Fake Schools. Ghost Students. Forged Signatures. $64m a year fraud scheme in California Workers comp

Voucher Fraud Series Part 2 

Karen Johnson is the foremost expert in California's most overlooked fraud — SJDB voucher and counseling school fraud — and she's back on Fraudcraft to break it all down.

In this episode, Karen pulls back the curtain on how fraud syndicates use vocational retraining vouchers as a weapon: dangling the $6,000 benefit (plus $5,000 in state RTW funds) to lure injured workers, pressure insurance carriers into faster settlements, and funnel kickbacks through a coordinated network of fraudster applicant attorneys, corrupt counselors, and doctors who certify workers as unable to return to work — keeping them trapped in the scheme.

The most staggering stat Karen shares: roughly 75% of injured workers get enrolled in these counseling and retraining programs but NEVER attend — yet the insurance carrier was billed in full and never got the money back. Those costs are passed to employers. And then to you, the consumer.

Karen has uncovered schools operating out of mailbox stores, dead claimants enrolled in cosmetology programs, forged DocuSign signatures, and a counseling school CEO facing 31 felony counts. This is syndicate-level fraud — and Karen has been fighting it alone for over a decade.

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Transcript

SPEAKER_00 0:00

Hey everybody, this is Tina. You're a very proud host of Fraudcraft, the podcast that promises you all things fraud significates, fraud schemes, fraud tech. We love diving in the world of California Workers Comp because it's so messy. There's so much fraud in there. We have a lot of really great experts who want to clean it up. I've got one of them on right now. Hi, Karen. How are you? Hey, good afternoon. So, as promised, this podcast brings you the best of the best subject matter experts, especially in California Workers Comp. And there's nobody better, and everybody will tell you this, than Karen Johnson. She is the best. And when we're talking the best, I'm talking about there's this very dark, obscure world called SJDB, voucher fraud, counseling and school frauds in California Workers' Comp. This is a system that is supposedly designed, and Karen will go into it, to help the injured workers get back to another career path if they choose. There's monies there for them. However, like everything else in California WorkersComp, the fraudulent fraudster, legal providers, medical providers, the bad applicant attorneys, there's a lot of good applicant attorneys, the bad applicant attorneys use benefits like this as the carrot on the stick to draw injured workers into very complex fraud schemes. And so I'm so proud to be good friends with this woman. She is not just an amazing investigator, but we're going to highlight how proud she is to be of service to the injured worker. And that's what I really love about you, Karen, is that there's really great people in the space who are investigators, attorneys, claims adjusters, who honestly really care about the injured worker. And that's you. That's that's who you have been since I have met you years ago. And I really love that about you. Now, what I want to talk about, I know I'm talking a lot before you even get started, but I want to tell our audience that we've done episode one, that we kind of glossed over the SJDB thing, the voucher counseling school thing. It's complex, it needs to be broken down, and that's what we're gonna do. So episode one was introduction of Karen Johnson, her greatness, this whole crazy weird world of voucher fraud. Now we're gonna break it all down. This is what it looks like, this is what the fraud is, this is how this is how people are harmed, this is how people are taken advantage of, these are the definitions, and we're gonna go into case scenarios. Lord, I'm all I'm so excited that I just pulled out my earplugs. I'm so excited to have you on because you're just an amazing person. We just don't have anybody like you in this space. There might be a few good investigators out there, but not at the level that that you're operating in. So it's such a privilege to have you on, Karen. Thank you very much. So if we could start from the beginning for our audience. Yeah, absolutely.

SPEAKER_01 2:38

So I think the one thing to remember about your 101 is that an injured worker gets hurt on the job and for whatever reason they can't go back to that job. And the benefit here is that it allows this injured worker to get a benefit of $6,000 to go back to school for retraining services. So, you know, maybe they were a mechanic before and now he's having back issues and he can't. So now he wants to take some computer classes or he wants to take an accounting class or whatever. So the benefit is to the injured workers. The insurance company is like the custodian of that trust fund. So the injured worker gets a stack of paperwork and it kind of explains to them what their retraining voucher is. And like I said, that has a $6,000 price tag on it. So it's basically like a training education grant for $6,000. So I think that's first and foremost is to understand what the voucher is. Then what happens is a lot of times these injured workers don't understand the voucher program. They don't understand their paperwork. I read talked to an injured worker just this last week who said, I've got so much paperwork, I just threw it all in the garbage. I didn't really read it. And so I took the time to explain to her what her voucher was, explained to her that she had options. Like in this particular case, what happened was she was contacted by a school who told her that she this was her only option. She was told that this was the only school that she could go to. And I, when I talked to her, I said, No, that's not the case. You can pick a school. She goes, Oh, thank you, because this school was going to be several several miles away from her. It was too far for her. And I said, Let me send you your paperwork again. And I put it in an envelope and I highlighted the sections for her so that she could look at it and she could make her educated decision on where she wanted to go to school. So what happens is the injured worker decides what schooling program they would like to go to. And then they send us their paperwork and the insurance company pays the bill for that education or reimburses the injured worker directly when appropriately. So again, the insurance company is writing the check for the $6,000, but it's technically the injured worker's benefit. It's part of his settlement, his or her settlement money.

