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By Barry Zalma
He was born J.C. Hampton on a farm in South Carolina on June 6, 1955. The midwife who delivered him filled out the forms and recorded his birth certificate two months later. He was intelligent and gregarious. He made friends with his peers and with those older than he. When his family moved to California in 1965, he fell in love with the big city.
J.C. enjoyed school and excelled in all of his classes. He would visit the public library almost every day and on weekends. J.C. would ride the bus to the Central Library in downtown Los Angeles where he would spend the day wandering the stacks, reading everything that struck his interest. His interest centered on medicine and the law. He read everything from Blackstone to Perry Mason and from the Merck Manual to Dr. Kildare.
He lived with his mother, three younger brothers and two younger sisters in South Central Los Angeles. His mother worked 16 hours a day as a domestic for three separate families. He knew that law school and/or medical school were unobtainable financial goals. His mother was getting older and she needed help bringing up his brothers and sisters.
Then he met Dr. Severe, a doctor of chiropractic. Dr. Severe recognized the worth of an intelligent self-taught young man to his business.
When J.C. turned 16, he obtained a work permit and started working as an office administrator for Dr. Severe. His wide reading in medicine and law helped him to deal with the constant flow of patients through Dr. Severe’s office. He began, in Dr. Severe’s office, one of the city’s first computerized billing systems.
Within a short time, J.C. learned that the practice of chiropractic was more paper-intensive than it was patient-intensive. When he arrived, the doctor had eight young clerks typing bills and medical reports on IBM Selectric typewriters. The work was slow and tedious. The computers eased the tension and made the practice more efficient and profitable.
In his first two years, working only part-time, J.C. balanced the books of the chiropractic practice. He also modernized its billing system and reporting procedures so that Dr. Severe’s net profit increased by $50,000.
When he turned 18, J.C. took over the position of office administrator of Dr. Severe’s chiropractic office. He controlled everything, the patients coming in and the patients going out. J.C. was responsible for all of the reports to the insurance companies, lawyers and government payers.
Because of his interest in the law, he became acquainted with the lawyers who sent patients to Dr. Severe. He learned that he could supplement his income by merely sending patients to lawyers who would pay him $300 for each patient he referred.
His interest in medicine was satisfied when Dr. Severe let J.C. view his work and assist as Dr. Severe treated patients. He learned, on the job, how to use the physical therapy machines. J.C. was expert in providing heat treatments, massage and, under the supervision of Dr. Severe, he even performed chiropractic adjustments. By the end of five years on the job, J.C. knew everything there was to know about the chiropractic practice. He could do any task required in a chiropractic office and would have done so but for the need of a license. Dr. Severe respected the assistance given him by J.C. and increased his salary to $25,000 a year.
The gratuities paid to him by the local lawyers to whom he referred patients were considerable. By the time he was 25, J.C. was making $50,000 per year and paying tax on only $25,000 of it. He was no longer poor. His two brothers and one sister were in college. His family was living comfortably in a larger house in a better neighborhood.
Like most young people who are brought up poor, the money he was making was not enough. It would never be enough. The strong moral sense his mother had given him as a young man weakened with the profits he was making. What he was doing, he convinced himself, was not wrong. He was only taking money from insurance companies stolen from his family, friends and neighbors. There could be nothing morally wrong with stealing from a thief.
Once he had convinced himself that there was nothing morally wrong in what he did, he began to develop a plan to multiply his profits. Because of his many contacts with lawyers, he learned that they earned their money by taking most of what they recovered for injured persons. He also learned that the amount of recovery depended upon the extent of the medical treatment and billings received by the various patients. Usually settlements would be between three and four times the medical bills. The lawyer and his client would make more money, therefore, if the medical bills were larger.
He also knew, from his experience with the insurance companies and government agencies who paid most of Dr. Severe’s bills, that they never questioned Dr. Severe’s conclusions with regard to the extent of physical therapy required by a patient suffering from soft tissue injuries.
Since most of the physical therapy treatments consisted of hot packs (the patient would sit on an electric heating pad placed in the area of the injury for 15 minutes a day) and mechanical massage (the patient would lie on a mechanical massage table), the involvement of Dr. Severe in the physical therapy was almost non-existent. The billings could be increased at the option of J.C.
