever, or how to get around it legally and all that stuff. They're gonna come out with a better end product using that tool without any restrictions versus us having to stay within our guardrails. And so you're going to really need somebody who knows how to work within those guardrails, but knows that there are people without the safety net and without the guardrails that are also using that AI tool. And you've got to be able to kind of try to outsmart them, try to figure it out. And one thing I've learned in the 30 plus years of doing SIU is we educate the bad guy.

SPEAKER_01 1:20:50

Yeah.

SPEAKER_02 1:20:51

You know, and and a perfect example of this is back in New Jersey when we used to do staged accident investigations on the auto BI side, they would dump four people in each car. So you would have a stacked accident of eight people involved in the accident. Now, usually the driver who was at fault wouldn't get to put in a claim, but everybody else in that, in those two cars would put in claims. And they were always like soft tissue claims, whiplash, right? And those things would settle out minimum case, you know, five to ten thousand dollars tops. So what would happen is you would get all eight people and you would take statements from them, and everybody would tell a different story because you wouldn't just ask them about their injury, you would ask them, where were you going that night? Who's this person? How do you know this person? Why were you in their car? And all of a sudden now you're getting eight different stories of eight different reasons why they're in that car and who, you know, who knows this doctor and who knows this guy and all that stuff. So it's easy to trip them all up. So we educated them on it. What do they do? Now they get one person in the car, and that one person has a more serious injury. What kind of injury? Well, let's call it an ACL tear. Let's say that they've got uh, you know, a bulging disc. I guarantee you, you can probably take nine out of 10 people that have never had an MRI in their life who are 30 to 40 years old and have some sort of manual labor job, or maybe not even a manual labor job now, just sitting in a chair all day, put them in an MRI, they're gonna have something blown disc or a bulging disc or an ACL tear or a rotator cuff or a carpal tunnel that you can show on an MRI and say, boom, guess what? Now you've got one person, and that person's claim now is worth $60,000 after the surgery and the medical and all of the treatment, and you only get one bite at the apple to take one statement from one person, you're not gonna trip them up. I'm gonna make sixty thousand dollars off of that one person versus you know, sixty thousand dollars off of eight people with two different cars. So AI, the most important thing now is prompting. And if you are working with a generative EI, AI, the AI is gonna be learning off of you. So the more you prompt it, the better responses you're gonna get. So while I did get some hallucinations in the beginning, I'm still training AI. So I'm training AI to think like me because I think I'm better than AI at the moment, but AI is pretty quick at summarizing stuff. But then here's the other thing, too. And I mentioned this to somebody the other day. If I summarize, say I'm given a report and I summarize it, based on my prompt, it's gonna tell me what I want it to tell me. Somebody else takes that same report and they ask it to summarize it based on their prompt, they're gonna get a totally different answer and a totally different product from that. So we've got to be careful that we're, you know, we're we're comparing apples to apples, that we're using the same prompting, that our prompts get better, and that, you know, information that's important is verified because you can't just accept that it's legit. I mean, we're hearing stories now, you know, on social media and also mainstream media about attorneys that are citing cases that don't exist. Yes.

SPEAKER_00 1:24:03

Because AI There are pretty major law firms right now that are in a lot of trouble for doing that.

SPEAKER_02 1:24:08

So, you know, yeah. So I think there's always gonna be a need for a human element just to make sure that AI is doing what it's supposed to be doing, training it up to do whatever it does. Do you need as many people? That's gonna probably be the issue down the road. And we're seeing the same thing with the insurance industry as a whole. You know, we went from doing everything on a claim to now it's all low touch, no touch. You know, put it in the system. It's gonna analyze what the claim is. We're gonna try to pay that claim as quickly as we can because there's studies out there that say the quicker you can pay that claim, the lower that claim value is going to be in the long run. The more you can do that.

SPEAKER_00 1:24:45

Do you mean settle out on that claim? Do you mean settle on the claims?

SPEAKER_02 1:24:48

Settle out on the claim.

SPEAKER_00 1:24:49

Yeah.