SPEAKER_00 4:43

This is where it all gets complicated because it's not just the $6,000, because there is money that comes in from the state as well, right? It's like $5,000 from the state.

SPEAKER_01 4:52

Yeah, but we really don't have any bearing on that. That's a DIR thing. So I think that, you know, the insurance company pays the bill on behalf of the injured worker.

SPEAKER_00 5:02

There is that $5,000. It is bundled somehow into this whole scheme of how an injured worker is carrot dangled, enticed, and then may or may not get it. And it's it's used in the fraud scheme, right? So I just wanted to make sure I'm thinking out loud.

SPEAKER_01 5:19

Well, yeah, there's a case where they're actually blackmailed with it.

SPEAKER_00 5:21

Really?

SPEAKER_01 5:22

Yeah, so there's a case where a school tells them that we won't get you your $5,000 unless you complete 70% of your training program.

SPEAKER_00 5:30

Okay. And that $5,000 that's not part of the $6,000. What's that $5,000? What's that called?

SPEAKER_01 5:36

So that is the return to work funds. That is directly administered by the Department of Industrial Relations. So once the insurance company processes the paperwork, which is the voucher paperwork as we call it, it's sent to the injured worker, the last page of that is the document that they need to file for their $5,000 from the state. So in essence, the injured worker is going to get $6,000 from the insurance company, and then they're going to get another $5,000 from the Department of Industrial Relations. So in total, they get a sum of $11,000 to use for training benefits.

SPEAKER_00 6:09

Okay, and if I understand correctly from what you said last time, you said it was that POS page. Proof of service document. The proof of service document. Gotcha. Okay. So if we were to wrap this up, play the scenario out, a California workers comp injured worker, right, is denied the ability to return back to work because of the restrictions, right? Like a permanent disability rating. Yep. Yes. Okay. Okay. And how many of these injured workers are they usually have their own attorney, have an applicant attorney? A lot. Okay.

SPEAKER_01 6:41

You know, I don't have the statistics on that, but you know, we see it a lot where we are mailing a copy of the voucher. We have to carbon copy their attorney. So whenever we send the voucher forms out, you know, obviously we have to send it to the injured worker and we send a carbon copy to the applicant attorney on file.

SPEAKER_00 6:57

That makes sense because I'm thinking this through because uh what most likely occurs is that the injured worker is represented by an applicant attorney for the process of the compromise and a release as well. And so the reason why I bring this up is because you're stuck a lot of the times, it's the applicant attorney's job to explain these benefits, but it seems like that falls on your shoulders a lot.

SPEAKER_01 7:18

You know, it depends on if the injured worker reaches out to us. And again, most of the time the injured workers don't contact us after the claim is settled and they've received their settlement checks, then they get a bunch of paperwork in the mail. This is their voucher forms. A lot of times they don't really always recognize what it is or, you know, reach out to us directly. They may use a counselor, which is a middle person. Counselor is again is somebody that is approved by the Department of Industrial Relations. Their role in this is to interview that injured worker and find out what's the best, you know, educational program or what's their best options, you know, to utilize those doctor funds.

SPEAKER_00 7:52

Let's talk about the counselor for a moment, because if I understand correctly, there's a whole lot of criminal charges that have been doled out the past few years against counselors, too, right?

SPEAKER_01 8:02

Correct. So, you know, thanks to the education of meeting with the industry, meeting with law enforcement, meeting with the prosecutors and stuff like that, there is a heightened awareness now of what voucher fraud is. And there have been several people that have been charged. So a lot of times with this case is if it's a criminal case with the school, there's a lot of times there'll be counselors involved in this also, you know, as a participant in the fraud. Okay.

SPEAKER_00 8:27

So what I think we should do is we should talk about the role of the counselor. And before we do that, what type of schools are these where we've got, let's say we've got an injured worker. The injured worker was a truck driver, or, you know, a lot of times in California, they're agricultural workers. They work on a farm or they work in a restaurant. So let's just say we have, you know, those types of claimants. What type of schools are out there that you normally see in your day-to-day work with this stuff?

SPEAKER_01 8:55

Unfortunately, the schools, there's there's been schools that are designed and have been created or built strictly to redeem voucher money. These are schools that are set up to do online training. They might be computer classes 101. A lot of times these schools will charge $6,000 to learn Microsoft Office. Another simple one is medical assistant programs, you know. So an 80-hour program for medical assistant is gonna cost you, you know, $4,500 for an example, automotive boot camps and online training. You know, things along that line. So these particular programs are geared 100% towards injured workers. If you walked into the school and and you were Joe Blow on the street, you would not be enrolled in the school. They're they're strictly geared towards injured workers.

