California Workers' Comp Voucher Fraud Exposed: The $64M Annual Scam Nobody's Talking About

Karen Johnson - Voucher Fraud - Series Part 1

California's workers' comp system gives injured workers $11,000 to restart their careers. Fraud syndicates found out — and turned it into a $64 million-a-year scheme involving fake schools, forged signatures, and claimants who never set foot in a classroom. Karen Johnson spent a decade as the lone investigator screaming about it, and almost no one was listening.
[03:11] — What is voucher fraud? Karen breaks down the SJDB benefit, the $6K trust fund, and why so many providers are desperate to get on a claim.
[13:19] — The moment she called insurance carriers to report fraud — and they told her it wasn't their problem. Why that response is exactly why fraud explodes.
[21:27] — Karen gets pushed out of her state job for pursuing voucher cases too aggressively. Then $22M in criminal convictions proved she was right all along.
[36:33] — The schools charging $6,000 to teach someone how to turn on a computer. Dead claimants still being billed. Signatures cut off settlement docs and taped onto enrollment forms.
[44:44] — Karen's 10-year estimate puts voucher fraud at $64 million per year — a number not captured in any broader insurance fraud statistics.
Karen Johnson is the nation's foremost expert on SJDB voucher fraud in California workers' comp. She spent five years at the Bureau for Private Post-Secondary Education building cases against fraudulent counselors and schools. 27 providers charged. 56 people facing over 400 felony counts. And 50% are still operating under a new name.
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Transcript

SPEAKER_00 0:00

Hey everyone, thank you for watching Fraudcraft, the podcast on fraud significates, fraud schemes, and fraud tech in commercial insurance. As promised, brings you the top subject matter experts in California Workers' Comp. I am extremely pleased to bring you the top expert in voucher fraud, Karen Johnson. I cannot stress enough she has and is playing an extremely important role in driving down the fraud in California and one of the most obscure fraud schemes in Workers' Comp. Everyone is upside down about the rising cumulative trauma claims, the crisis in California Workers' Comp. The reason why these claims are so out of control is because cumulative trauma claims are used by fraud significates in complex fraud schemes with these tentacles that involve these micro schemes. One of them being the SJDB or AKA voucher fraud schemes that involves vouchers for schools and counselors in the California Workers' Comp system. Karen Johnson is going to break it all down for us. If you're enjoying this podcast, support us by subscribing. It's free. Sponsor us, hit like on the videos. I also want to hear from you. These episodes are for you. Comment on the videos, join a community. Hey Karen, how are you doing? Hey, good morning. Thank you so much for being on Fraudcraft, the podcast that promises to teach everyone about fraud significates, fraud schemes, fraud tech. I am I worked my butt off to get you on, didn't I? It had its challenges. Well, I want to first, you know, I like to say this. I like to tell the world why I have you on. And I am so excited because this is a total game changer in California, in California Workers Comp. We first met a few years ago at AFA, right, in Monterey, I believe. Yes. I remember this very well. I I remember very interesting people, and you are a very interesting person. And you have the best energy I've ever seen. But anyway, I remember I was in the lobby, I was checking in, and I think our mutual friend steered you over, or you somehow came over to me, and your energy precedes you. I felt you coming. You're you're very intense. You're like this tsunami in a really great way, amazing way. So you need that intense energy to do the work that we do because what we do is extremely complicated. And so you need really great energy to not only do the work that we do, but you'd be able to teach others, even explain what you do, to present what you do. Um, and you've got that in spades. The other thing that I really like about you is that you are so amazingly generous. You're gifted and you share everything you know with others all the time. And you want to make a change out there. You are extremely focused on California businesses and California injured workers. That is first and foremost with everything that you do. I've seen that for years with you. And you're a dang bulldog, man. I mean, no one is going to set you back or set you down. You're gonna break through and you're gonna win. And I really like that about you. Well, let me ask you this: how do you want to be described as far as what you do, as far as your subject matter expert? Do we want to call you voucher fraud expert, counseling school expert? How do we wrap that up in that title?

SPEAKER_01 3:10

You know, for me, my little bubble is the voucher fraud. Now, I'm obviously in the work comp industry and I I do other investigations, but my specialty for the last 10 years has been voucher fraud. I don't consider myself an expert, you know. I think I'm like the last survivor, you know, one of the last standing people when this whole thing started.

