CDI Updates Fraud Cases

March 25, 2003

The California Department of Insurance (CDI) updated several cases recently:

·HANFORD, CA - Griffin Bailey, Jr., D.C., 42, of Hanford, entered a plea of no contest to one misdemeanor count of accessory to a fraudulent workers' compensation insurance claim and was immediately sentenced to three years probation and fined $1,000. Bailey is a licensed chiropractor and owner of Bailey Chiropractic. The Kings County District Attorney's Office prosecuted the case.

The plea resulted from a joint investigation of Charlotte Chapman, of Hanford by the California Department of Insurance (CDI) Fraud Division and the Kings County District Attorney's Office. From 1999 to 2001, Bailey treated Chapman for neck pain, back pain and carpal tunnel syndrome while she was under contract with Bailey to manage his chiropractic business. While receiving treatment from Bailey, Chapman reportedly participated in multiple triathlons and military obstacle course races and worked full time while receiving workers' compensation and private disability insurance benefits. When questioned by investigators, Bailey reportedly stated he prescribed participation in the athletic events to Chapman as treatment for her back injury.

In February 2003, Chapman plead no contest to one count of felony workers' compensation insurance fraud. She is to be sentenced in the Kings County Superior Court on April 30, and could receive up to five years in jail, an $188,000 fine and pay $94,000 in restitution. Chapman is part-owner of Valley Medical Managers.

·SAN JOSE, CA - Cortland Clare Lanning Jr., of Monte Sereno, was sentenced on one felony count of allegedly making a false or fraudulent statement for the purpose of reducing premium, rate or cost of workers' compensation insurance; one felony count of filing a fraudulent employment tax return and one felony count of failure to remit taxes. Lanning's sentence was three years probation, four months in the county jail work furlough program and $180,000 in restitution to Santa Clara County, the workers' compensation carrier Golden Eagle and the Employment Development Department (EDD).

Suspect Tonia Camarena, of San Jose, was also sentenced for a misdemeanor, accessory to a felony. Camarena's sentence was three years probation and 100 hours of community service.

Investigators found that Lanning Jr., owner of C.K. Lanning Construction, a San Jose based firm, and his bookkeeper, Russell Louis Mendoza, reportedly conspired to alter payroll records for the purpose of reducing the premium rate and cost of workers' compensation insurance. C.K. Lanning Construction Company's payroll records were allegedly altered to increase the hourly payroll rate reported to their workers' compensation insurance carrier, thus effectively reducing the rate at which insurance coverage was billed.

The investigation further revealed Lanning wrote a series of checks from the account of C.K. Lanning Construction Company to employee Tonia Camarena in order to obtain cash used to pay wages. These cash wages allegedly went unreported to both EDD and to their workers' compensation insurance carrier, thus reducing their income tax liability and further reducing their workers' compensation premiums.

Lanning Jr. and Mendoza were originally charged with multiple felony counts of workers' compensation insurance fraud and tax evasion. Tonia Camarena was reportedly charged with conspiracy. The case was prosecuted by the Santa Clara County District Attorney's Office.