SPEAKER_02 1:24:49

So the quicker you can settle that claim, the more you might save money. And then the more you can automate some of that claim processing, the less people you need. The less people that an insurance company has on their payroll, the less, you know, fixed expenses they have. And now you become more profitable. And it might be within the insurance industry, you know, a lot of times an insurance in insurance company can make money even if they're losing money. And that's where a lot of people don't understand that. Like, you know, if they take in a dollar premium, but they pay out a dollar five on that dollar premium they take in, everybody thinks they're losing money. But they might make another 10 cents on that dollar in investment income. So their net is really they're making five cents. If you're making five cents on every dollar and you're working in the billions of dollars and trillions of dollars, then you're making money. And so that little percentage, if you can tweak it, where you know, we can't increase our policy base anymore because the the whole population of the United States isn't growing. Well, how do we make more money doing the same thing every year, year after year? We have to find a way to cut expenses. And how do you cut expenses? You cut people that you need to depend on. And the way to do that is to automate, you know, and it's no different in any other industry. I mean, we're seeing it in the fast food industry. My first job, real job, you know, back in the uh in the days as a high schooler was working in a fast food chain. And now half of those jobs have gone away through automation and through, you know, AI.

SPEAKER_00 1:26:26

You talked about we educate the bad guys. What I want people to know is that we're being studied all the time. And I want, I want C-suites of insurance carriers to know, California businesses to understand this, consumers. The bad guys out there are studying us all the time. And I've actually had fraudster applicant attorneys, fraudster doctors tell me that we know insurance carriers and how they operate better than they do themselves. They study, they know insurance, insurance carriers, how they manage claims, how they handle litigation, how their SIU works, you know, which claims they they fight, that sort of thing. Have you seen that? And what are your thoughts on that?

SPEAKER_02 1:27:08

I mean, I haven't seen it personally, but I can't I can't imagine that let's say there's an applicant attorney firm or a huge firm that has multiple offices all across the country. They're a national firm. Why wouldn't they take all of the data from all the settlements that they get from every insurance company, put them into a database and say, analyze this and tell me which carriers settle higher, which adjusters within that carrier settles higher? Which area of you know insurance do I have a better chance of profiting from? Is it work comp? Is it you know third party litigation auto? Is it commercial auto? What is it? And then that's where I know as a business now of a law practice, I'm gonna start focusing my attention on. If I know that California. California work comp is the best place to make money in the work comp industry. I'm going to put a lot of resources there. But if I know commercial uh you know auto in Detroit is going to be the hot spot and I'm going to make a lot of money because there's a lot of trucking routes that go through Michigan and that whole area, then that's where I'm going to set up a firm to just focus on that. You know, so you got to imagine that that whatever we think we can use AI for, other people are thinking how they can use AI to complement and um profit from.

SPEAKER_00 1:28:38

I'm talking to a lot of people in this industry, the private sector and law enforcement sector. And time and time again, the comment is I'm scared of AI. I'm scared to use AI. I don't understand AI. How would you help people? Because I know you're very comfortable with AI. Um, and you're one of the best right now in the business in terms of using AI to support your needs and what you're doing.

SPEAKER_02 1:29:00

So AI is not going to steal your soul. And and I tell this to my daughter. So it's funny, my daughter's got to write a resume because she's going to be looking for a new job. And I'm like, oh my God, throw it into AI and then have them write your cover letter for you. It's like, oh my God, no. No, what if somebody finds out? I said, are you kidding me? Who's not using AI for a resume now? Who's not using AI for a cover letter? You'd be a fool not to use this tool. All right. What you want to do is you want to make sure that whatever you use AI for, at the end of the day, it will still be a representation of what you believe and what your work product is that you're going to stand behind. So if I'm using AI to analyze data and that data spits out something, I'm going to make sure that I can stand behind the results of that AI data. If it's a summary, I want to be able to say that for certainty all of that information checks out, all of the citing is there. It's no different than back in the day when we had to do an essay. And if you cited a resource or you cited an author or whatever, you had to put a footnote in, you know, you had to have a bibliography, you had to put a footnote in, you had to have your endnotes, you had to have your citations. It's no different today with AI. If you're going to rely on AI as a tool, you better make sure that there is going to be something that AI can point to that you can go out to and verify is truthful. And AI is going to learn. So the more you use it, the more it's learning from you. But at the same time, you should be learning from it. You should know that if you ask a prompt one way, you're going to get one result. And then how else can you ask that prompt? And what other result can you possibly get?