SPEAKER_00 3:30

You are the top voucher fraud expert in the nation, even though you argue with that, I know, but it's true. That's what you are, which means that you are part of a set of keys that unlocks the reason why California workers' comp fraud is so out of control the way it is now, because what people don't understand is fraud significates, the bad doctors and the bad lawyers and the bad ancillary services, they do everything that they can to get on, to be able to bill on a work comp claim. So then you've got capping and kickbacks, and it's all extremely lucrative. And a lot of times that these services actually aren't even truly performed, but you get the billing. So the reason why a lot of providers operate in the work comp space is because of all the other benefits that are allotted to them, which is the voucher fraud. Um, and Karen and I are going to talk in in-depth about voucher fraud, and we're going to convince you why you need to understand about voucher fraud and why you're paying so much money at the at the cash register at checkout and why your your work on premiums are so high. Voucher fraud is a big, big reason why. However, what I want to warn everybody and that I've experienced is that it's freaking complex. That whole system of voucher fraud and counseling schools, it's a madhouse. It's codes and regulations are few and far between. And just as yeah, I know I see you shaking your head. That's one of her that's one of her big things. Karen has been literally trying to change the landscape in California with the the codes and the in the regs. Um, and she's working really hard, but she's getting frustrated. So the other thing that I I want to talk, I want to say about you is that I knew absolutely nothing about voucher fraud and counseling school and that sort of thing. And I know a lot about provider fraud in California Work Comp. And what people need to know in the insurance business, and especially in California Work Comp, because there are so many DM providers who can jump on work comp claims, is that because of their appearance of legitimacy, there's one way to see how a provider is operating in billing on a claim. And then there's the fraud angle. And what I mean by this is that you can have a major fraudster billing on a work comp claim and everything appears legit. That's why they get paid. Because you need great experts like Kieran to be able to look at their services and their billing and go, hey, wait, that's not right. This is fraud. And it's so complicated that Karen not only needs to know what she's looking at, but to be able to explain it. And this is why I'm spending so much time and energy pulling experts like Kieran into this podcast because at the end of the day, all of us are being screwed by these shitsters. And we need to support the experts in this industry, or things will just go through the roof. Well, they already are, but things are just gonna just keep getting worse. And they are. We are the only ones standing at the door saying that these guys know you will not be doing shady acts today. So we can see the fraud that most people cannot see. To you, it will look normal, and it's all tied into why there's so much fraud and CT claims, cumulative uh trauma claims occurring in WorkCom. I'm just your I'm I'm your biggest fan. There's you, and then there's there might be a couple of others that are on your level that truly understand this. There's no one at the forefront with a megaphone screaming at everybody, saying everybody needs to look at this. This is all fraud. We need to make this stuff go away. We these bad guys need to be charged and convicted. There's no one doing that right now. So you've got the full force of fraud craft behind you. And we're gonna get started with showing everybody how they can learn and do what you do and be on the lookout. I do, I am fascinated with before you came into the work comp space because you weren't uh a prior police officer or investigator or claims examiner, and that's significant as well because it's very hard to just walk into the insurance industry and you hit the ground running when you came in and understand all the the language, the work comp language, especially in California. That's a whole nother beast. Can you walk us through a little bit about your history?

SPEAKER_01 7:31

Well, previously I spent 20 years in the cable industry. I used to investigate cable theft back in the day when black boxes were illegal. And I used to investigate those. In that industry, I got the nickname the Pitbull with lipstick because I used to seize bank accounts, garnish wages, and make people cry. So, you know, that was my younger days. I was quite an aggressive little investigator. Um, and then I later started working for the state. I worked for consumer affairs for an agency called the Bureau for Private Postsecondary Education. And that's kind of what led me and started to lead me into this whole work comp thing is injured workers being rolled in retraining programs and the amount of fraud that was involved in those. And that's kind of what led to all of this. And can you walk us through what that looked like? It's called the Bureau for Private Post-Secondary Education. It's a state licensing agency that gives private post-secondary schools uh licenses to operate. Schools can be um nursing schools, vocational schools, vet schools, puncture, you name it. If it's a private school in California charging over $2,500, they have to be approved by the state of California. And my role was an enforcement analyst, and I handled student complaints. And students would call in with concerns or complaints or issues with the schools that they were enrolled in. My first big case was an unapproved nursing program. And this what really kind of set my passion for helping the students. These young ladies were American citizens. They lived in the Bay Area. They enrolled in a nursing program that was $75,000. And as the program went on, they actually had to go to China to do their clinicals. They got back from China and they started to get very concerned on whether or not they'd be able to take their state boards. And a couple of the students had reached out to the Bureau, and that case landed on my desk, and I found out that that was an unapproved nursing program. And what the owner was gonna do is she was gonna falsify their records to make it look like they went to school in China so that they could sit for their state boards. And it was an unapproved program. The faculty was not approved, the classroom materials were not approved, nothing had been vetted. The students were gonna get ripped off for $75,000. And that really started my passion to understand how much fraud is in our in our school systems when you're having to pay for your education out of pocket.

SPEAKER_00 9:49

And of course, that owner presented herself as being an accredited program. Use that as marketing material and yeah. Now, when you were doing this type of work, did you understand that some of some of these people coming in that might have been complaining to you were work comp claimants at the time?

SPEAKER_01 10:05

That kind of came on later. So I was it was about two years into it, which I was really glad because then I had a good foothold of understanding the Bureau and the regulations and stuff. And we started getting complaints from from injured workers to say, hey, look, you know, I wanted to go to school over here, but somebody took my money. The school over here took my money, and now my voucher money's gone. And we're like, well, what is voucher money? You're right. So we had a lot of complaints, and we would reach out to the insurance companies like, hey, look, your your student or your claimant got ripped off. And um, you know, I'm trying to help them, and they're like, hey, we paid it, not our problem. There's nothing we can do. And then one day a case landed on my desk. I was like shocked. I'm like, this is the playbook of how this fraud is being perpetrated. It identified the schools, it identified how the injured workers were being ripped off, it explained what the voucher money was, why did they get the voucher money? You know, why are they even getting this education money from work comp? It doesn't make any sense. And so with that, I really started to deep dive into it. It was from an insurance investigator. I called the investigator right away and I'm like, hey, can you explain this to me? What is this? And so, yeah, that was kind of what started it. Then what happened was once I could kind of understand what was going on, I went through our department, all of our, all of our other enforcement agents, and I said, Hey, look, if you have one of these voucher complaints, I want it. I want it. So then I started collecting all the voucher complaints from the students that had come into our agency because nobody understood them. I mean, we were all, you know, we're we had a caseload of 100 cases. And if you got something that was like hours of research, we you buried it. Like you were, you're plucking off the easy stuff. So I took it on, I started creating spreadsheets and I started analyzing it and I started contacting other people. I was working working with the attorney at the Department of Industrial Relations. And then I was working with the a county prosecutor who had some schools in her area. And so she she was kind of taking it from that legal criminal standpoint. I was kind of trying to learn it about the from the private, you know, from the post-secondary standpoint. The Department of Industrial Relations was kind of coaching me and giving me some information about what the voucher was and why these workers got them. And then it just kind of went from there. And then I just started creating these cases.