SPEAKER_00 9:41

Okay, I'm gonna act as your interpreter for a moment, and I'm going to explain to our audience what you are really saying. You're really being kind and you're being very neutral on this. And I'm just gonna take it up a notch and say what you're really trying to say. What you're really trying to say is there are fraudsters out there who are solely focused on trying to gain as much money as they can from the workers' comp system. So they sit around and they think, what can we create? What type of school can we create that would normally cost a few hundred dollars and we can take all that money for ourselves and not care at all about the injured worker?

SPEAKER_01 10:15

You know, absolutely, and that is exactly what's happened. I mean, when I worked for the state doing this, is that I would get calls all the time from injured workers who didn't even know they were enrolled in schools. So the schools are enrolling these injured workers without their knowledge because that voucher form went to the applicant attorney. The applicant attorney gave it off to his preferred counselor or his preferred school of choice, his or hers. And then they would just simply, you know, use DocuSign to sign these documents and submit for payment. I mean, there was one school that was operating out of a mailbox, et cetera, when we started this in 2016. And this was, you know, millions of dollars a year in voucher money that was being sent to a mailbox, et cetera, and the industry didn't know it.

SPEAKER_00 10:59

Okay, I'm gonna interpret for you again. Um, I'm gonna interpret two different things that you're saying here. The first thing that you're saying is that when you're saying that the injured workers didn't even know that they were enrolled in schools, what you're saying is that those schools billed the insurance carrier for attendance, got the money, students didn't even know they were enrolled. Now the school is rolling down the road with all that money, usually about $4,500 or something like that, right? Per student. Okay. Yep. Didn't bother to tell the insurance carrier that they never contacted the student or the the student is not even going to the school, right? And the second thing I want to interpret for you is the fact that you said that schools operating out of a mailbox express or a postal annex or something that like that, right? So what you're actually saying is that those schools are willing for students to be enrolled in a school and going to classes operate out of a postal annex. So you don't exist.

SPEAKER_01 11:54

I saw it quite a bit when I worked for the state, and I would go out and do site inspections, or I'd go out and inspect the schools. Uh there was one I did, um, she was enrolling students in an automotive program, and it was on the 14th floor of a professional high-rise building that was a um professional suite. And when I went into the room, there was no screwdrivers, there was no computers, there was no car engines, there was nothing automotive in that suite. And yet, you know, again, she was rolling injured workers in that program. And it's like, you know, we saw it all the time, or I'd walk into a class or a school and it would be dusty computers, and there would be no, they had a hard time even finding the the students' files. Like, where's the records? You know, where's the attendance records? So, you know, I saw it over and over and over again, unfortunately, when I work for the state.

SPEAKER_00 12:40

Aren't counselors care so much about their client that they're making sure the school exists?

SPEAKER_01 12:46

You know, that's a mixed bag. I mean, I I do work with some counselors that absolutely care a lot about the injured workers, and they they give a great service to these injured workers and they help them out quite a bit in what's their best interest for them. So, but then on the second hand, there's ones that don't. And, you know, there's there's a couple of them that have been caught and they've been charged with foraging the signatures of the injured workers, foraging documents, you know, enrolling them in multiple schools. So it's it's a mixed bag, just like with everything else. Like you said, there's good cops, there's bad cops, but unfortunately, it's been not recognized, you know, and it's a very difficult crime. It's a very difficult investigation to do these voucher cases because a lot of times these injured workers they don't come forward and they don't communicate with us and say, Hey, look, I think there's a problem. And that makes it difficult when you you don't have a victim who's willing to cooperate. It it makes it challenging.

SPEAKER_00 13:48

In High Tell.

SPEAKER_01 13:49

Yes. So that would be the state. The Bureau for Private Post Secondary Education is the agency that approves that. So if I wanted to open a school, I would write my curriculum, I would define it and explain it, and then I would submit it to the state for approval. And I could either have a fully in-person program, I could have an online program, or I can have a hybrid program where I'm gonna do both online and in-person. So that would be approved by the state. So that does become very important if you're gonna do these doctor investigations to find out. I have an example of one where the injured worker lives in Mount Shasta and the cosmetology school was in LA. And you can't take cosmetology 100% online. You can take it hybrid, but you know, obviously, a worker in Shasta in Northern California is not flying down to LA to take some colismatology programs.

SPEAKER_00 14:42

So that was uh a big red flag for me on that case. For the SIU special investigator to be taking a look at this if they're supposedly enrolled in tractor trailer driving school or makeup or haircutting or anything like that, it would be difficult to learn all that just online.

SPEAKER_01 15:02

You would hope. Unfortunately, there are um programs offered by the California State University systems, those are all 100% online, you know, and those are HVAC programs, those are veterinary tech programs, programs that you would expect an electrical technician to know the difference between a Phillips and a standard screwdriver. But when they're taking these classes online, uh you don't know what they're learning.

SPEAKER_00 15:25

It gets very difficult. I think I'd want a plumber electrician at my house learned gone in their cation just online and have never touched anything. I mean, that's or or driving a big rig down the highway at 65 miles an hour.