SPEAKER_00 1:30:46

Yeah, I like that. I'm going to move on now to how we talk about why everybody needs to care about fraud, why it's so important of what you and I do in this industry, fighting fraud, law enforcement fighting fraud. Some of the things that I've seen over the years is I've gone to a lot of trials and I've seen prosecutors fail at conveying the relevance and the materiality of the fraud case that they're prosecuting, the fraudsters, the fraudster applicant attorney, the fraudster doctors, copy services interpreters that they're that they're prosecuting. I find them falling short, conveying the materiality and the importance to the jury. I find it also difficult to get the general public to really understand why they should care. It's very difficult to articulate what we do and why it matters to the general public. So saying that, what is your message to the general public, to the consumer, to the California business? And in doing so, helping the next prosecutor who's standing in front of a jury and the judge and trying to get them to understand why capping is so important to prosecute kickbacks, all the fraud that we see on the provider level.

SPEAKER_02 1:31:57

The problem has always been, and this was something early on that I learned is that, you know, who's the real victim? You know, and and and nowadays, more than not, everybody just thinks, well, the victim's an insurance company, they make lots of money. Are they really a victim? But what happens is they've disassociated that premium dollar when I write a check, you know, to the insurance company, or now do an electronic, you know, payment through my credit card or whatever. Disassociate that payment to their insurance premium, and they forget that, you know, what used to cost me $500 for car insurance now cost me $5,000. Well, why? Why did that go up? You know, it went up because, you know, yeah, inflation, yeah, the cost of everything, nickel cost, car costs, all that. Fraud gets baked into that. If a company isn't really actively fighting fraud, then all they're doing is they're baking that into the premium dollars. So they're passing that along to the consumer.

SPEAKER_00 1:33:02

Yeah.

SPEAKER_02 1:33:03

Because how else are they going to pay for that? And so what ultimately happens is you're the one, you as the consumer are still the victim. And yeah, sure. Or fraud piece of it might be a couple hundred dollars out of your $500 premium. But what else could you do with that $200? And is it right that that person next door gets to collect $60,000 and nothing because they claim that they've got an injury, or that doctor who went to you know, medical school, racked up $500,000 in medical loans, thinking that he was going to make millions of dollars, realized that he had to work for that money. And now all of a sudden, he finds a way to make more money on DME, durable medical equipment, like a tens unit or a brace, a back brace. He can make more money on kickbacks from durable medical equipment and pharmaceutical stuff than he can make treating that one patient. That's a problem. That's a serious problem. And I've seen that in data where I've pulled the data from a doctor, and what that doctor bills for just treating a patient is a fraction of the money that's getting billed with his signature and his NPI number, his provider information on the bill being submitted for the durable medical equipment and the medication that's a kickback to him. So he's making money off of other people making money off of his patients more so than he's making off of his own patients. That's not right. And so what happens there is then it becomes more of a corporate practice of medicine of how much money can I make off of this person who's got an injury, whether they need it or not, versus what do I have to do to treat this person to get them back to work if they're going to, you know, work comp claim or to get them as pre-accident whole as possible after an accident or injury.

SPEAKER_00 1:34:56

You just reminded me of another major scheme in California Workers' Comp is the phenomenon of let's find the 90-something year old doctor who can barely stand, can barely function, but still has their license, and a chiropractor creating a medical clinic using that doctor's medical license, you know, as the owner operator in treater who actually doesn't treat. We have we have case after case after case in California where, you know, they use this doctor, their medical creds, um, to operate this clinic. And that doctor is actually not treating anybody, might go in and they'll find them. There's actually cases of this to where the doctor's sleeping all day at the desk, but they just have an active license, and that happens a lot in in California. And they but they put that doctor's name and information on those medic reports as the medical treater. And I think um, what would you say to that? And you know, what would you say to claimants out there? Because I think one thing is that, you know, claimants need to know that this is happening.