SPEAKER_00 12:15

The one thing I you mentioned that I want everybody to think about for a moment is that you actually took complaints by injured workers, California WorkComp injured workers, who were coming to you and and complaining about the schools.

SPEAKER_01 12:30

It was a laundry list of complaints. Um, the money was already gone without their knowledge. They didn't know the money was gone. Um, I had students were getting computers, but they were refurbished computers because part of the voucher money is um the thousand dollars for the computer. And the school would give them like a $250 or refurbished computer. And so there was that issue. There was a it was a laundry list of complaints, you know, on how the students were being ripped off by these schools.

SPEAKER_00 12:58

Okay, and and the one thing that I want to highlight is the fact that you went to the insurance carriers and you said, Hey, by the way, your injured workers aren't getting what you paid for and they blew you off.

SPEAKER_01 13:09

Well, and and you know, I did work two and a half years as auto claims. It was a a challenging job. A claims adjuster, I have the utmost respect for any claims adjuster because that is a tough, tough job. And, you know, to the claims adjusters, like, hey, I paid the money, I did my due diligence, I really don't have time. And then they didn't say it that way, but basically it was kind of like, hey, I don't know what to tell you. You know, we we paid the money based on the invoices. Um, and and then what I was finding is that these weren't even the schools. Some of them were mailbox, etc. or postal annexes. Um, these were unen unapproved programs. They were sub-enrolling them in in different schools. So like they would take the $6,000 and then enroll the student in a in a $250 online program. They were, like I said, enrolling them in unapproved programs. So there was a laundry list of of some of the complaints that we were seeing.

SPEAKER_00 14:02

The message that I want to get across is that every time an insurance carrier says, oh, well, we already paid for it and we're moving on, that is a direct signal to the bad guys that we can keep doing this. And oh, by the way, we're gonna ramp this up now because no one is coming after us, no one is paying attention, no one is auditing us. So you just highlighted a huge problem right there of why we have so many cumulative trauma claims happening, so many, so much provider fraud happening is because the the shysters are like, no one's coming for us. You know, no one's gonna you literally told them that what they pay for they didn't get, and they were like, Well, we're gonna move on.

SPEAKER_01 14:40

And that's exactly what was happening. You know, when I reached out to a couple carriers and I provided them with some information, I gave them some tax ID numbers and I said, that's how much money you just paid to a mailbox, et cetera, you know, to a school that doesn't exist. That that's when we started making traction. And then as I started to bring people in, I started educating law enforcement, I was educating the carriers. Uh, we were speaking at AFA, trying to educate the industry. You know, then people started taking a look at it, and the schools kind of had to like revamp their their processes. You know, there were a couple schools that were were not operating with the correct approvals. And ironically, the day they got kicked off the list, they lost millions of dollars. You know, they had to go back and kind of rechange their programs, but no, I just made it more challenging for them. Did you see a like a division between work comp and non-work comp? Well, I mean, I had students that were ripped off big time by schools for a lot of a lot of things. Uh, schools that were closed due to losing their financial aid, the unapproved programs, programs that weren't properly accredited. So for the common student or the common public person who was going to a university or some type of a vocational retraining program, there was a a laundry list of of complaints. Maybe they just didn't get their diplomas or whatever. The work comp, you know, those were pretty standard, you know, in the sense that mostly it was that these injured workers didn't know that their their retraining money was gone, you know, that that it was spent and they didn't know where it went or who how it how what happened. You said you had about a hundred cases open at a at a any given time? That was our standard kind of we had anywhere from eighty to a hundred cases on when we worked for consumer fairs. That later changed. Um, you know, they went in and hired more staff. The Bureau had a long history of, you know, having to come back after sunset and stuff, and so it's a history thing. But, you know, we were ramping up, hiring more staff, and the workload was kind of leveling out. But at the time that I found this, it it was a pretty big workload.

SPEAKER_00 16:36

Did you interview owners of these of these schools?

SPEAKER_01 16:40

Oh, yeah. I um I had a lot of fun. I got to go out, you know, because part of our job was to do school inspections or site visits. So we would go out just part that was part of our duties as a whole, not just vouchers. I went out and visited with cosmetology schools, um, you know, things along that lines, acupuncture school, gathering that information, gaveling the intel. Then I could kind of come up with a game plan of knowing what I needed to go out and look for. You know, some of the fascinating situations that we would run into is that these injured workers, you know, it's a heavy Hispanic situation of they speak Spanish and they're enrolled in English programs. You know, that doesn't work. You know, that their school was not approved to teach in Spanish, but they enrolled a bunch of Hispanic injured workers. The other one was the injured workers' highest um education. To enroll in a college, you have to have either a high school diploma or have past ability to benefit, meaning that when you take those classes, you can comprehend what you're being taught. And sadly, a lot of these situations, I'll never forget one, is she only had a third grade education. And she the funny, she was enrolled in an online program, she had a third grade education, and she did not have internet service at home. These schools, well, the kind of my my slogan, I do a lot of public speak or uh speaking at conferences on voucher fraud. And my slogan is dead injured workers don't enroll in schools. And I say that because we've literally had situations where the injured workers have passed away and the schools still collected their voucher money, their retraining money.

SPEAKER_00 18:12

And it just you can't make this shit up. When you talk about enforcement action, what could you do? What happened to these shady school owners?

