Workers' Compensation Fraud Inspector General 2023 Annual Report

2023

OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Executive Summary The mission of the Office of the New York State Workers’ Compensation Fraud Inspector General (WCFIG) is to conduct and supervise investigations of possible fraud and other violations of the laws, rules, and regulations pertaining to New York State’s workers’ compensation system. Through its investigations, audits, and reports, WCFIG reduces costs to the workers’ compensation system by combating fraud and improving the efficiency and effectiveness of the system. WCFIG’s investigations are complex and often involve detailed record analysis and interviews of employers, employees, health care providers, and insurance carriers. These investigations can result in criminal referrals, arrests, and prosecutions, as well as recoveries of restitution.

2023 marked Lucy Lang’s second full year as the New York State Workers’ Compensation Fraud Inspector General, having been appointed to the role by Governor Kathy Hochul on December 3, 2021. Throughout 2023, Inspector General Lang and her staff continued to conduct numerous in-person trainings and outreach presentations to organizations and key stakeholders in the workers’ compensation system, including local, state, and federal agencies, private carriers, and fraud prevention coalitions.

1,732 COMPLAINTS

18% compared to 2022 55% compared to 2021

11

ARRESTS

$768K+

IN WORKERS’ COMPENSATION FRAUD UNCOVERED

Lucy Lang

Inspector General

As a result of these efforts and other proactive initiatives, WCFIG received 1,732 complaints in 2023. This represents an increase of more than 18% compared to 2022, and a nearly 55% increase compared to 2021, at the end of which Lucy Lang was appointed as the Workers’ Compensation Fraud Inspector General. The investigations conducted by WCFIG in 2023 led to 11 arrests and uncovered more than $768,000 in workers’ compensation fraud.

Additionally, criminal convictions stemming from WCFIG investigations resulted in more than $1.3 million in fines and restitution for defrauded New York State agencies, insurance carriers, and employers.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Purpose & Scope of Annual Report New York State Workers’ Compensation Law section 136 mandates that WCFIG annually submit a report to the Governor and the Chair of the Workers’ Compensation Board that summarizes the activities of the office for that calendar year. Consistent with that statutory mandate, this annual report outlines the mission of WCFIG, describes the operational and administrative actions implemented by the office, and provides a summary of significant prosecutions that resulted from the office’s investigations in 2023. This report also provides information about WCFIG’s new and continued strategic partnerships with law enforcement partners, state agencies, insurers, and employers.

Introduction & Background WCFIG is responsible for protecting and promoting the integrity of the New York State workers’ compensation system, which provides cash benefits, medical care, or both, to workers who are injured or become ill as a direct result of their employment. Claims for compensation are adjudicated by the New York State Workers’ Compensation Board.

Appeals from decisions by the Workers’ Compensation Board are brought to board panels and full boards within the workers’ compensation system. Ultimately, appeals can be brought to the New York State Supreme Court Appellate Division, Third Department.

Pursuant to New York State Workers’ Compensation Law section 136, WCFIG is vested with the authority to investigate fraud and other violations of the laws, rules, and regulations relating to the workers’ compensation system, and to refer matters to federal, state, and local prosecutors or other appropriate law enforcement agencies for further investigation and criminal prosecution. In addition, WCFIG may refer matters to administrative entities, the New York State Insurance Fund, and other insurance carriers for investigation and/or audit. As part of its mission, WCFIG may also recommend legislative and regulatory changes to strengthen the workers’ compensation system.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Investigative Activities Overview of Investigative Process WCFIG investigations usually begin with either the lodging of a complaint alleging workers’ compensation fraud or the identification of potential fraud by the Inspector General in the course of WCFIG’s proactive initiatives. There are generally three types of fraud allegations received by WCFIG: (1) fraud by employers who are required to maintain workers’ compensation insurance coverage for their employees but who fail to do so, have inadequate coverage, or misrepresent the number and classification of individuals employed on their payroll in the insurance application process; (2) fraud by claimants resulting in the receipt of benefits to which they are not entitled; and (3) fraud by medical providers and/or other professionals, including but not limited to physicians, physician assistants, law judges, attorneys, court reporters, and insurance professionals.

Complaints regarding the workers’ compensation system are handled in the same systematic way as all other complaints received by the Offices of the New York State Inspector General.