SPEAKER_02 1:36:00

Yeah. And that comes to patient safety. So again, you can talk to the fraud, and this is wrong. They're stealing money, they're getting kickbacks, they're capping, they're running, they're doing all this. But at the end of the day, are these also doctors that you really trust? Are these doctors that you trust, you know? I mean, it's crazy how some of these doctors will say, Oh, yeah, this person needs surgery on their back. I'm gonna do an epidural injection. You know, you ask me, you know, you want to stick a needle in my back close to my, you know, my spinal cord and one slight, you know, twitch or or move the wrong way and I could paralyze you for life? No, sorry, it doesn't hurt that bad. I mean, granted, if there are people with that much pain and that's the only solution, yes. But when you've got a doctor that every single patient that goes into that doctor goes through the same exact treatment plan over and over again, now you've got a question is that doctor treating that person or are they making as much money off they can? And then what happens is the patient doesn't become a patient anymore. The patient becomes a widget, right? And in business school, we learn about widgets. Widgets are basically whatever you can make money off of, and how much money can you make off of that widget? All right. So, you know, a patient isn't a human being anymore who's in pain, who needs to get some sort of recovery. Now it's a patient comes into my office, how much money can I make off of them? And who else can make money off of them? And that's where the ancillary services come into play. So now everybody's gonna make as much money off of this injured worker or this accident victim. And that way everybody gets to profit from it. And who doesn't want that?

SPEAKER_00 1:37:39

You hit the nail on the head because anyone listening right now can Google Pacific Hospital of Long Beach, that case, you know, with the that hardware that was installed and patients, you know, that um that wasn't FDA approved.

SPEAKER_02 1:37:52

Yeah, they were using uh what metal that was supposed to be, yeah. It was supposed to be like, you know, pristine, clean surgical metal that you could put in your body, and they were just getting scrap metal from uh some airfield out in the desert, and then just reworking that metal for, you know, hip replacements and and uh uh knee replacements. And that was crazy. And then people were getting all kinds of infections and all that stuff, and come to find out that the fraud there was let's see how many people we can do these surgeries on and use the cheapest amount of metal we can instead of true surgical grade titanium or whatever they use nowadays.

SPEAKER_00 1:38:29

Yeah, they absolutely don't care. And I I like that you brought up the patient harm issue. I have another soapbox soapbox issue for you. One of my big things right now is the fraud assessment commission, right? So California businesses who pay for a workers' compensation premium, a percentage of that, like you said with the SIBTF claims, a percentage of that goes directly to the fraud assessment commission who hands out money to the California District Attorney Offices and CDI. CDI, I believe, it gets right off the top a cut of 45% without having to prove a thing, without having to show any date or anything, our cases are working, yada yada. Okay. I have a problem with that. Like you should kind of prove your case when you're asking for all this money. But anyway, but at the same time, fraud costs are rising. I believe that the uh the Center Against Insurance Fraud has said that we're paying Americans are paying over $308 billion a year to fraud, which I think is actually not taking into account provider fraud. So that's a big deal. Add on another billion or two on that one at least. We also understand that there is a massive billion-dollar underground economy occurring in California with all this provider fraud stuff. But anyway, I'm digressing. So referrals, law enforcement says that they're not receiving enough referrals every year from insurance carriers to be able to prosecute, prosecute. However, they're receiving about $89 million per year from the fraud assessment commission to educate, investigate, and prosecute fraud crimes. But referrals are sinking. Fraudsters are not getting caught, fraud is costing us hundreds of billions of dollars every year. And now, because of AI, fraud is becoming smarter than anyone can keep can keep up with. So, what are your thoughts on all of this? Um, you know, what are your thoughts on the fraud assessment commission about law enforcement? California businesses paying money directly to law enforcement. I'm trying not to ramble here, but there's so much packaged into this. What are your thoughts on all of this?