SPEAKER_01 15:40

That you know, it's a lot of these truck driving schools are hybrids in that, you know, they're online and they're in person. So, yes, it's very concerning.

SPEAKER_00 15:48

One of the things I'd like to talk to you about um before we move into any case scenarios is that we talk about there's a counselor involved, and I think that's a pivotal part of this. So I'd like to talk about private versus public institutions involved in this type of work. Said scheme, I say scheme as well. The aspect of whether it leads to a certification or not, a state certification. Can you talk about all that?

SPEAKER_01 16:14

So there's there's several different programs that these injured workers get enrolled in. Private post-secondary is that it's private schools, it's private classes. It's put on by any person that wants to apply to have a school who wants to charge over $2,500. They they, like I said, they create a school, they get curriculum, they get teachers, they get, you know, materials, they present it to the state of California for approval and they get approval. Now, one of the big programs is contractors licensing. So, you know, a lot of times these injured workers, and it's very common, and and I'm not against it. I I fully support it, you know, is that they want to get their contractor's license, and I think that's a great thing. So, again, in a situation like that, that's a private post-secondary situation where, you know, they're gonna go back to school, they're gonna take some classes, they're gonna get their contractor's license, and that's what those schools are geared towards. Now, the public institutions is a is another situation, as I'm gonna call it. And the frustrating part with the public schools is that, you know, these public schools, these universities are utilizing third-party vendors that are not regulated by the state, that the programs are not vetted by their accrediting agencies. So, you know, again, in that situation, these injured workers are being steered to an HVAC program that's online. And again, I've spoken to the injured workers, I've spoken to the schools. It's very concerning when I got an injured worker who is gonna enroll in an online HVAC program. And when he graduates, if he graduates, because my experience is that roughly 75% of these injured workers don't complete the programs. So if he's one of the 25% that pre-completes the program, he's gonna get a certificate that makes it look like he graduated that university. And that's just not the case. The university faculty did not teach that program, the university accrediting agency did not review the curriculum of that program. So basically, it's kind of like a little diploma mill or certificate mill for these programs. That's the difference between the private and public. It's very common in our industry and our society now to allow electronic signatures. So it's very hard for us as an insurance company to, you know, try to validate when we're getting all these documents in the mail on a regular basis and the claims adjusters are, you know, they're handling their claims. We can't sit and verify electronic signatures. So we have to kind of take it at face value that these injured workers are are familiar with what these forms are and they know what they've signed. And, you know, they have knowledge of it, but that's not something we can verify.

SPEAKER_00 18:50

A lot of those the signatures that are on the enrollment agreement for the schools really mysteriously match the signatures on the some release settlement documents.

SPEAKER_01 19:00

We used to see that quite a bit. Um, there was actually one case scenario that we had that actually somebody was visiting the school and it sitting in plain sight were these documents where the the little strips of signatures were literally being taped on the enrollment agreements. In today's world, we see just more docusigns than anything. And it you can clearly see that it's not a legitimate. I mean, it's legitimate in a docu-signed world, but it's not somebody scribbling on a on a you know, on the paper or stuff like that.

SPEAKER_00 19:32

Encourage everybody to come watch you speak because you do a lot of public presentations. I think that's really great because that's the only way to get this out. And I I want to thank you for doing that. And I think you get to reach enough people, which will is why you're on the podcast so that we can reach more people and that we can really get the word out there.

SPEAKER_01 19:49

And the now, when it comes to the private post-secondary schools, you know, they have to be on the ETPL, which is the eligible training provider list, which is is handled by EDD. And and again, this is why vouchers get so complicated, is because you've got so many different agencies involved in this. But, you know, clearly on the on the voucher forms, it says that the school must be ETPL approved. So as a as a carrier, you know, you would hope that the claims adjuster would take the time to make sure that before she processes that payment that the school is is approved for vouchers. And, you know, in cases where they're not, maybe send that off to their claims or to their SIU units to take a look at that and find out, you know, who is this school? Are they BPP approved? Is it some Joe Blow that's just trying to collect these funds? And, you know, things along that lines. Make sure that it's a legitimate location. I'll do things like check their addresses, I'll check their catalogs for their programs, things along that lines to make sure that they're that they're legitimate. We would see for a while there was one school that was notorious for calling up the injured worker and saying, Hey, what kind of class do you want? Oh, you want dog grooming? Okay, well, let's put you in dog grooming. And the school's not approved for dog grooming, you know? So crazy stuff like that. And then, you know, like I said, the paperwork comes across the desk and the claims adjuster is like, I gotta go. And she, you know, stamps it and pays it. So, but from an SIU standpoint, when you're kind of break it down a little bit, there are some tools that we can do.

SPEAKER_00 21:16

Here's where it gets kind of cloudy that I'd like to clear up for people trying to learn this, right? For the private schools, the schools have to be P BPPP approved, PL approved. So, what's the difference and what does that all mean?