Each of the more than 6,000 complaints received by the agency t annually via telephone, online, email, mail, and by hand are logged and reviewed by the Case Management Unit. WCFIG complaints are then directed to the WCFIG Triage Unit, an internal group formed in 2018 in response to the growing number of workers’ compensation fraud complaints. This unit, which is headed by the Attorney-In-Charge for Workers’ Compensation Bryan Richmond Fraud, Bryan Richmond, and the Managing Investigator for Attorney-in-Charge for Workers’ Compensation Fraud Workers’ Compensation Fraud, Jane Seeley, includes investigators, an investigative nurse, and an auditor, and conducts a preliminary investigation testingggggg and analysis of the matters alleged.

Based on the results of the Triage Unit review, certain complaints are referred to another government agency or insurance carrier for further action, or to a WCFIG team for further investigation. Cases opened by WCFIG for full investigation are assigned to multi-disciplinary teams led by an investigative counsel who is assisted by investigators, investigative auditors, medical professionals, and computer forensic specialists. The investigations are supervised by a regional Deputy Inspector General and the Attorney-in-Charge for Workers’ Compensation Fraud. Acting under WCFIG’s statutory authority, the investigative teams may subpoena witnesses, take sworn testimony, and compel the production of relevant records.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Following a WCFIG investigation, findings may be referred for prosecution to district attorneys across New York State, the New York State Attorney General’s Office, or the United States Department of Justice. Referrals may also be made to investigative offices within the New York State Workers’ Compensation Board for enforcement action such as the revocation of a medical provider’s authorization to treat workers’ compensation patients or the issuance of “stop work” orders against non-compliant businesses for failure to secure appropriate workers’ compensation insurance. In other cases, the investigative findings may be referred to insurance carriers such as the New York State Insurance Fund, which can initiate civil litigation or administrative proceedings, including the reduction or suspension of workers’ compensation wage indemnity benefits to claimants engaging in fraudulent or inappropriate conduct. Investigations may also be closed as unsubstantiated.

Key Prosecutorial and Investigative Partners

Arrests and Completed Prosecutions in 2023 WCFIG investigations initiated in 2023 led to criminal charges against 11 people. Seven of these Claimant Fraud (36.4%) matters involved employer fraud, while the remaining four involved claimant fraud. Of these 11 arrests in 2023, six resulted in convictions and five matters are still pending. Several criminal prosecutions initiated in prior years concluded in Ar res ts 2023, resulting in criminal convictions of an additional five people. Overall in 2023, WCFIG investigations, and the corresponding criminal prosecutions, resulted in more than $1.3 million of restitution, fines, and other court orders. Below are Employer Fraud summaries of several of the WCFIG investigations (63.6%) that resulted in criminal convictions in 2023.

$1.3+ Million PAGE 04

In restitution, fines, and other court orders resulting from WCFIG investigations.

OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Cases Involving Fraud by Employers In 2023, WCFIG continued its investigations of employers within New York State who fail to maintain appropriate workers’ compensation insurance for their employees as mandated by New York State Workers’ Compensation Law, or who misclassify their employees to reduce the cost of their insurance. Fraud by employers adversely impacts both the residents and the economy of New York State by placing injured employees at risk and placing honest employers on an uneven playing field with those competitors who do not provide their employees with the requisite insurance. WCFIG’s investigations in 2023 of workers’ compensation fraud by employers resulted in seven arrests and prosecutions.

In December 2023, the owner of multiple demolition and asset recovery companies entered into a federal guilty plea to tax charges following a joint investigation by WCFIG, the Internal Revenue Service, and the United States Attorney for the Eastern District of New York, which included findings of fraud involving workers’ compensation insurance premiums and tax evasion.

The 2023 joint investigation found that the owner of Metro Industrial Wrecking and Environmental Corp., Modern Waste Services Corp., MIWEC Asset Recovery Inc., and Waste Away Inc. (collectively “Metro Industrial”) misclassified the workforce of these entities to multiple insurance companies to avoid paying higher premiums for workers’ compensation insurance. Despite reporting to insurers that its workforce was largely clerical, Metro Industrial’s employees were mostly engaged in demolition and asset recovery, a higher-risk and more costly classification code. During the period of misclassification, one of Metro Industrial’s employees died while removing a large metal sign.