SPEAKER_02 1:40:30

You know, it's no different than New Jersey. So New Jersey had a very similar program where, you know, the insurance companies pay into funding the insurance fraud investigation at the state level, and then the state also gives money out to the county levels. Those counties that wanted to incorporate fraud investigations into their prosecutorial work would, you know, apply for that money, get money that they can then hire people to focus on that. If you were in a county that really never saw fraud, it didn't really pay for you to apply for that and to get it. So what would happen is the counties that you knew always were the ones that had a lot of fraud, would always apply. They would always get it. And then what happens is they rely on that money because they've built up their, you know, personnel that are focused on handling insurance fraud, and you've you've now become dependent on that money. You have to put in for that grant every year, and you have to show something to try to get that money every year. Is it quality stuff? Is it stuff that we send to them that we hope they do something with? I've I've accepted a long time ago that my first responsibility is to my insured. My second responsibility is to my insurance company. The third responsibility is I have to apply to the regulatory requirements of submitting whatever I got to submit. So if I prove fraud and I can save my insured money or I can save my insurance company money, that's a win. If I have to submit something to the state, I'll submit it to the state. What they do with it, that's gonna be up to them. I've had complex cases that I've tried to explain to state investigators, to prosecutors, to DAs, that they just didn't understand it. They didn't understand the complexity of it. And if they couldn't understand it, they said, well, if I don't get it, I'm never gonna be able to explain it to a jury. Yeah. So at that point, it's like, all right, here's the fraud. I'm submitting my my, you know, whatever form you're submitting in the state that you're in, and you do with it what you want. If you get somebody that comes along and is able to sell that case to you in an easier way or a softer way, great for you. Um but I don't worry too much about them. Yeah, it sucks. What used to frustrate me was that in New Jersey, and I think it's the same in California, we have to go through annual training per year as an SIU investigator. Every year we have to get continuing education training. All right, but there was never that same requirement for the state investigators. So the state investigators didn't get the same training that. So we're we're the ones that are the experts giving this over to a state investigator, and a state investigator is getting the case. I've had some very passionate state investigators who did fantastic jobs, but they also answered to other people that may or may not be within the SIU fraud community or have an understanding of SIU fraud or may be, you know, politically controlled what they do with that case and how they handle it. And that gets frustrating, you know. There is always that I I've had those discussions with law enforcement of all right, you know, I got people uh running around with guns in the neighborhoods shooting people. That's my number one priority, not some guy taking money from an insurance company. You've got an SIU, you guys figure it out. Don't pay them. Why don't you just and that would be the greatest thing where I would have a hard time just saying, you know, they're like, well, just deny it. But you don't understand. We can't just say no, we're not gonna pay you because we have regulations and laws and all that that we have to comply with. So when you say don't pay it, yeah.

SPEAKER_00 1:44:11

But we're paying these district attorneys and the CDI to handle these fraud cases. And I what what ticks me off is that I talk to a lot of them and they're like, continuity is our problem. What do you mean continuity is your problem? Well, because we rotate, you know, we're we're in for two years and then we're out three years or out. But also at the same time, these cases take us three to four years, you know, to adjudicate or to prosecute that that sort of thing. And I'm like, well, that doesn't make any sense. You know, you can't rotate out every two years and have a three or four year case and work that properly. It just doesn't happen.

SPEAKER_02 1:44:44

Yeah. And I think, you know, what I think what happened, what I've seen here in my experience with California was while they have that with CDI and they have a grant program, they also put a lot of onus back on the insurance companies. Hey, if you prove fraud, file a key TAM. You get to file a key TAM, you get to win. We'll just come in and, you know, mop up after you've, you know, collected whatever or shut them down or done whatever.

SPEAKER_00 1:45:08

But now I've heard of so many key TAMs being filed, and then the California Department of Insurance will come in and then they'll they'll pull that case aside and they'll say, We want to take a look at this. So you can't file that key TAM because they freeze it.

SPEAKER_02 1:45:19

Yeah, I haven't experienced that yet, but I I I have heard of people saying that, yeah, we had a great case, but we couldn't do anything with it.

SPEAKER_00 1:45:26

And then all of a sudden there's this funny story of them saying, Oh, the statute ran out.