SPEAKER_01 18:20

Well, what would happen is we would go out and do our inspections. If we had findings, we would write up, you know, what our findings were and the schools would have the opportunity to correct it. If the findings were so egregious, the Bureau could take action to try to close the school and push for closure. Eventually, I was training law enforcement. I was working a lot with district attorney investigators, department of insurance investigators, and I was kind of explaining what the voucher fraud was because you gotta at this time nobody really knew what it was in 2016. It was like, we don't know what this is. So once we started doing that and started laying this out, and and people, you know, we had people that were starting to specialize in it, you know, with the different agencies, then they could start taking criminal action. So criminal action was separate, insurance company did their investigations, and then the state did their own investigations. So we all kind of had to stay in our own lanes, you know. I stayed in my lane, they stayed in theirs, you know, and so on. And then, you know, at some point after I left the bureau, that's when the the cards started to fall. That's when the dominoes of all the criminal cases really started to fall into place.

SPEAKER_00 19:29

Yeah. And then um walking through your professional history, how long were you with BPPE? I was there five years. Then what happened? That you you hit, you know, your five-year mark and suddenly you're no longer with BPPE. So did you uh did you decide to do a career change and why?

SPEAKER_01 19:44

So what happened as the voucher school stuff was starting to ramp up, the oh, how do I want to say it, the temperature of voucher fraud was rising. And the Bureau was telling me that these cases were too big for us, that it wasn't my job to investigate these cases, that this the should Department of Insurance should have handled these, not the Bureau. And I was told to close my cases down, and I said I refused to because, you know, we were giving these schools the license to operate. And so I became quite challenging. I was challenging the directive I was given, and then I started getting denied promotions. Um, I was starting being written up for behavioral issues, and I'm like, okay, this isn't a good ride for us. And so that's when I had the opportunity to come to work for, you know, an insurance company. And, you know, in hindsight, everything happens for a reason. I am absolutely ecstatic where I work now. I love my job. But secondly, because I did leave the bureau in such a way that it made them take a look at what was going on, is there was a lot of changes at the bureau. And they were kind of forced to recognize that voucher fraud was legitimate. And especially it happened when the criminal cases all started falling into place, right? So Ryan and Sutec, that was a $22 million case. And then the Bureau had to take a hard look at, you know, all these voucher cases because they really weren't going to go away. And now the criminal cases were happening and there were press releases. Some of these schools were $22 million. And you got a press release, you know, private post-secondary school busted for fraud and $22 million. The state starts looking back at the Bureau and going, What'd you do? You know, we chased off the investigator that was handling it.

SPEAKER_00 21:19

Exactly. And why they saw them rising is because they, these shady owners were receiving the notices that nothing was being done against them. So that's why. That this is why I've been standing on this mountain screaming to everybody. It's like, as long as in California, the BPEs of the world, the CDI, the district attorneys, even the insurance carriers on the private sector, too, you keep looking the other way when someone calls you and says, Hey, by the way, this organization is committing fraud. Oh, well, you know what, we're just going to move on. This is why we're seeing all these problems. So I I'd like to ask you about the I like getting into the real housewives of it all. I'd like to get your opinion, your Assessment, your observations on what these shitty owners are like. Like, what's the personality when you're dealing with them? Because you're out there, you're on the street. I love talking to investigators who hit the streets. Uh, you know the temperature, the colors, you're able to describe everything, you're interacting with these people, you're seeing the schools. If you could talk about these schools, what it looks like, what students are going to, what's the personality makeup of the owners. Can you talk about all that?

SPEAKER_01 22:29

They always portrayed portrayed themselves as like all about the workers, all about those students. We're here to help them. We're here to do our our, you know, kumbaya with the injured workers, and we're here to give them an education. And and they always play themselves off as like these do-gooders. Um, but then they also kind of come off pretty arrogant, you know, like they're like, I'm I'm doing everything right. I I've got state approval and I can do this and stuff. And I'm like, okay, you know, now let's start following the rules. So it it was a mixed bag. You still interact with with them? Very little. It's kind of funny, is because I do have, you know, like you said, I have a big presence. Um and when I came to work for my new employer, and even before then, is that a lot of these schools do not bill my insurance company. So a lot of these schools don't bill us, so I don't have the opportunity to challenge them on their their invoicing because they know that I'm not going to pay them. And they know who Karen Johnson is, and they know that, you know, I'm not getting by me.

SPEAKER_00 23:26

Karen, this world is so complicated that to do justice for our audience, I'd like to start from the beginning and let's talk about all the alphabet soup, like you say it is the SJDB, the voucher, what is a counseling school, that sort of thing. Can you walk us through that?

SPEAKER_01 23:43

So, what happens when an injured worker, when a worker gets hurt on the job, right, through work comp, he's had an injury, he and he is unable to go back to his previous employment for whatever reason. Maybe he's got a leg injury now and he can't, you know, do whatever he was doing. He gets a retraining voucher, and that retraining voucher value is $6,000. When he gets that $6,000, he's also going to get $5,000 from the state of California. Department of Industrial Relations also issues return to work funds of $5,000. So in total, these re-educational benefits are a total of $11,000 that are given to the injured worker. Now, the $5,000 from the state, no questions asked. The state just writes a check, they get a go on their merry way. When it comes to the $6,000 from the insurance companies, there's some guidelines there on what that money can be spent for. So, in part, the injured worker can get $500 for miscellaneous costs. He doesn't have to provide any receipts or anything, he just gets $5,000. He can get up to $1,000 for a computer. So if the injured worker opts to or wants to go out and buy a computer, he can spend up to $1,000. And that $1,000 comes out of that $6,000 trust fund. There's also a counselor, and that is a vocational return to work counselor. Those are approved by the Department of Industrial Relations. And the counselor is supposed to help the injured worker with, you know, what are their limitations, what type of a new career do they want, what type of an educational program they should be looking for, and when they should be enrolling in the school. So that is a counselor designed in the program to help them. And that counselor can bill up to $600 for that benefit. So again, that comes out of that $6,000 trust fund. And then whatever's left over, the injured worker can use for a training program. So, you know, if he's done the counselor, he did the $500, he done he's done the thousand dollars, and that leaves him $3,900 to use for educational services. And that's where these schools start getting involved. So you've got the counselors involved, and then you've got the schools involved. And everybody wants their piece of the pie.

