Knox Ricksen LLP Moves Its Northern California Office to Walnut Creek
Knox Ricksen LLP has moved its Northern California office to Walnut Creek, California. After decades of being known as an Oakland-based law firm, Knox Ricksen joins a growing number of law firms moving their practices to Walnut Creek, an East Bay hub just fifteen minutes east of Oakland. Walnut Creek features an active downtown area with “hundred-year-old buildings, extensive high-end retail establishments, restaurants and entertainment venues.” “Even though we have a tremendous amount of litigation in Southern California, we are a Northern California based firm and it made sense to find a location where we can centralize the handling of our health care fraud and mass tort operations, yet maintain our traditional local practice in Northern California,” says Managing Partner Thomas E. Fraysse. “With Walnut Creek as our base of operations and with our Southern California office conveniently located in downtown Los Angeles, we are able to handle litigation throughout the State of California.”
Knox Ricksen LLP provides consulting and litigation services to entities and individuals who have been victimized by fraudulent activities specializing in Insurance Code section 1871.7 qui tam and federal False Claims Act (31 U.S.C. sections 3729-3733), imposing liability on persons who defraud governmental programs; maintains an active Mass Tort practice representing injured persons in consumer product and pharmaceutical claims; and a Personal Injury and Wrongful Death practice, representing individuals in claims and litigation whose lives have been changed forever by tragic deaths or severe injuries caused by negligence or the intentional acts of others.
CALIFORNIA ENACTS NEW LEGISLATION FOR THE SUSPENSION OF MEDICAL-LEGAL SERVICE PROVIDERS IN THE WORKERS’ COMPENSATION SYSTEM
Continuing the legislative endeavor to excise fraudulent medical and medical-legal services from the Workers’ Compensation System, Governor Jerry Brown signed Senate Bill 1160 and Assembly Bill 1244 on September 30, 2016, to take effect January 1, 2017. The most notable changes introduced by these bills are the procedures for suspension of medical and medical-legal service providers from the Workers’ Compensation System, and for the stay and potential dismissal of all liens owned by such providers. Providers, including individual doctors, or associations such as agencies, clinics, or corporations, may now be subjected to automatic suspension from participation in the Workers’ Compensation System upon being charged or indicted with criminal or fraudulent conduct related to their services.
The state legislature determined that employers and insurers are routinely pressured to settle liens with medical and medical-legal service providers, even after the provider is charged with fraud. This is partially attributable to a failure to document the system’s databases with information regarding the criminal charges and suspensions. As a consequence, lien claims continue to be processed during the pendency of criminal proceedings against the providers whom own those liens, and can result in additional funding to these providers for services that were connected to fraudulent activity. To bring an end to these monetary rewards for fraudulent providers, AB 1244 and SB 1160 intend to guarantee the automatic suspension of providers from the Workers’ Compensation System upon the provider being charged with any felony or misdemeanor involving abuse of a patient, or medical fraud, including fraud on the federal Medi-Cal, Medi-Care, or state Workers’ Compensation Systems. The bills additionally increase the level of scrutiny applied during processing and adjudication of all liens owned by a provider who has been charged with criminal fraud, or otherwise suspended from the Workers’ Compensation System.
AUTOMATIC SUSPENSION FROM THE WORKERS’ COMPENSATION SYSTEM FOR CRIMINAL
AND FRAUDULENT CONDUCT
Existing law requires that the Secretary of the United States Department of Health and Human Services notify the California Director of Health Care Services when a medical provider is suspended from the federal Medicare or Medicaid programs, and also requires that the Director of Health Care Services must suspend that provider from the state Medi-Cal program. AB 1244 extends this notification process to the Workers’ Compensation System by requiring that the Director of Health Care Services notify the Workers’ Compensation Administrative Director of the suspensions, and also requiring the Administrative Director to thereafter suspend the providers from the Workers’ Compensation System as well.