SPEAKER_02 1:45:31

Yeah. Then there's that, you know, because now you have to worry about the timing of, you know, when you file, when you put somebody on notice, what your statute of limitations are, what evidence you can bring in, what evidence you can't, when you can't use that evidence. It's crazy. And that's why, you know, sometimes from a carrier point of view, do what you got to do for regulatory purposes, but always remember that, you know, our our concerns may not always align with the state's concerns as far as doing something, unless it's patient safety issue. There, there should be no question whatsoever. If you've got doctors that are doing something that they shouldn't be doing, then the state better move on that and move on that fast.

SPEAKER_00 1:46:15

Yeah, absolutely. Um, what I'd like to move on to next is something that I call criminology and victimology of fraud significate schemes. And I know you've worked a lot of fraud significates, organized crimes, that sort of thing. So can you talk about what you've seen in terms of the types of claimants that get preyed upon and they get roped into the fraud significate scheme? So if you would comment on kind of what you've seen, because then we like to send that message out to the consumer of, hey, you know, look out, you know, look out for this. If if you're this type, look out for this because you're being preyed upon. And then on the flip side, on the actors involved, the fraudsters in the fraud syndicate schemes, you've talked to a lot of them. Can you tell me about their character traits, what you have found them to be like?

SPEAKER_02 1:47:06

Yeah, so you know, when it comes to fraud, you kind of always expect that it's, you know, it's across the board. Rich people are gonna prey on the poor people. You know, and it's it's it's the poor people that are committing the fraud, not the, you know, not the middle class or the rich people. It's the poor people. And I find it's it's across the spectrum, all right? It's everybody, you know, whether we're talking individual claim fraud at the claimant level or the insured level, all the way up to provider fraud. What I have noticed on the organized fraud schemes, now we're talking stag accidents, we're talking slip and fall, staged accidents, all of that stuff. When it's organized and it's targeted towards a volume of claimants, all right, and this is important. A law firm or a doctor in a practice that relies on making money off of accident victims or claimants, they are only going to be able to stay in business if they have a steady stream of income, a steady stream of patience, a steady stream of widgets. All right. And how do you get a steady stream of widgets coming in your door? You got to get people out there to direct people in, you know. Is it a billboard? Is it, you know, a radio commercial? Is it some guy down the street who decides that he's gonna go and get a scanner and listen to every call? Or now on your phone, an app. You don't even need, oh my God, I did bait myself with a scanner. So now you got, you know, you got first responder apps and all kinds of apps that'll tell you where accidents happen, right? We all joke about the the ambulance chasers, but that's still what goes on with these runners and cappers.

SPEAKER_00 1:48:54

You know, they're using AI bots now too, right? And AI bots.

SPEAKER_02 1:48:58

So now, yeah, and I'm getting involved in that kind of investigation where it's telehealth fraud driven, where they're getting information about people and they're calling people up, getting them to sign their rights over, and then they're getting a doctor on the phone for five minutes who then tells them we're gonna send you these drugs and this equipment, and have a nice day. And then the insurance company gets billed for that.

SPEAKER_00 1:49:23

And if you're a criminal investigator or prosecutor, who do you charge?

SPEAKER_02 1:49:26

Yeah, yeah, exactly. So, so what I have seen is that in order to get a volume of patients coming in your door if you're a medical practitioner or coming in your firm if you're a legal practitioner, is you need people out there getting people into your door on a regular basis. And that's where we get into the capper and runner situation. And every just about every state pretty much now has a law against it, but it still happens. All right. And it's and and and you have to ask yourself, you know. I've seen where a company in California will announce that they're going to have a layoff because of whatever. And next thing you know, there's 100 people that have claims coming out of that facility. All right. Did they all get into a work-related accident all at the same time once they found out that the company might be having layoffs? That's always crazy. Or you just get a regular plant and one person has an accident and they go and they get a great settlement and they tell other people, and then those people are told, hey, if you send anybody over to us, we'll get you money too. We'll get you this, we'll get you that. And so, you know, the the drive of getting more patients in is what drives and and where do you see this? You don't see this in banks, you don't see this in insurance companies, you don't see it in white-collar, you know, businesses. Agriculture in yeah, in in agriculture. You see this in areas where people are going to be more susceptible to um being persuaded for money and being persuaded by other people to do things that they might not normally do. And being told it's not going to cost you anything, somebody else will pay for it, and don't worry, you won't get in trouble for it.

