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U.S. attorney targets 'rampant corruption' in workers comp scheme

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Eight people have been indicted for allegedly submitting $25 million in fraudulent billings for medical services and devices to California workers compensation insurers, according to the U.S. Attorney's Office.

The defendants and six affiliated companies are accused of conspiracy and honest services mail fraud, the attorney's office said in a statement Tuesday. Grand jury indictments unsealed this week allege that the defendants “paid or received tens of thousands of dollars to” refer injured workers to certain medical service providers and receiving illegal kickbacks for those referrals.

So far, authorities have arrested a radiologist, a chiropractor, a medical equipment provider, a medical clinic administrator and a medical marketer in relation to the alleged scheme, according to Tuesday's statement. An attorney and an unidentified medical service provider also have been summoned to appear in federal court on Thursday.

“Today's indictments are only the first wave of charges in what we believe is rampant corruption on the part of some physicians and chiropractors in their dealings with the health care system in general, and California's workers' compensation system in particular,” U.S. Attorney Laura Duffy said in the statement.

Authorities say the scheme started when California injured workers filed a workers comp claim and sought chiropractic treatment for their injuries. The chiropractor accused in the scheme then referred those patients to other medical providers, such as a radiologist, who allegedly had paid bribes to receive those referrals.

Bribes in the scheme were allegedly hidden by masking those fees as “professional services” or “office rent,” the attorney's office said. At times, defendants in the case allegedly passed cash bribes to each other by hiding them in newspapers or handing the money off in the parking lot of a Jolly Roger restaurant.

Workers comp insurers were billed for treatments given to patients who were unaware of the alleged scheme, the attorney's office said. That includes “shockwave therapy,” and millions of dollars in billings for heating packs or ice packs given to injured workers.

If convicted, defendants in the case face up to 20 years in custody and up to $25,000 in fines, the attorney's office said.