Following a prosecution by the United States Attorney for the Eastern District of New York, the owner pled guilty to federal tax charges and was ordered to pay $662,242 in workers’ compensation premium fraud restitution to the involved insurance companies in addition to payments to the Internal Revenue Service.

Cases Involving Fraud by Claimants In 2023, WCFIG continued its investigations of workers’ compensation claimants who defraud the workers’ compensation system by falsely reporting their work status or activities or who are otherwise collecting benefits to which they were not entitled. Fraud by claimants increases the costs of insurance to New York State employers and erodes the public’s trust in the workers’ compensation system. In 2023, WCFIG’s investigations related to claimants who fraudulently collected workers’ compensation benefits resulted in four arrests and prosecutions.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

In June 2023, following a WCFIG investigation, a Licensed Practical Nurse working as a home health aide for Oswego County Opportunities, Inc., who misrepresented her ongoing outside work activity while collecting workers’ compensation wage indemnity benefits, was arrested and charged with three felony offenses including Grand Larceny, Insurance Fraud, and Fraudulent Practices in violation of the Workers’ Compensation Law. The WCFIG investigation found that between February 2019 and March 2021, the claimant worked as a home health aide for multiple private employers while repeatedly stating to physicians that she had not been engaged in any work activity since her involvement in a workplace accident in 2019. Throughout the time the claimant engaged in outside work activity, she continued to collect workers’ compensation wage indemnity benefits.

In December 2023, following a prosecution by the Oswego County District Attorney, the claimant pled guilty to the felony offense of Grand Larceny. She was subsequently sentenced to a three-year conditional discharge and ordered to pay restitution of $24,229 to the New York State Insurance Fund.

In September 2023, following a WCFIG investigation, a Direct Support Assistant employed by the New York State Office for People With Developmental Disabilities (OPWDD) was arrested and charged with seven felony offenses including multiple counts of Grand Larceny, Insurance Fraud, Offering a False Instrument for Filing, and Fraudulent Practices in violation of the Workers’ Compensation Law. The WCFIG investigation found that between January 2022 and March 2023, the claimant misrepresented the degree and extent of his disability, as well as his ability to work. More specifically, during this period, the claimant was working as a bus operator while stating to physicians and completing workers’ compensation documentation indicating that he had not been engaged in any type of work activity since being involved in a workplace accident in late 2020 that led to difficulties with prolonged sitting and driving. Throughout the time the claimant worked as a bus operator, he continued to collect workers’ compensation wage indemnity benefits.

Following a prosecution by the Monroe County District Attorney, in December 2023, the claimant pled guilty to Offering a False Instrument for Filing. He was subsequently sentenced to three years of probation and ordered to pay restitution of $16,764 to the New York State Insurance Fund.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Cases Involving Fraud by Medical Providers and Other Professionals In 2023, WCFIG also continued its investigations of medical providers and other professionals whose job responsibilities are integral to the proper administration of the workers’ compensation system. These professionals may include treating and independent physicians, physician assistants, nurses, home health aides, law judges, attorneys, court reporters, and insurance professionals. Provider cases are often complex and involve longterm investigations. As a result of WCFIG’s investigations in 2023, several matters were referred to both licensing agencies and the Health Provider Discipline Unit of the Workers’ Compensation Board resulting in the loss of certifications. Several other investigations involving medical providers and other professionals are ongoing.

Reports and Recommendations In May 2023, the Inspector General released a report detailing patterns of egregious workers’ compensation abuse by New York State Department of Corrections and Community Supervision (DOCCS) security staff. The report, which followed an in-depth investigation by the Inspector General and her staff, detailed a disturbing pattern of workers’ compensation abuse spanning seven years throughout multiple DOCCS facilities, arguably incentivized by existing terms in its contract with the New York State Correctional Officers and Police Benevolent Association (NYSCOPBA).

