Participants in $200M California Workers’ Comp Scheme Sentenced

Several conspirators involved in a massive workers’ comp kickback scheme were ordered in late February to serve prison sentences and pay millions in financial penalties for their roles in the corrupt payment of millions of dollars to induce doctors and other medical professionals to refer hundreds of injured workers for medical treatments and services.

According to court records, dozens of marketers, doctors, lawyers and medical service providers conspired to bilk the workers’ comp system in California by buying and selling patients and their individual body parts like commodities.

Among the defendants sentenced was an attorney, a chiropractor, two business owners and several marketers who referred patients for tests, such as MRIs, functional capacity exams and sleep studies, and treatments like X-rays and ultrasound, as well as pain medications, and durable medical equipment based on the corrupt payments.

Defendant Fermin Iglesias and co-defendant Carlos Arguello reportedly operated a patient-capping enterprise, in which they found individuals who would file workers’ comp claims against their employers.

Iglesias and Arguello then sold, bartered and exchanged these applicants with others in the workers’ comp industry, including attorneys, primary care physicians and providers of medical goods and services. Each of these entities had to “pay to play,” and as the patient was referred throughout this corrupt system, money changed hands at each step. Arguello operated several patient-recruitment entities, including one called Centro Legal.

Through billboards, flyers, advertisements and business cards, Centro Legal recruited persons to seek workers’ compensation benefits from their employers or former employers. When the injured worker called the 1-800 number on the billboard or card, he or she reached a call center, which might be located in another country. From there, Iglesias’ company, Providence Scheduling, took over brokering the patient to maximize the profit that could be extracted from him or her.

Centro Legal referred the newly-acquired patient to complicit workers’ comp attorneys. To get these new clients, the attorneys in the corrupt network were expected to comply with certain conditions: first, they had to use Arguello’s copying service to fulfil document requests for all of the new client’s medical records; second, they had to agree to designate as their client’s primary treating physician with one of the complicit physicians within the corrupt network. In exchange, the attorneys received compensation.

In sentencing hearings held on Feb. 20 and 21, U.S. District Judge Cynthia A. Bashant sentenced each defendant to custodial time. For his crimes, Iglesias was sentenced to 60 months in custody, and required to forfeit $1,005,000 in ill-gotten gains. Judge Bashant imposed five years’ probation on Igelsias’ corporations, MedEx and Meridian, and imposed a $500,000 joint and several fine. Miguel Morales was sentenced to 12 months and one day in custody, and was required to forfeit $140,000.