SPEAKER_01 21:31

Okay, so BPP approval, which is the Bureau for Private Post-secondary Educate, is the state agency that basically gives these schools their approvals to operate. They're the ones that bet the teachers, they're the ones that bet the curriculum, they're the ones that look at the online platforms to make sure they're all legitimate, they make sure all the business records that the financial responsibility is all there. I mean, it is a hugely in depth program that these schools have to go through to get state approval. So that is handled by again Consumer Affairs, the Bureau of For private post-secondary. Once the school has that approval, then that school can take that approval over to EDD, which is employment development, and get on their program to get people back to work, you know, things along that line, and get approved on the ETPL, which is the eligible training provider list. So that is like a second platform of approval that can, you know, give them a different audience for students, for an example. And you have somebody who's been laid off from their job and they want to go back to school, EDD might contact them and say, hey, look, we we see that you you made widgets and now you want to be a cosmetologist. We'll pay for that. That's all part of EDD's program. And it kind of ties into this work comp arena that we're in. So the school basically has to have two approvals. They have to have the state approval and then they have to have ETPL approval. And that's for private post-secondary private schools, for example, truck driving schools, cosmetology schools, computer technology schools, medical assistance, um, anything that's that's more that vocational training would have to have those two approvals.

SPEAKER_00 23:05

A lot of the fraud that's involved in this world, um, the E just trust that they're operating.

SPEAKER_01 23:11

Yeah, no, BBPE does have a compliance and enforcement section. And that's what I did when I worked for them is I would go out to these schools and I would verify were their instructors, was their equipment there, how old was the equipment? You know, so that was a role that we did do to go out and and verify these types of things. So students who had complaints or had issues or had concerns would file complaints with the Bureau, and that was our investigative. But then also the to that is that schools were required to have, you know, inspections every so many years, every two or three years or five years, whatever it is, that the Bureau has to go out and do those types of inspections. So, yeah, that is a regular process there. Let's talk about the counselor. Counselor's job is to help that injured worker navigate this training program, to talk to them about what are their limitations, what are their work restrictions, what would be a good career path for them, what would be a good school opportunity, do they want to take in person? Do they want to take online? So that counselor is, like I said, it's a counseling service. Um, that is what is it is in the perfect world. So there's good counselors and bad counselors. As a carrier, if you're gonna look at something, you should be asking for detailed invoices, like what are the dates and services that you provided services to this injured worker? If the counselor just sends you a bill for $6,000 and that's it, it's like, is that really what you're gonna pay when you don't have any documentation that services were provided to the injured worker? So that's kind of between an insurance company to kind of validate that the counseling is doing some services. The $600 is what the counselor can collect. So the counselor can be paid $600 out of the $6,000. Asking those questions like, did they provide any services? I don't like it when the counselor sends me a bill for $600 and I'm like, what did you do? Now with the new regulations coming out, there will be stricter guidelines on what counselors are required to do, and that will be to provide detailed invoices, and that the person providing the counseling services must actually be a DIR-approved person.

SPEAKER_00 25:11

And what fraud have you seen on the counselors?

SPEAKER_01 25:15

Enrolling the school, the injured workers in schools without their knowledge is so they get their hands on the voucher from the attorney and they just they fill out their forms to say, hey, look, Joe Blow, you know, injured worker. I helped him with this counseling and I enrolled him in this school. So, and then later you find out that the injured worker didn't even know that they were enrolled in a school. So they'll enroll the injured workers without their knowledge, they'll forge the injured workers' signatures. Um they'll I've even seen them direct injured workers to go to unapproved schools, which cracks me up. Be like, what kind of a counselor are you? You're supposed to be helping them and you just enrolled them in a school that's not even state approved. Um, you know, things along that line. So giving the injured workers bad advice, that can be an issue. We see that on occasions.

SPEAKER_00 26:01

From the injured workers' perspective, how they see the fraud if there's something wrong. Like we've got an injured worker and they they sign the enrollment agreements, they talk to a counselor. What do you see on their end?

SPEAKER_01 26:12

You know, I think that when they start to take the program, they find out that the program is not what they thought it was, that the program is not there at all. Like they some of these schools, what they'll do is they'll say, Oh, we're gonna start next month, or oh, we're gonna start next month, or oh, we're gonna start next month. And eventually they the injured workers are like, We've never started the program, or there's no teacher, there's no materials, it's a bad program, um, things along that line. So the injured worker will start to realize that something's not, you know, adding up here. And again, a lot of times it's very challenging though, because the injured workers might just go, forget it. I'm not gonna do this. I got to go back to work, I gotta feed my family. And they just drop it. They don't pursue, you know, the fact that they really wanted an education. So I had another situation recently where the injured worker was told, if you go to school, you're gonna get 60, I believe it's $6,500 or something like that. You know, you're gonna get the $5,000 from the state, and you're gonna get $1,000 for the computer, and you'll get a $500. So they they actually lied to the injured worker and said, Hey, look, if you go to school, we're gonna get you $6,000, you know. The injured workers don't know when you read their depot transcripts or you talk to these injured workers, it's like, what's your highest level of education? You know, a lot of times these are blue-collar, they've been working all their lives, um, probably don't have a high school diploma, and they're being enrolled in these programs where they they have to read and write English or take online classes and they don't know how to turn the computer on, or they don't even have internet service. So or they don't speak English. Right. They don't speak. Oh, we see that all the time. So I think from the injured worker, it depends on how invested they are in wanting to get that program. You know, if they call me up and say, hey, look, I I I had one where she called me up and said, I was told to take YouTube channel videos. That was my training, was to watch YouTube videos. That was it. And I'm like, yeah, that doesn't fly here. So, you know, I fought with getting their money back for them. We got the refunds from the school. I encourage that injured worker to file a complaint with the state, let the state do their job. So a lot of times if I talk to the injured workers, I educate them. It's like, hey, look, if you feel like you've got a bad program, you need to contact the state because they're the ones that need to fix it.

