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Workers comp fraud report echoes litigation trend

Workers comp fraud report echoes litigation trend

Workers compensation fraud complaints ticked up in New York in 2021 as more employees returned to work, though nearly half were deemed “unsubstantiated,” according to a report by state officials.

The rise in fraud allegations, though, correlates with an increase in accused workers seeking legal advice, a well-known workers comp fraud defense lawyer said.

Last week, New York State Inspector General Lucy Lang released the state’s 2021 Workers Compensation Fraud Annual Report, detailing claims and fraud investigations last year. 

In 2021, WCFIG received 1,118 fraud complaints, up from 1,019 in 2020, and dismissed 492 matters as unsubstantiated or 44%, compared with 336 in the prior year.

Aries Dela Cruz, director of strategic initiatives at the Offices of the New York State Inspector General in Albany, New York said there are “myriad reasons” complaints were unsubstantiated, but the overriding reason is insufficient evidence to bring a criminal prosecutor or refer to a prosecutor.

“There may either be insufficient evidence of employees or there is actually workers comp on the employer’s part,” Mr. Dela Cruz said. “For an employee, there’s either insufficient evidence of outside activity or that the employee has not actually received indemnity benefits during periods of outside activity.”

Todd Spodek of New York-based Spodek Law Group P.C. – criminal defense attorney to the so-called Soho Grifter fraudster Anna ‘Delvey’ Sorokin – who represents workers accused of fraud, said his firm has seen an increase in clients seeking representation for fraud in the pandemic. 

“The pandemic definitely drove up fraudulent claims, and since it became easier to file the claims under COVID, more people filed and more people were potentially committing crimes or doing things that were unethical,” Mr. Spodek said.

Additionally, while courts in New York reopened in 2021, a significant backlog caused by closures during the pandemic limited or delayed of criminal proceedings and the presentation of new cases to grand juries by district attorneys throughout the state, the fraud report states.

Mr. Spodek said the uptick is likely a result of the economic effects of the pandemic on workers – job loss, delays in getting unemployment, housing issues – paired with COVID-19 delays and disruptions. 

“There certainly are more cases being put under scrutiny,” Mr. Spodek said. “Just like there was an uptick in Paycheck Protection Program fraud cases, there’s an uptick in people who tried to take advantage of workers comp benefits.”

What becomes of unsubstantiated complaints depends on case evidence, Mr. Dela Cruz said. “Some are closed outright, and some are referred to other agencies for possible further investigation,” he said. 

“A lot of people filed fraudulent claims and were unable to provide the documentation to support it,” Mr. Spodek said. “And, a lot of times people just forget about them. There’s also a significant amount people who file these things and then wind up moving or leaving.”

Among the 1,118 complaints, WCFIG opened 28 as full investigations, continued 334 matters as ongoing preliminary investigations, and closed 51 for the failure to allege actionable wrongdoing or where WCFIG lacked jurisdiction to investigate, among other reasons. 

Of the 492 unsubstantiated matters, WCFIG referred 213 complaints for further action to the appropriate agency or insurer, including the New York State Insurance Fund, other investigative offices within the New York State Workers’ Compensation Board, or other interested parties.