Beginning January 1, 2017, the Workers’ Compensation Administrative Director is required to suspend any medical or medical-legal service provider from the Workers’ Compensation System if they’ve either (1) been suspended from the Medi-Cal or Medicare programs due to fraud or abuse; (2) surrendered their license, certificate, or approval to provide healthcare, or had them revoked; of (3) been convicted of a felony or misdemeanor which:
- Involves fraud or abuse of the Medi-Cal program;
- Involves fraud or abuse of the Medicare program;
- Involves fraud or abuse of the Workers’ Compensation System;
- Involves fraud or abuse of a patient;
- Relates to the conduct of the individual’s medical practice as it pertains to patient care;
- Is a financial crime that relates to the Medi-Cal program, Medicare program, or Workers’ Compensation System;
- Is otherwise substantially related to the qualifications, functions, or duties of a provider of services.
The Administrative Director will be responsible for updating the Division website regarding the names of suspended providers.
A PROVIDER’S RIGHT TO NOTICE AND HEARING PRIOR TO SUSPENSION FROM THE WORKERS’ COMPENSATION SYSTEM
The newly added language of AB 1244 requires the Administrative Director to notify the provider of the pending suspension and allow the provider 10 days to request a hearing, prior to issuing the suspension. If a hearing is not requested then the Administrative Director will suspend the provider thirty days after the notice was given. If a hearing is requested by the provider, the suspension is stayed and the Administrative Director must set a hearing and come to a final determination within 30 days of the provider’s request for hearing.
Following a suspension, the Administrative Director is responsible for updating the Workers’ Compensation qualified medical examiner and medical provider network databases by removing the suspended provider’s name. The Administrative Director will also provide notice of the suspension to the public at large via the Department’s website, as well as written notice to the Workers’ Compensation Chief Judge, and to the provider’s relevant state licensing, certifying, or registering authority.
THE FINAL DISPOSITION OF LIENS FOLLOWING SUSPENSION FOR CRIMINAL CHARGES OF FRAUD
A provider who is charged with criminal fraudulent conduct automatically has all medical or medical-legal service liens stayed, and they remain stayed until the final disposition of the criminal case is issued. The final disposition may order the dismissal of the provider’s liens with prejudice. If there is no final disposition directing dismissal, then all liens filed by the provider throughout the State will be consolidated and adjudicated by the special lien process as discussed below. The special lien process is subject to the same laws and procedures as all other matters before the Workers’ Compensation Appeals Board.
THE SPECIAL LIEN PROCESS FOLLOWING SUSPENSION OF A LIEN CLAIMANT WITHOUT A FINAL DISPOSITION FROM A CRIMINAL CASE
There are two circumstances in which the liens of a suspended provider are handled by the special lien process: (1) the suspension was for a reason other than criminal charges, or (2) the final determination of a criminal case did not direct the Appeals Board to dismiss the provider’s liens. For both, the Chief Judge for the Workers’ Compensation System must appoint an attorney to identify all outstanding liens owned by the provider and appoint them to an appropriate district to be handled by the special lien process. Under the special liens process, the burden of proof shifts to the suspended provider-lien-claimant to overcome a rebuttable presumption by a preponderance of the evidence. The provider must prove that each of the liens, and underlying bills, are not connected to any criminal, fraudulent, or abusive conduct by the provider. If the provider-lien-claimant fails to overcome the presumption, they will not have a right to payment. However, if the provider-lien-claimant is successful in rebutting the presumption, then the liens will be adjudicated by the special lien proceedings, or will be transferred back to the originating venue for adjudication, as determined by the presiding Workers’ Compensation Judge.