Included in the report’s factual findings was data showing that in fiscal year 2020-2021, DOCCS had to cover nearly 1.8 million hours of staff time as a result of workers’ compensation absences, which constituted a nine percent increase from the year prior, and a 61 percent increase over the prior decade. Notably, in fiscal year 2019-2020, roughly two out of three workers’ compensation claims filed by correction officers attributed the injury at issue to an on-the-job cause unrelated to physical contact with an incarcerated individual.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Given the impact that widespread staff absences in correctional facilities have on both the incarcerated population and the remaining DOCCS staff—including decreased morale, forced overtime, staff departures, lack of available programming or recreation, and the safety of all— the report urged the New York State Office of Employee Relations to review and consider modifying the workers’ compensation benefits afforded to the Security Services Unit of New York State, including DOCCS employees, during the collective bargaining process for the next contract.

Training and Outreach During 2023, WCFIG continued to expand its efforts to provide training and information on both its mission and various aspects of workers’ compensation fraud to interested parties across New York State in and out of state government. As part of this initiative, the Inspector General appointed a Director of Training and continued a robust social media presence to connect with the public and solicit complaints. WCFIG has also continued to provide inperson presentations and trainings conducted by WCFIG staff. This includes providing training to every new recruit enrolled in programs at the DOCCS Training Academy in Albany.

The training focuses on the Inspector General’s jurisdiction and issues relating to workers’ compensation fraud and abuse. Since the inception of this initiative, the Inspector General has trained thousands of future correction officers on these matters. The increased training has improved WCFIG’s visibility to stakeholders statewide including DOCCS staff and facilitated open lines of communication leading to increased complaints and more prompt identification of fraud.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

In April 2023, the Inspector General and her staff met with the Workers’ Compensation Board at a regular meeting in Schenectady, New York to present the 2022 annual report, outlining a number of new initiatives and successes in her first year as the Workers’ Compensation Fraud Inspector General.

In May 2023, WCFIG staff conducted a presentation regarding identifying and reporting workers’ compensation fraud at the spring conference of the New York State Association of Self-Insured Counties in Oswego, New York.

Also in May 2023, the Inspector General and her staff presented at The Conference That Counts (TCTC) and annual meeting of the Hudson Valley Chapter of The Institute of Internal Auditors held in Albany, New York.

The following month, in June 2023, WCFIG staff presented at the annual joint New York Anti-Car Theft & Fraud Association (NYACT) and National Insurance Crime Bureau (NICB) Workers’ Compensation Fraud Training seminar in Plainview, New York.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

In October 2023, the Inspector General gave the keynote presentation at the Annual Training Conference of the National Association of Inspectors General in New York City and participated in various breakout sessions where she described her jurisdiction and work as the Workers’ Compensation Fraud Inspector General.

In 2023, Inspector General Lang created the Offices of the Inspector General Training Unit to further meet her goal to provide training to private organizations and government agencies. Housed in the Chief Counsel’s Office, the Training Unit is comprised of the newly hired Director of Training Katie Q. McCutcheon and Executive Coordinator for Training Karen Wolfe.

Katie McCutcheon Director of Training

Jack Wild

Director of External Affairs

In 2023, the Inspector General appointed Director of External Affairs Jack Wild to enhance understanding and compliance with the Offices’ mandates, increase coordination with local, state, and federal law enforcement, and grow engagement with the public and press. Throughout the year, the Inspector General and her staff met with numerous state and county agencies to clarify WCFIG’s jurisdiction and its role in preventing fraud and ensuring integrity within the workers’ compensation system and state workforce.

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Resource table with WCFIG information at a community event PAGE 10

OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Inspector General in the Media Since Inspector General Lucy Lang’s appointment, the agency has reimagined its approach to press. This strategy simultaneously launches the Offices of the Inspector General into a new era of transparency while remaining steadfast in our commitment to the confidentiality that a thorough and independent investigative process requires. This work notably includes working to ensure that journalists understand what WCFIG does, its jurisdiction, and how its work to safeguard the workers’ compensation system benefits the state as a whole.

In 2023, IG Lang was interviewed 28 times across all major mediums, including print, television, radio, and web.

28

Total Interviews in 2023

2023

13

Media Interviews Breakdown

Television

10

Print

5

Radio

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Initiatives and Task Forces In 2023, WCFIG maintained key partnerships with other investigatory and prosecutorial offices in order to combat workers’ compensation fraud. WCFIG regularly met with representatives of the New York State Insurance Fund to share information and coordinate resources to combat fraud and improve the efficiency and effectiveness of the workers’ compensation system. WCFIG also met with many of the state’s district attorneys, the New York State Attorney General’s Office, and United States Attorneys’ offices to discuss WCFIG’s enhanced oversight and enforcement efforts, as well as to present case referrals. WCFIG staff also met with the Northern District of New York Health Care Fraud Task Force.