SPEAKER_00 25:52

Okay.

SPEAKER_01 25:52

So what makes these cases so complicated is all the regulatory agencies that are involved in this. So the situation is that the Department of Industrial Relations mandates that the insurance company provide the voucher. So that's one. Part of the regulation states that the program that the student enroll in must be on the eligible training provider list, which is part of EDD. So EDD maintains this list called the ETPL or Eligible Training Provider list, and that's the list that the students can choose from to go to school. But then you also have the Bureau for Private Post-Secondary Education, which is BPPE, and that is the agency that gives the schools the license to operate. So now you've got the BPP involved, BPPE involved. If you're going to have an investigation, then you're going to have the Department of Insurance involved. So you're going to have the Department of Insurance investigators or the county investigator handle the criminal side of those investigations. So you've got so many agencies involved in all of this that it becomes very confusing and very complicated. It's confusing for the injured workers. Like, what is the ETPL? Where do I find it? Right? How do I get my money? Who is this counselor? Why was this counselor? Why did they get $600 of my money? I don't know who this person is. You know, and then that then that we would start to see the situation of, you know, the school took the money. Because what happens when an insurance company sends out that voucher? It is mailed directly to the injured worker, but a carbon copy is given to that applicant attorney. So the injured worker's attorney gets a copy of that $6,000 voucher. Those attorneys network with the counselors and they will hand off that voucher form to their preferred counselor who's supposed to help the injured worker, but then the counselor has this valuable $6,000 valuable piece of paper in their hands. And if they don't have, you know, scruples, then they just forge some signatures and submit the billing.

SPEAKER_00 27:55

And one thing we might want to talk about for the special investigators out there is that a lot of times what you see is that these schools will get the signature that is retained on the compromise in release documents, right? The settlement documents. They get that signature and then they just copy and paste it on the attendance.

SPEAKER_01 28:14

Well, one of the craziest cases I had when I was working for the Bureau, an investigator had gone out to a school to kind of interview them about the all the voucher money that they were collecting. And while in plain sight, I had taken a picture of a desk, and on that desk was the injured workers' enrollment agreement for the school, and their signatures were literally cut off of the settlement agreement and taped onto the enrollment agreement. Like you could see the strips of paper with the signatures in this photograph. You have the photograph of the enrollment agreement, and these strips of paper where the school owner was sitting there taping them onto. You can't make this stuff up.

SPEAKER_00 28:55

I've heard that applicant attorneys in their offices they'll dangle these benefits in front of the injured worker. They'll say, Hey, you can get $6,000 for school and you can get $5,000 from the state if you just go ahead and sign off on your claim now. Like we don't want to go to a deposition, we don't want to go to trial. We want you, injured worker, to not make us do anything more for you. We will get you this money and you just sign off, and then we don't have to do anything more.

SPEAKER_01 29:21

Applicant attorneys will approach the insurance companies and say, we want to settle this claim and we want to demand a voucher. So applicant attorneys will demand it. Even if the injured worker is not entitled to it, they try to use it as a negotiation tool to try to resolve these claims. And so they'll demand these five, these six thousand dollar vouchers because they're you know, because it's not just the six thousand dollars, the five thousand dollars is also tied to it, also. So it's a way for them to get their their client an extra, you know, eleven thousand dollars. So it's a lot often used as a negotiating tool.

SPEAKER_00 29:56

And what is SJDB?

SPEAKER_01 29:58

It's the supplemental job displacement benefit. So that is basically the program, the SJDB or supplemental job displacement benefit program that makes it so that injured workers who are injured on the job who can't go back to their job get new training. You know, like a great example is somebody hurt their back, you're right. They're they have a significant back injury, they're not gonna be out there being a truck driver anymore. They're not gonna be out there to be able to do physical labor like they used to, and maybe they need to learn a new career. And at that point, maybe they want to do, you know, I had I had one gentleman I was helping, he wanted to be a locksmith. You know, he wanted to be self-employed, he wanted to do a locksmith. And I said, Great, that's I think that's a very, you know, good program for somebody to try to get into. So I helped him get into a locksmithing program. It's an opportunity for them to get that retraining. And that's what's real important that these monies be available, but the monies not be ripped off.

SPEAKER_00 30:51

Okay, Karen. So what you had just commented earlier when we were offline is you said something that helped clear things up for me, which I am still seeking after all the time I've looked at this, is that SJDB is AKA for a voucher.

SPEAKER_01 31:05

It's the short term or the slang term for the SJDB benefit program.

SPEAKER_00 31:10

You call it the voucher. Okay, because a lot of times you'll just see SJDB or you'll see voucher or you'll see counseling schools. So you've got SJDB is the program, AKA voucher. Like you had said, also, think of voucher as the trust fund. Correct. Okay. And then in this program, you've got the counseling schools and you've got the counselors. What qualifies the counselors to be counselors?

SPEAKER_01 31:32

You'd have to go back and look at DIR. Department of Industrial Relations regulates that. They have to submit an application, they have to have a certain amount of qualifications to be eligible to be on their list. And that is all done by the Department of Industrial Relations.