DECLARATIONS UNDER PENALTY OF PERJURY FOR THE FILING OF LIEN CLAIMS
The Workers’ Compensation System functions under existing law, which requires all lien claimants to file their lien with the Appeals Board for adjudication. In light of SB 1160, the legislature has expanded liability for perjury in order to avoid payments for fraudulent services. Now, all lien claimants who file a lien after January 1, 2017, must also file a declaration under penalty of perjury that the lien is not subject to independent medical review or independent bill review, and that the lien claimant:
- Is the employee’s treating physician providing care through a medical provider network;
- Is the agreed medical evaluator or qualified medical evaluator;
- Has provided treatment authorized by the employer or claims administrator under Section 4610;
- Has made a diligent search and determined that the employer does not have a medical provider network in place;
- Has documentation that medical treatment has been neglected or unreasonably refused to the employee as provided by Section 4600;
- Can show that the expense was incurred for an emergency medical condition, as defined by subdivision (b) of Section 1317.1 of the Health and Safety Code; or
- Is a certified interpreter rendering services during a medical-legal examination, a copy service providing medical-legal services, or has an expense allowed as a lien under rules adopted by the administrative director.
Any lien filed after January 1, 2017, without this declaration may be dismissed with prejudice. Furthermore, liens filed prior to January 1, 2017, are retroactively required to have this declaration on file no later than July 1, 2017, or they too will be subject to dismissal with prejudice.
INCREASED REGULATION ON THE ABILITY TO ASSIGN LIENS
Language of Section 4903.8 of the Labor Code has been amended to declare that only a lien owner will be entitled to any payment for lien services identified by subdivision (b) of Section 4903. This includes liens for medical-legal expenses except for those subject to independent medical review or independent bill review. New language adds that payment for the liens defined by subdivision (b) of Section 4903 will only be made to the lien claimant who provides evidence that they are the owner of the lien.
Furthermore, the new language provides that any lien filed after January 1, 2017, may not be assigned for any reason aside from the one exception: where the person who performed the lien services no longer performs such services and has assigned all right, title, and interest in the remaining accounts to another. In this very limited circumstance the assignee may recover the lien payments. Otherwise, any assignment after January 1, 2017, will be invalid.
The increased cooperation between state and federal agencies is expected to efficiently end funding of fraudulent medical and medical-legal services in the Workers’ Compensation System. By automatically suspending providers who have engaged in fraud or abuse, and subjecting lien payments to the special lien process the Workers’ Compensation System endeavors to eliminate any reward of fraudulent conduct, and deter future fraud in the system by this lack of reward. Finally, to avoid future circumvention of this new legislation through assignment of liens, increased regulation of the ability to assign has been included. Beginning January 1, 2017, the legislature has added additional defenses to fortify the Workers’ Compensation System from fraud.
 Labor Code §§ 139.21(a)(1)(A), (C); 4615(a).
 Labor Code §4615(b).
 Labor Code 139.21(b)(2).
 Labor Code § 139.21(c)-(d).
 Labor Code §4615(a).
 Labor Code §139.21(e)(1).
 Labor Code §139.21(e)(2), (h).
 Labor Code §139.21(f).
 Labor Code §139.21(g).
 Labor Code §139.21(g).
 Labor Code §139.21(i).
 Labor Code § 4903.05(c)(1)-(2).
 Labor Code § 4903.05(d).
 Labor Code § 4903.05(c)(1)-(2).
 Labor Code § 4309(a)(2).
 Labor Code § 4309(a)(4).
By Angelica A. Zabanal, Knox Ricksen LLP
Allstate Insurance Company and the People of the State of California were awarded $11.5 million and permanent injunctive relief after prevailing in a qui tam lawsuit filed in Los Angeles County Superior Court against defendants involved in a scheme to defraud insurance companies through phony or “sham” law offices. The Final Judgment and Permanent Injunction in the matter of People of the State of California ex rel., Allstate Insurance Company, et al. v. Wonguen Chang et al. (Los Angeles County Superior Court Case No. BC541476), ordered by Superior Court Judge Michael L. Stern on November 22, 2016, follows Allstate’s favorable jury verdict against defendants Christina Chang (“Chang”) and Christine Suh (“Suh”) in the matter on July 13, 2016.