SPEAKER_00 1:51:21

But we're we're where's the fault with the WCAB and the WCAJs where they don't understand that there's really something wrong, and this is what we see a lot in California War comp is when, like, let's say what our farms or our restaurants or our grocery stores, and it's usually Latinos, right? It's it's let it's Latino driven, it's it's Latino markets. Um, why don't the WCAJs understand? And I'm talking about the workers' compensation adjudication judges, they don't see that there's a big problem here. There's fraud in this to where a farm lays off 15 people, and 15 people file CT claims against the company. You know, one applicant attorney handling all these injured workers has 15 CT claims, all the same injuries. That's been a big problem for years.

SPEAKER_02 1:52:10

It is, it is. And you know, so it's I saw it firsthand in New Jersey, in northern New Jersey. There was a town, Patterson, New Jersey, and all the surrounding cities around Patterson where no fault was the driver. So what you had to do is you had to get people into car accidents so that they could then put in claims for injuries and then make money off of their bodily injury claims. And so what happened was you had runners and cappers and people organizing these staged accidents going into the poorer communities, the Hispanic communities, because it's easy to prey upon the Hispanic patient, Hispanic claimant. You've got a language barrier, you've got a socioeconomic factor, you've got white coat syndrome. So you send that person to a doctor, a doctor's gonna tell them you need this, this, this, this, and this. They're gonna do it. They're gonna do it because they've been taught never question a doctor. A doctor is a brilliant person who went to medical school and they know everything. And so, yeah, it used to drive me crazy when you saw that these individuals were being preyed upon by their own people, yeah, driving them into this whole network of fraud rings and staged accidents. I mean, there are um recorded incidents of people dying as a result of staged accidents in New Jersey. And I think even out here in California, where they would intentionally hit a truck and the truck would run them over and kill them. I remember there was a case in New Jersey where a woman was sitting in the front seat and had a baby in her lap, and she wasn't seatbelted, and they rammed into the back of another car, and boom, that kid got slammed into the dashboard and died. And that was an intentional accident, and there was no expectation that anybody was gonna have be that seriously hurt. Um, yeah, unfortunately, you know, people get taken advantage of. And there are certain communities, you know, within New Jersey, there was also a Haitian community within the Newark-Essex County area. And you would see a lot of those people in that community be taken advantage of because, again, you had a language barrier, you had people that you could easily influence and control within the medical community and the legal community.

SPEAKER_00 1:54:33

For anyone who doesn't want to believe you right now, I can tell you firsthand that I have spoken to fraudster cappers, attorneys, doctors, medical providers who have told me directly they were Latino, and this is in Southern California. They specifically targeted their own people because they understand their own people and what their own people would do and follow and how they could persuade them and coerce them. And so what you're saying is spot on, it resonates, and it's something that I've tried to tell um, like the Latino community, the Hispanic community, is that these are Hispanics targeting Hispanics. And that was ugly at first when I first introduced that the first year or two. People didn't want to know that and didn't want to hear that. And then speaking more to them, and I would ask them directly, I'd say, Why are you targeting your own people? And they'd say, Because I know my people, I know how I can coerce them, I know how I can get what I want from them, I know that they won't challenge an attorney, a doctor, they don't challenge licensed people. It's ingrained in our culture to trust um these licensed people. And I think the more and more that we do need to get that message out. And I have had you for a long time. We have talked about a lot of content. And so what I'd like to do is give you a break and then um put this episode out and then tab you again. Um, I know you're very busy and I I really appreciate your time, but you're so vital for what needs to be said out there. Your your candor, your your expertise, your knowledge, everything. We have to get you out to the consumers out there, the businesses that you I have so many, so much more that I want to cover with you. So I'll end it here for now. We'll we'll we'll do a pause and then I'm gonna catch you on the the next episode. Definitely, definitely.