J.C., as the administrator, began a program of intensive physical therapy for each patient represented by counsel. They would come, on the average, five or six days a week for 15 minutes of treatments. Each treatment on each machine was billed at $40 per treatment.
The physical therapy treatments and the billings for the physical therapy treatments were recorded in a separate set of the doctor’s books and records. The doctor only knew of the billings for treatment he specifically ordered. All of the treatment not ordered by the doctor, but by J.C., was paid directly to J.C. In addition, he negotiated an increase in his $300 referral fee to $300 plus one-third of the fee collected by the lawyer. Business was good.
J.C. was making as much or more money than Dr. Severe. The word processors were operating full-time, eight hours a day, six days a week turning out medical reports and billings.
One of J.C.’s regular lawyer referrals was attorney Steven Penurious. Attorney Penurious came to J.C. with an idea to make a larger profit. The plan was simple and J.C. took it as his own.
J.C. would spend his mornings in front of the unemployment office. He would, as was his normal nature, strike up conversations with newly unemployed persons. He would explain to them their rights to benefits under the workers compensation system of the State of California for stress related injuries. All that was required of them was that they visit Dr. Severe’s office for examination and treatment as directed by J.C. and that they retain attorney Penurious. They would receive benefits far greater than unemployment insurance and would not be required to try to find work. They could relax and simply collect their money. The only requirement he set was that they could not take a job. The benefits paid were far greater than that paid by unemployment insurance and greater than most could obtain in the job market. J.C. had no trouble signing up 10 to 15 new patients every day. He and Penurious split the fees on an equal basis. J.C. kept to himself the payments for the physical therapy he reported to the insurers.
J.C. began recruiting ambulance drivers, body shop operators and tow truck drivers whom he would pay $50 to refer automobile accident victims to Dr. Severe’s office. J.C. began a series of physical therapy treatments and referred each of the accident victims, even if they were uninjured, to attorney Penurious. Each month 50 or 60 new claims were developed in this manner and J.C. and Penurious were making a fortune.
Greed is unlimited, however, and J.C. saw no reason to share his profits with injured people. Treating these people, even with the minimal hot pack treatments, became time consuming. There had to be a better way.
The plan created by J.C. and carried out by attorney Penurious was simple and devious. They developed a cadre of individuals who would buy automobile liability insurance policies. Each was prepared to report that they had been at fault in an accident with fictitious individuals. Each of the insured individuals would receive a $200 fee for each claim they reported. J.C. would create a complete medical history and treatment report for the fictitious individual on his word processor and sign it with the rubber stamp he had of Dr. Severe’s signature. Attorney Penurious would make a claim and settle with the insurance company without any individual claimant ever seen. Their $200 investment usually resulted in a $5,000 to $10,000 settlement with the insurance company. J.C. and Penurious had found a money-making machine.
J.C. and attorney Penurious became exceedingly wealthy. The truly injured patients were helped. Since the crowds were not going through the chiropractic office, these real patients received more thorough treatment. Dr. Severe was pleased because his practice ran efficiently and his income continued to increase. He never caught on.
J.C. and Penurious retired from their life of crime before they turned forty-five and are now living the pleasant life of luxury and comfort. J.C. was elected to the City Council in his community and Penurious is beginning a campaign to run for Congress in his area. His practice is now limited to divorce and estate planning.
Copyright Barry Zalma, 1994.
REPRINTED, WITH PERMISSION, FROM THE INSURANCE JOURNAL, 1994.
The above story is based on fact. The names, places and descriptions have been changed to protect the guilty. This story was written for the purpose of providing insurers and others in the business of insurance sufficient information to recognize insurance fraud. By describing methods by which insurance fraud has been perpetrated against insurers, it is hoped that insurers will be better able to defeat fraudulent insurance claims when they are presented.
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Barry Zalma, of the Culver City, California, law firm of Barry Zalma, Inc., is also president of ClaimSchool, Inc., the publisher of “How Your Friends and Neighbors Are Screwing You” a compendium of similar columns. His phone is (310) 390-4455.
© Copyright 1995 Alikim Media