The matter was handled by Knox Ricksen LLP’s qui tam practice group, including Thomas E. Fraysse, Richard A. DiCorrado, Angelica A. Zabanal and Ryan G. Jacobson.
Allstate alleged that Chang and Suh knowingly engaged in a fraud scheme in which they used the identity of practicing lawyers to create eight “sham” law offices to make false, fraudulent or misleading claims against insurance companies, so that settlement payments could be converted to their own use. Evidence presented at trial showed that several California lawyers were paid $3,000 per month for the use of their names and law licenses, which resulted in the creation of at least eight “sham” law offices in the Los Angeles area, over which the lawyers exercised no significant direction, management or control over the operation of the law office or the making and processing of claims. Chang and Suh rented office space, named the firms using the lawyers’ names, hired staff, opened firm bank accounts, obtained clients, presented demands to insurance companies for settlement and negotiated settlements, all in the name of licensed California attorneys, falsely making it appear as if a lawyer represented the client and claimant. Settlement payments from Allstate and other insurance companies were deposited in the “sham” law firm client-trust accounts (IOLTA accounts) opened by Chang and Suh, who then used remote check-cashing facilities, including a check-cashing facility owned by Suh, to convert the settlement proceeds to untraceable cash. Four lawyers whose names were used testified that they did not procure any clients for the law offices that they purportedly owned, did not create the law firms, did not authorize demand letters that were sent to insurance companies under their signature, were unware that settlements had been negotiated and paid by insurance companies, and had no access to client files, firm records and firm bank accounts. One lawyer testified that when he first appeared to work at a law office bearing his name, he was told to go home and was not allowed to review client files.
Allstate contended that Chang and Suh knowingly misrepresented that the law offices were lawful enterprises and that they concealed the fact that they were “sham” law offices, owned, operated, managed and controlled by unlicensed persons, all in violation of California law, including California’s Insurance Frauds Prevention Act. Allstate also contended that the settlements were procured so that Chang and Suh could convert the settlement proceeds for their own use by “structuring” checks out of the firms’ client trust accounts which were cashed in bulk at remote check cashing facilities, including liquor stores and small local markets.
At trial, Chang testified in her own defense, but her daughter, Suh, invoked her Fifth Amendment Privilege Against Self-Incrimination.
On July 13, 2016, after a two-week trial, a Los Angeles jury agreed with Allstate, finding that Chang and Suh knowingly made false claims against Allstate in 241 and 313 claims, respectively, and imposed civil penalties and assessments totaling $6,407,859.39. In post-trial motions, Judge Stern imposed further civil penalties and assessments against defendants Charles Rhyu, Robynnie Byon, Eunjin Chang and Wonguen “Steve” Chang in the amount of $1,734,948.26, and ordered the defendants to pay $3,401,229.38 in attorney’s fees, expenses and costs. The total monetary judgment is $11,544,037.03.
Judge Stern also issued a permanent injunction, prohibiting Chang and Suh from owning, operating or controlling a law firm; from hiring lawyers to work in a law firm; from practicing law without a license; from representing persons making claims against insurance companies; from advertising legal services; from issuing checks from law firm operating and client-trust accounts; from splitting fees with lawyers; from handling or processing insurance settlement checks; and from opening or using any bank account for a business engaged in the practice of law.
“This trial was notable as it represents one of the highest jury verdicts in a qui tam action brought on behalf of the State of California,” says Thomas E. Fraysse. “We are very pleased with the outcome of the matter, especially with respect to jury verdict and the injunctive relief ordered by the Court.”
Chang and Suh have filed an appeal.
A copy of Allstate’s Complaint and the Final Judgment and Permanent Injunction is attached and can be accessed by clicking the following links: Allstate’s Complaint is posted here and the Final Judgement and Permanent Injunction is posted here.