SPEAKER_00 28:28

Is that if you're an injured worker, those benefits uh and don't, you better report them because that is an indication that you're wrapped up in a fraud syndicate scheme.

SPEAKER_01 28:37

They're they prey on these people. They're, you know, the the injured workers in most of the cases are victims in this. Now we we have seen situations where the injured workers will sell their vouchers to a school. Um, I saw that when I worked for the state of California, is that I would go in, it was a truck driving school, and I would go ask for the student's file, and I knew that it was voucher money that they were getting because I'd received the complaint from the insurance company to say, hey, look, there's a problem here with this truck driving school. I'd go out to the school, I'd ask to see the student files, and the school had billed the $6,000, but then cut a check to the injured worker for $3,000 or $2,500 or whatever. So in that situation, you know, you kind of got the school and the injured worker kind of working hand in hand to collect that money, you know.

SPEAKER_00 29:24

Right.

SPEAKER_01 29:24

You'd have to go out and do the research or talk to the these injured workers aren't going to tell you what really happened. You know, and like I said, the vast majority I've talked to, they don't care. They just they wanted to move on with their life. They're they're over it.

SPEAKER_00 29:37

I get that. I guess my message to the injured worker would be you really don't understand what's happening on the side or on the back end on your head. You know, you think you're getting away with that that $3,000, but you actually shortchange yourself from all these other benefits that you actually could have had if you did it correctly, um, and weren't involved with these fraudsters, and you can get wrapped up in this criminal scheme where at some point you might find yourself on the stand or arrested. Um, you know, consider an accomplice.

SPEAKER_01 30:07

Exactly. And that's what makes these cases so hard to prosecute is to get these injured workers to kind of step forward and not be scared and say, hey, look, we're here to help you. Um, you know, when you talk about injured workers having their money stolen, I had a great case the other day where the injured worker was going to enroll in that phlebotomy program and they were taking her whole the whole $4,900. They were gonna take all of her money. And I looked at the catalog and I'm like, this program's only $1,600. Why are you charging her $45 or $4,900 when you in your catalog says it's only $1,600? So, you know, I contacted the school. I said, we're not gonna pay this. This isn't right. And I contacted the injured worker. She confirmed that's the program she wanted. I said, Great, that's what we're gonna do. But then we got her her the paid the difference. So she still had money left over that she wanted to take a certified nursing assistant program, which, you know, again, as a single mom who's trying to go back to school, this was actually gonna allow her to get her phlebotomy program and get a medical assistant program, which was even gonna extend her a little further than she'd even thought. And she's like, she was so excited, you know. And she just called me a couple of weeks ago and said she'd completed her program. And I was like in tears of like a proud mom of like, you got it, yes. You know, I was so happy for her that she goes, I'm a single mom and now I've got this certificate. I get to be a phlebotomist. I did my externship, and I was like, I was glowing. I mean, that was just I was celebrating that night. And you know, it's it's very challenging when I watch these schools rip off these injured workers and just not take, you know, just not give them their services.

SPEAKER_00 31:39

So it's just frustrating. You have identified something that uh falls short with a lot of people that resonates with me because back in the day when I saw all these capping schemes happen in California Workers Comp, the messaging out, everybody was like, Well, you know, what's the big deal? Who's who's really losing here in this scenario? Yeah, we have bad attorneys, we have bad doctors, you know, whatever. You know, where's the actual victim? Well, at the end of the day, like you have recognized the victim is the injured worker. Even injured workers don't get it that they're being used by these fraudsterists. This is a big machine hanging in the background that you have identified that you really can't see. It's very obscure. You really have to drive down into the fraud and see what is all happening. And that's what makes you a really great subject matter expert in this space. Um, let's talk about some other scenarios that you have seen where injured workers have been harmed because at the end of the day, what we're trying to do with this podcast is people not fall prey to these schemes, what to look, you know, what to look for. Here's real case scenarios. Can you hit us with some more?