WORKERS’ COMPENSATION FRAUD TASK FORCE Throughout 2023, WCFIG continued its participation in the Workers’ Compensation Fraud Task Force, which was created in an effort to reduce workers’ compensation costs in New York State as well as prevent and mitigate accidents, create efficient and effective claims management, and reduce fraud and abuse. WCFIG has been an active participant in this task force since its 2015 inception and meets regularly with its members, including representatives from the New York State Insurance Fund and human resources staff from various state agencies. WCFIG continues to actively pursue numerous investigations arising from its work with this task force.

JOINT TASK FORCE ON EMPLOYEE MISCLASSIFICATION AND WORKER EXPLOITATION This past year, WCFIG also continued its collaboration with the Joint Task Force on Employee Misclassification and Worker Exploitation (JTF), which was established in 2016.

Employee misclassification adversely impacts the residents, businesses, and economy of New York State by denying employees the full protections of workers’ compensation and unemployment benefits, and places honest employers on an uneven playing field with competitors who do not provide their employees with legally required benefits.

Accordingly, the JTF was charged with coordinating the work of state agencies to ensure, among other things, the enforcement of laws that address employer misclassification of workers and the development of legislative proposals and other tools to combat this problem. WCFIG is currently investigating several cases involving employee misclassification. The JTF was suspended during periods of the pandemic but restarted its efforts with the involvement of the Inspector General in 2022, and remains active to date.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

DIRECT COLLABORATION WITH THE WORKERS’ COMPENSATION BOARD WCFIG also continued its collaboration in 2023 with the New York State Workers’ Compensation Board’s Division of Operations and Compliance Enforcement Unit, which monitors the workers’ compensation insurance coverage of businesses and employers in New York in order to ensure proper coverage for all New York workers in the event of a work-related injury. WCFIG and the Division of Operations and Compliance Enforcement Unit met numerous times in 2023 to combine resources in investigating matters involving fraud perpetrated by employers in New York State.

In addition, WCFIG continued its collaboration with the Workers’ Compensation Board in order to combat fraud committed by healthcare providers complicit in enabling fraud against the workers’ compensation system. Throughout 2023, WCFIG coordinated efforts with the Workers’ Compensation Board’s Office of General Counsel, which oversees healthcare provider discipline, in conjunction with the Office of the Medical Director within the Workers’ Compensation Board. Healthcare providers and physicians must be authorized by the Workers’ Compensation Board in order to treat workers’ compensation patients. Similar to WCFIG’s endeavors with the Workers’ Compensation Board’s Division of Operations and Compliance Enforcement Unit, when a WCFIG investigation involving a medical provider reveals misconduct that does not rise to the level of criminality or is not accepted by a prosecutor for criminal prosecution, WCFIG refers those matters to the Workers’ Compensation Board for appropriate administrative action.

JOINT CONTINUING LEGAL EDUCATION CONSORTIUM In 2023, the Inspector General began participating in a joint continuing legal education (CLE) consortium initiated and hosted by the New York State Insurance Fund, composed of stakeholder organizations including the Workers’ Compensation Board, the Department of Labor, the Board of Industrial Appeals, and the Unemployment Insurance Appeals Board. The group aims to conduct quarterly joint legal education presentations for their combined staffs in an effort to share knowledge of fraud investigations and trends and other expertise relevant to their respective missions.

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OFFICE OF THE WORKERS’ COMPENSATION FRAUD INSPECTOR GENERAL 2023 ANNUAL REPORT

Conclusion This 2023 WCFIG Annual Report summarizes the office’s anti-fraud activities during the past year. In 2024, WCFIG will continue to promote the integrity of the New York State workers’ compensation system through its investigations, collaborative efforts with other local, state, and federal agencies, and training and outreach. Additionally, WCFIG will continue to engage in proactive initiatives to strengthen the workers’ compensation system and increase the detection, prevention, and prosecution of claimant, employer, and provider/professional fraud. In the years ahead, WCFIG will continue to protect vulnerable workers, prevent fraud, and yield significant savings for New York State.

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