SPEAKER_00 31:45

Okay, and then at some point they prove that they they qualify. Department of Industrial Relations says, okay, go be a counselor, and now you can bill insurance carriers, right? Because counselors bill insurance carriers direct um for their work, right? For that $600? Correct. Yes. Okay. So you're telling me that the claimant gets or the applicant gets $6,000, but part of that is supposed to go for a counselor, but you're telling me that the counselors bill directly to the insurance carrier. So how do you know if you're an accountant, how do you know how that all works out financially? Because how do you how do you know if the counselor is getting that $600 from the $6,000 or oh, and they'd bill the insurance carrier.

SPEAKER_01 32:28

Yeah, so what happens is the counselors in the schools are paid for by the insurance company. So the injured worker gets the voucher forms. So once he's eligible for the voucher to say, hey, look, we understand. Here's the instructions, here's your voucher forms. It's a packet of about six documents that has to be signed and dated by the injured worker. So there's a page there that says, Hey, this is the counselor I use. So they use Joe Blow Counseling Services. The counselor's name is on there. The injured worker signs the paperwork, he signs it, and then that send it to the insurance company, and the insurance company writes the check to the counselor. So the injured worker doesn't get the funds directly. They have to be paid through the insurance company. So, and the same thing happens with the school. So, you know, then you go to the school page and the injured worker says, I'm going to go to 13123 Technical College, and then they sign the paperwork. With my company, we um we request the enrollment agreement because we want to see those that are signed by all parties. And then at that point, we write the check to the to the school. Can the can the counselors own the schools and get paid for both?

SPEAKER_00 33:36

Mm-hmm.

SPEAKER_01 33:36

It has happened.

SPEAKER_00 33:37

Okay, it's interesting.

SPEAKER_01 33:38

Generally in those situations, what happens is the counsel the school owner just takes the all the money. He just takes the $4,500. So then they just bill us the $4,500 and then it on the paperwork. Because using a counselor is optional. The injured worker doesn't have to use a counselor. So at that point, the the school is kind of bundling and just taking all the funds.

SPEAKER_00 33:56

I don't understand. I know what school I want to go to. If I if I can't continue my whatever I'm doing right now, I have an idea of where I want to go and what school I want to go to. Why the heck do I need a counselor?

SPEAKER_01 34:07

Most of the time these injured workers don't fully understand their options. You know, they don't understand their benefit in a way. And a lot of times because these people didn't go to college in the first place, and a lot of them haven't even finished high school. These are mostly Hispanic laborers that are frauded in this arena. And that's what makes this very frustrating is them preying on these people's vulnerability of these injured workers. And it's the injured workers that could really benefit from this, right? They could benefit from taking English as a second language. They could benefit from taking some Microsoft Office programs or some computer programs. What's frustrating is when I see schools that are charging $6,000 to enroll a student on how to turn on a computer and use Microsoft Office. That's a $6,000 program.

SPEAKER_00 34:54

Yeah, I guess the problem I have with it with it is why is it all our problem that someone doesn't take the time to understand their own benefits? They can't go to the Department of Insurance page and say, okay, these are my benefits, you know. Why is that our problem, your taxpayer problem or California business problem to pay for helping someone educate what school they can go to or what their benefits are to them?

SPEAKER_01 35:17

And and I think that's why the there's plugged in this opportunity to have a counselor. So that you know, if a counselor is doing the right thing, you know, and they are supposed to help these injured workers, then there's a true value in that program. Unfortunately, due to loopholes, people are taken advantage of all the time. And, you know, quite honestly, most of these injured workers probably don't even want to go back to school. So that was that I think that's why the fraud was so easy in the beginning. These injured workers didn't even know they had the benefit. And these counselors would get their hands on it or the school would get their hands on that voucher form from the applicant attorney and they would just bill for the full $6,000. I mean, these schools were doing five to ten million dollars a year. And they don't enroll Joe Blow off the street. These schools are specifically designed and open strictly for injured workers. Nobody walking in off the street is enrolling in these programs. And that's what I saw when I was working for the Bureau, right? Is I'd go out, I would do the inspections, and every single enrollment agreement was tied to a voucher.

SPEAKER_00 36:16

I feel like the state added this weird extra step onto these benefits that didn't need to be done because this injured worker, in order to get these benefits, the voucher benefits of going to a counseling school, which I can't believe we actually paid for this anyway, but anyway, they're they're they're they're settling their workers' compensation claim. And that's what I think a lot of people haven't figured out yet, still, is that this applicant is basically stating, I I'm not returning back to back to work. I'm too injured to return to work. I I sued my employer, sued the insurance carrier. I'm getting all this money, and most of that usually is a you know $25,000, $30,000. And then, oh, by the way, you have to now pay me more money to go back to school. I'm gonna get more money from the insurance carrier, money from the state to find a school that I probably don't even really want to go to, and I probably won't even go to that career field. I bet you have some thoughts on what a remedy would be to this to no longer do vouchers.