SPEAKER_02 1:56:26

Because one of the things I didn't cover that I want to is that, you know, when we talk about networking, you've got to take advantage of people like me. I'm not going to be much longer in this industry, but all of this stuff that I've gathered in my head, I want to be able to impart on, you know, some of the newer investigators out there. And I've tried to coach people, I have coached people and I've successfully coached people because, you know, not everything you can find in a textbook, a lot of things you learn through tribal knowledge, which we didn't really get a chance to talk about, and and experience. And so that's stuff that that that really needs to happen more. AI only learns when people input that information in. Well, it's the same thing when we interact with other people, we learn from other people from what they've experienced and what they've learned. And that has to still happen on the human level as much as the AI level.

SPEAKER_00 1:57:25

Your expertise is incredibly valuable, not only to the new SAU investigator coming in, all insurance carriers, e-suites, need to listen to what you have to say. Secutors, school investigators, they need to hear your content. Um, because the fraud is rising every year. It's going out of control. But we need to hear from the best. I really appreciate it.

SPEAKER_02 1:57:46

And I think what you're trying to bring to this group of people that find this and and want to listen to this, they're going to learn really, really important stuff that is going to make a difference. And and it might not be this episode, it might be another episode. It might be you talking to, you know, somebody else, a bad guy that decides he wants to tell his story. Or, you know, an applicant attorney that says, Hey, I'm tired of the fraud too, because, like you said, I have to compete with the bad guys, and I'm a good guy, and I like to go to sleep at night with a good conscience. So, you know, stick it out, listen to it. You might pick up one or two good pieces of information, but follow it through. There's some great people, some great characters, and who knows, you might have fun listening to some of the stories. I didn't even get into half of the war stories that we could talk about that you and I have laughed about many times. And maybe we just make an episode of, you know, hey, let's tell some funny SIU stories because I've got a few of them too.

SPEAKER_00 1:58:52

Rich, I can't thank you enough for being on this podcast. We are going to do many, many, many episodes.

SPEAKER_02 1:58:58

Yes, this is Rich Duffy. So, all you kids out there that grew up on Minecraft, now you got to switch gears and start doing fraud craft because it's all about fraud craft and criminology and victimology and all these fun things. Keep listening to Fraudcraft because this is an awesome podcast by an awesome, awesome moderator. Tina is unbelievable. When I first met her, I just instantly gravitated to her and knew this is my kind of person in this industry. We just kind of find each other. And once you make that connection, that connection stays. So stick around. There's going to be a lot of great stuff coming out of this podcast, and I'll be back to either help bring some more to it or to listen, or maybe you'll even have me on with other people, and we can all have a lot of fun talking about Fraudy on fraud craft.

SPEAKER_00 1:59:55

Yeah, baby. Yeah, I appreciate it. Thank you very much, Rich. And we'll catch you on the next episode. I'll be there. What a great guest. What great information that was just imparted. This is why I love doing this podcast. We have great people. This is this is why I created this podcast is to highlight the great subject matter experts that we have in this space. This podcast is for you, for the consumer, for the special investigator in the insurance industry, for the criminal investigator and the prosecutor in law enforcement trying to figure out the weird language and what to do with insurance fraud crimes. It's complicated. I want to thank you so much for watching us, for supporting us. I can tell you this we need your support. If you don't mind subscribing, it's free. By subscribing, you'll see all the new videos coming on. I have a lot of subject matter experts coming on. We have really great stuff happening. This podcast is growing like crazy. I love it. And we're getting the word out there, and we're helping people, and that's what's really important. So please support us by subscribing, by hitting like on the videos, by watching the videos in their entirety. The algorithms don't like it if you don't do that. I'm learning that. Also, what's really important is that this is to build a community, right? So I want to know what you're thinking when you're watching the video. What questions that you have, what thoughts are prompted by the content? If I can't answer your question, as you can see, we have a lot of subject matter experts at hand. Stay on for the next video because I have another great guest for you. And most importantly, remember that it's cool to be kind. Money's earned from this podcast. Go to really great charities related to animals who don't have living homes right now. So we'll see you on the next video.