SPEAKER_01 32:48

Sure. So I had a young man uh enroll in one of the public institutions. It was a California State University, and he was so excited, he was ecstatic to think that he was enrolling in a public school, public university for him was a big deal. And then when he got there and he needed help, he went to the instructor and said, Hey, I I'm having trouble with this program. I need some help. And the instructor said, Well, you either watch some YouTube videos or you hire your own tutor, but we we can't help you. And then he started doing some research, and that's when he found out that he was enrolled in a third-party program. But even worse than that, he was actually sub-sub-enrolled in another program that was uh an online program out of Iowa somewhere. It wasn't even a California-based school. So he was just so disappointed and so frustrated with the situation. His enrollment agreement said he his whole mindset was he was so proud that he was enrolled in a California State University and he was not. That one just kind of broke my heart because I felt like I was dealing with my own son, you know, in that situation. I've had situations like I've mentioned the gal in Mount Mount Shasta. She's 73 years old and she was ripped off and she wanted to go back to school for cosmetology. Like I talked to her, I still talk to her. She calls me all the time. I'm still working with her, but you know, she's 73 years old and she really wanted to go back to school for cosmetology because that's what she had done previously, and the school took her money, you know. So I had to fight the counselor and the school. I in that case, I fought the counselor. I'm like, how dare you enroll her in an unapproved program? You know, that's not good. So I I asked for the counseling money back, I asked for the money back from the school. Um, and she's now got those funds available to get the education she wants. So that was another one that stands out to me.

SPEAKER_00 34:32

Um again, the one before you go any further, I want to remind people that the people who you're talking about has already got their money.

SPEAKER_01 34:39

Well, they were paid. The hard part is we have to pay them up front. So, you know, unlike a medical bill, for an example, you know, a medical bill is paid after the fact. You pay for the medical bill after the MRI or after the x-ray or after the doctor's appointment. When it comes to these vouchers, the insurance company, we have to pay the money up front so that that injured worker can actually start the program. So that makes it very hard because then you got to try to fight to get that money back. Uh, I've had injured workers that were told that these are the only programs that we offer. This this is your only choice. Um, I've had situations like that. Um my PowerPoint presentation for the last two years has been dead injured workers don't enroll in school. It's my slogan. And and I I it it sounds corny, but it's true. I had a cosmetology school and I was on the phone with them. I'm like, are you sure? You're sure she wants to go to school? Oh, yeah, yeah, yeah. I said, Well, let's do this. Why don't you call her and I want you to verify it again, please? And they called me back and said, Oh, no, no, we've confirmed she wants to go to school. And I said, Really? Because she's dead. Dead injured workers don't enroll in school, you know. Um, and we've seen this in the criminal complaints, you know, where the bureau's gone out and done inspections and found out that the injured workers were dead and they were enrolled in school. It's a sad situation. Uh some other ones are again these online programs where they tell them to watch YouTube videos. Um when they when they kind of do these backdoor programs, you know, where they're they're kind of offering their own curriculum that's away from state approval, then at that point it's scary because we don't know what they were taught. We don't know what their their protocols are, we don't know who the the teachers were, what was the curriculum, did they were they even qualified to teach the class? So there's a lot of stuff that happens in this education world that, you know, at the end of the day, somebody's gonna get a diploma or certificate saying that they've attended this program, and when in reality, we don't know what the heck they did. It's very concerning because they're gonna end up in the workforce.

SPEAKER_00 36:37

If you have an injured worker, uh thieve that they were enrolling in type of school, HVAC or truck driving or or anything, real estate, you name it, uh those are the documents as they signed. That's that's the class they believe they were about to take. And then this is not offered to them. They don't get to take that any classes or they get a different class. What can they do?

SPEAKER_01 36:59

What they should contact the insurance company because the insurance company was the one that paid for the program. If there's a good SIU unit there, they the SIU should do an investigation on that situation. But also, most and foremost, is contacting the Bureau for Private Postsecondary Education, filing a complaint with them. You can also file the complaint with the Department of Industrial Relations. So it's the Department of Industrial Relations that regulates and says, hey, these vouchers have to be handed out. And they do have an anti-fraud unit with DIR. You'll get an investigator there who's like at least has some experience, or like, hey, I know something about this. I don't know exactly all of it, but I know who to talk to. You know, and so there's a lot of lieutenants and sergeants at the Department of Insurance that are familiar with voucher fraud now.

SPEAKER_00 37:40

I think that's why you're also so valuable to us, Karen, is the fact that we, the rest of the world, is just waking up to this fraud that you have been working for years and you've met injured workers to see this and hear you and start coming forward. Um just like the complex capping schemes that I work, the organized fraud schemes, this is part of it. This is like a piece of the pie of these major schemes is the edit counselors, the bad counseling schools, uh, the voucher fraud, uh and such great work in what you've done. Um weren't for you, the so many more fraudulent schools operating out there. Um any current criminal charges happening within the past couple of years that we can talk about from coming out of the horizon?