SPEAKER_01 37:14

It you know, it's a fascinating scenario where I'm at right now. It's fraud. It's fraud. Well, it is, but it isn't because uh well 99% of it is fraud. But I will say that I there are occasions. Like I was helping one injured worker, you know, she was enrolled in a medical uh billing program. And she said, because we I she was gonna get ripped off. Um, I made sure that she wasn't ripped off. You know, it was a $2,900 program. They tried to take all of her money. I said, no, we're not gonna pay the school more money than the program was worth. I helped this injured worker. I talked to her, she said, this is what I want to do. I want to go to this school. I'm like, great, we'll pay for it. But then she found out there was money left over and she could take a certified nursing assistant program. You know, so she's gonna go back to school, she's gonna get her medical billing, but then she's also, now that the money's left over, she's gonna go back and get, you know, a continued education. So it doesn't happen very often, but there are injured workers out there who legitimate, and and I had one, oh, it's so frustrating. You know, I'm talking to this middle-aged professional woman. She's in the healthcare industry, she's got an education, she's smart, she's articulate, and she goes, Hey, I wanted to go back to school for something. I don't remember what it was. The counselor told her, oh no, you can't use this for a real school, you have to use it for a vocational school. And by the way, these are your options, which by the way, her husband owned that school. So she's the counselor, her husband owns the school, and they're directing her to take a babysitting class. I kid you not. So is there a ton of fraud? Yes. Did this injured worker want to utilize the money? Yes. Am I frustrated when I have an injured worker who is homeless? He called me up. This is what happened. He calls me up, he gets enrolled in a vocational school. Ends up, it is not a good school. They're telling him to take YouTube videos. I see this all the time. Your program is a YouTube video. Watch this channel. And so he calls me up and says, Karen, this is a ripoff. They stole my money. I'm like, great, let me get your money back. So I fight, I get the money back, it goes back into his trust fund. Six months later, he calls me up and goes, Karen, I'm living in my car. Can you just write me a check? Can I just have my money? And I said, with the way the program's written, I don't have the authority to just write the check to you. It's very, very frustrating for me to have to watch these checks get written out to bad providers, you know, when I know that he could benefit. Another one that sits with me is a 65-year-old Hispanic male that's a mechanic that got enrolled in a nursing program. Now, I'm sorry, but a 65-year-old Hispanic male that doesn't speak English being enrolled in an English teaching medical assistant program, that's that's not a good combination. I I'm I I'm not being I'm not being dishearted about this. I know this is very passionate to me. However, I bet you that 65-year-old Hispanic male would like to send his daughter to college to get a family education. Let her get that education. You know, the program is not written in a way that we could just write the check to the injured worker to let them go do their thing. I had another one. The injured worker was being ripped off by a public school. I went out, I met with the injured worker. I'm like, hey, did you sign all this? And he's like, no, I don't know what that is. And I'm like, okay, well, this is all bad, but you still have your money available. And he goes, but I don't know what to do. And I I live in a very small rural area, very agriculture area. And I said, you know what? I do some nonprofit work and education is part of that. And I said, you know, let's put you in touch with your county department of education, your office of education, and and let's see if there's some courses here in the area that maybe would benefit you and some classes that you want to take in your area. There's no reason why a gentleman in Northern California is being enrolled in a school down in LA. That doesn't make any sense. I think one of the most heartbreaking stories I had was a young man that was rolled in a California university system. He's like 23, 25 years old. He's super excited. He says, I'm enrolled in a California university system for this mechanical type class. He's ecstatic. He starts enrolling and he starts taking these classes and he has some challenges and he contacts the instructor and says, I need help. Well, the instructor tells him he's either gonna have to hire his own tutor or he's gonna have to watch YouTube videos. Well, this young man finds this appalling. And so he contacts us because we paid out the voucher to this state university and finds out that he's actually sub-enrolled in another program that this university is utilizing. Worse than that, that company sub-enrolled him out again. So he's actually sub-sub-enrolled in a program out in Iowa. And he said, Karen, I thought I was going to a state university. I was so excited that I was gonna go to a public university. And I find out that I'm going to some online hokey pokey school out of Iowa. No, that's not what I signed up for. That's not what my enrollment agreement was. And when I pull up his paperwork, that's not the enrollment agreement that we got. We got it uh an enrollment agreement from a state university. All fraud. This poor young man, he was so upset, so frustrated, I had to fight tooth and nail to get his money back for him from the counselor and the school because I was really frustrated with them. And I'm like, you all ripped him off. We want the money back. And then I he enrolled actually, he's up here in Northern California. He enrolled in his community college. Those are the kind of stories that I deal with that I hear time and time again that just frustrates the dickens out of me.

SPEAKER_00 42:35

Well, for one thing, thank you so much for being that person who cares and actually help these people. Uh, I know you don't hear thank you enough for doing those things um because this is a you know a crazy world. A lot of people don't get their recognition. So why can't we just add because all of this is attached to a compromise and release settlement from a workcom claim, right? So why can't we just add $5,000 onto everybody's CNR compromise and release and do away with all this SJDB, ABC, DEF stuff?

SPEAKER_01 43:09

You know, that's above my pay scale. That is at the political state arena. That's a D Department of Industrial Relations needs to make that call. Our politicians need to make that call. At this point, the regulations say this is what I have to do. And it pains me to see us paying out millions of dollars, literally millions of dollars, to these schools. I probably see 12 legitimate enrollments a year that I can say that I could put my finger on and go, this is legitimate.

SPEAKER_00 43:36

The rest of it are those by accident.

SPEAKER_01 43:38

Historically, based on my experience of doing this for 10 years, it's estimated. My estimate is that voucher fraud is roughly $64 million a year. That's how much money is getting paid out to fraud. Second to that, and not incorporated into this estimate, is that roughly 75% of these injured workers do not start or complete the programs. Now, That information for me comes from my experience with the Bureau as well as my information of working where I'm at now and asking for proof of attendance. So if 75% of these students don't start the program or don't complete the program that we had to pay for up front, there is no regulation saying that the school must provide the refunds. And that 64 or 64 million dollars that I talk about is potential fraud. This number is not part of that.