SPEAKER_01 38:27

You know, there's a couple of charges that happened last year. Um there's a counselor out of the LA area that was charged. Um she was her and a school were charged. So there's actually two counselors and a school that were charged at the end of last year. I think it was a total of 31 felonies. And in that case, you know, they were enrolling the injured workers without their knowledge. They were foraging their signatures. That's a public record document. There's a press release out on that. There were a couple other schools, probably about two or three years ago, there were a couple schools charged. So those were big cases as well. And then again, that same counselor, that same counselor's been charged in actually three cases. Um her first case, the charges were dropped due to statute of limitations, but her other two cases are are very significant of like 29 and 31 felonies.

SPEAKER_00 39:16

So I just Googled Hazel Insurance, just released um, it's a 2026 press release, February 23rd, 2026. CEO of largest vocational school and alleged co-spirators charged in a scheme that drain injured workers' education benefits. Yes. The price releases are fantastic because they really tell the story of how the injured workers are being frauded. Absolutely. So it's out of Los Angeles. It says the CEO of one of California's largest vocational return to work counseling centers, Hazel are drained on 31 felony counts for allegedly operating a kickback in forgery scheme that drain injured workers' educational benefits for personal profit. Outside of California, you might not know is if you're a pro billing provider in the California workers' compensation system and you've been criminally charged, is that you get put on the labor code 4615 list, which that you cannot collect on your bills or liens a disposition of your case. And then if you've been convicted, then it goes to labor code 139-3 uh 21. Um you get um funded from the California workers' comp system. So so right now she cannot give compensation from insurance carriers for her schools, and neither can anyone else charge in the scheme.

SPEAKER_01 40:35

So was uh the Department of Insurance did that case. It's been a it's a great case. And then Department of Insurance, I believe the same investigator did her prior case from the prior year. So let's see, that was the 2025 case. She was charged in 20, I think she was charged in December of 2025. She had another case in 23 or 24. There was another case also filed on her. Um, and the same investigator handled both of those. Again, just asking that people get involved and to bring awareness to this. Um, you know, I've been doing this for 10 years, and I think that the the society is hot right now when this whole fraud thing. Um, I think they're starting to be tired of it. I think we're worn out of fraud and we're tired of being victims of it, regardless of who you are or what industry you're in. There's just so much fraud in our country, and it's been so acceptable for so long. But you know, voucher fraud is sixty-four million dollars a year. $64 million is fraud in workers and just the vouchers and just the vouchers alone. So, you know, it's very frustrating. It's not just a it drop in the bucket.

SPEAKER_00 41:43

You said voucher fraud in the California workers' compensation system. $54 million a year, right? Correct. Talking about a fraud that is very obscure that few people are focusing on right now. It's still like a new type of fraud in our system, right?

SPEAKER_01 41:58

What happens is the Department of Industrial Relations publishes their um information as far as how much money is paid out to vouchers. It's a statistical information. Um, based on my experience of doing this for 10 years, I estimate that roughly 75% of the money paid out is paid out to some sort of fraud when it comes to the voucher. So that's just my rough estimate. But like I said, that's a conservative number when I throw that out there. The astounding information is data that I saw when I worked for the state was that you would find a school that was doing $15,000 a year in voucher money, and then the next year they're doing $250,000, and then the next year that same school is doing, you know, $750,000 in voucher funds. And I could see that in the bookkeeping and the finances as I was looking at the accounting for these schools, because we have to make sure that schools are viable financially to continue to operate. They have to, they have to be a profitable entity to continue. And so I got to see the financials and I got to see where these schools were barely scraping by or they weren't enrolling voucher people at all to being $10 million a year 100% voucher funded.

SPEAKER_00 43:07

I want to thank you so much for coming on and educating everybody about the SJDB voucher fraud issue happening out there. I'm gonna try to have you on as much as possible because this warrants continues. There's criminal cases that are coming down. I want to messaging, can we share with injured workers out there that are going to be a good one?

SPEAKER_01 43:27

I think first and foremost is to read the paperwork that they're given by their insurance company, is to pay attention to those documents. They're very important. You know, that that's a $6,000 voucher right there that they need to understand what it is and read those papers. There's contact information in those documents for the injured worker that tells them how they can call GIR if they have questions. They can reach out to, you know, the Bureau or ETPL if they have questions, contact the Bureau for Private Postsecondary. I think doing their research and as far as their training programs or the school that they want to go to is important, that they know that they have choices. A lot of times these uh bad players will call these injured workers and say, hey, look, we've enrolled you in this computer class or your your insurance company enrolled you in this program or authorized you to take this class from us. And they don't even know they have choices. I I've had injured workers that were enrolled in a nursing program that really wanted to be a truck driver, wanted to do cosmetology, and they were never told that that was their options. So again, I think letting them know they have choices and that they should pay attention to that paperwork and and utilize it to the best of their benefits.

SPEAKER_00 44:32

Karen, thank you for all your work. And uh I want everybody to watch you on our next episode. Appreciate you.

SPEAKER_01 44:37

Absolutely. It's my pleasure to be here. Thank you.

SPEAKER_00 44:39

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.