SPEAKER_00 44:27

I know. That's that's what I want to ding ding ding ding ding ding ding mention this because I've had subject matter experts come on here and we're talking about how $300 billion a year fraud that we're getting hit with, right? And this isn't part of that calculation. $64 million a year is a standalone calculation that is not incorporated in any others because no one freaking understands it. No one's enforcing it. These fraudsters are getting away with this, and we taxpayers are paying this money. It's coming out of our pocket.

SPEAKER_01 44:58

You know, I'm I'm very fortunate where we are today. So we are 10 years down the road from when this whole thing started. And I'm really, really blessed and lucky and thankful that, you know, we've had some good law enforcement cases. I mean, the district attorney's offices that are prosecuting these cases, starting with the investigator, whether it be Department of Insurance or the District Attorney investigator, you know, kudos to those investigators that really dug in with me and really had to peel this onion and get these cases charged. You know, that is, I think, one of the things that I got to say that I'm very lucky in that we've been able to get a lot of these schools charged. And then, you know, also to the Bureau, kudos to them. After I left, there's a change of regime. Um, they have some new, they have a new enforcement chief and the Bureau for Private Postsecondary. You know, they're taking some serious actions and they've closed several schools involved in this voucher fraud. Now, that being said, 50% of the people that have been charged with voucher fraud are still operating under a new um mask. Um, so they are still claiming voucher money. So what's happened so far is 27 providers have been charged, 56 people, which works out to be 56 people charged with voucher frauds, is some of over 400 felonies of felony charges involving voucher fraud. You know, it it's it's a long road, it's not an easy road, it's a very bumpy road, but there are some really good people involved in this who are doing great work, you know, in the industry to try to make yeah, yeah. I just need we need more carriers to get involved. We need more carriers to do their due diligence. These providers know not to bill me. No, they don't bill my company, but they'll bill the other company because they know they'll get paid. Yeah.

SPEAKER_00 46:47

You know, regime change, things are things are starting to change. One of the problems I have is that there's not enough announcement media releases to let everybody know, hey, these providers have been charged. It's like all across the board with all the other different fraud in California WorkComp. That needs to change too. They need to really get the the media release out there because I know you've been going around telling everybody, hey, these people have been charged, but you can only do so much. So CDI really has to step up and and start doing more of those announcements or the DA's office. So, Karen, does all this stuff just involve private schools?

SPEAKER_01 47:20

Unfortunately, no. What happened was around 2017, an insurance company had given me some statistics about their payment um logs of how much money they'd paid out on vouchers. And in there, I found a massive red flag regarding the university system. And what that was is that like in 2015, this insurance company had paid like $10,000 and then they paid $50,000 the next year, but then by the next year, they were paying out $250,000, and then the next year they were paying out, you know, $500,000. And that was one insurance company to one California State University. When I saw that, I realized what happened was that this voucher fraud had infiltrated our public school system. I don't say that lightly. And what it is is that the students and the injured workers are not actually enrolled in the public institutions. They are enrolled in subcontracted educational programs. Not that all of them are bad, but in our arena, when it comes to this insurance and this these workers, this is not a valuable program for them in most cases. So what happens is the student thinks he's enrolled in a public university or a public community college. They are sub-enrolled into an online program. Now, the problem with these online programs is these companies have a library of up to 100 different programs that these people can enroll in. And some of them are pretty serious programs. I see a lot of times that they're being enrolled in auto repair, vet tech, HVAC programs, electrical technician programs, but these programs are not accredited or not reviewed by an accrediting agency. So for most people who don't know, is that an accrediting agency or a state oversight agency, their responsibility is to go in and inspect these programs to make sure they're legitimate. And what I mean by that is like who's revealing, who's reviewing the faculty? Who's teaching these classes? What are their qualifications? What type of equipment? These are online programs, you know, what is the what are they being taught? You know, are they online with seeing old outdated equipment? How can you take an electrician program online? How can you take an HVAC program online that doesn't compute up to a legitimate program? Where it becomes a major issue is that that school issues a diploma or a certificate with their letter head on it, that public university. So this student was taught out the back door, and their diploma says, I went to the university of whatever, California State University, right? They take that certificate, they go to the potential employer who goes, Wow, you took an HVAC program from this California State University. You must have some really good skills, and I want to hire you. And that employer has no idea that that program was all online, and this person doesn't know the difference between a standard and a Phillips screwdriver. This is real.

unknown 50:25

Yeah.

SPEAKER_01 50:25

Right? So my concern, and like I said, there are some legitimacy to these programs. I get it. However, in the arena that we're talking about, in work comp, you know, again, it kind of gets back to the ability to benefit. I went to I visited one school, it's a public institution, and I walked in with the enrollment agreement. I said, Hey, did you talk to Jose Morales? No. The contractor filled out that enrollment agreement. I said, So do you know if he speaks English? No. Do you know what his highest his highest level of education was? No. Do you even know if he legitimately wanted to enroll in your school? No. But we paid you $4,500 because the subcontractor filled out all the paperwork. Again, it in this arena where it comes to voucher money, there's a massive financial incentive to commit this fraud. Because, and again, how do we know that he even completed the program? The contractor keeps the attendance records. If I ask for the attendant records, I can't get them. I'm not allowed because they're protected. So there's this huge financial motive now for these guys to enroll these injured workers in the public universities. And some of them are up to $25 million.

SPEAKER_00 51:37

So you paid for that school expecting that that person attends, but then they're telling you that they can't release that information to you because it's protected.

SPEAKER_01 51:46

Universities hide behind this thing called FERPA. It's a Federal Education Act. It's a privacy act, it's part of the Federal Department of Education. And so what they do is they tell me to go pound sand. And I don't have any regulations that that will counter that.

SPEAKER_00 52:01

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 the 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, uh, 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.