California Man Faces up to 40 Years for Alleged Workers' Comp Fraud

A California man is facing up to 40 years in prison and $3.2 million in fines for allegedly defrauding the State Compensation Insurance Fund.

Joseph Baiden, 56, is charged with eight felony counts of workers' compensation fraud after bring arrested for underreporting $20 million of payroll for Nurse Connection Inc., a medical staffing service he operated, in order to reduce his insurance premiums. The estimated loss to the State Fund over a seven-year period is approximately $1.4 million, according to the California Department of Insurance, which conducted the investigation.

"It appears that Baiden was living a lavish lifestyle due to ill-gotten gains," Insurance Commissioner Steve Poizner said in a statement. "But through the work of our investigation and the efforts of our partners, the walls supporting his fraudulent schemes have come crashing down on him."

CDI froze Baiden's bank accounts and seized five homes and properties throughout the Los Angeles area with an estimated value of $4 million. The Los Angeles County District Attorney's Office is prosecuting the case.

Representatives of Nurse Connection declined to comment.

In June, Poizner announced $30 million in competitive grants to county district attorneys to fight workers' compensation fraud. Counties' applications are reviewed based on past-year performance and other criteria by a grant panel, the insurance commissioner and the Fraud Assessment Commission. The impact of workers' compensation fraud in California is equivalent to a $500 tax on every California resident, Poizner said (BestWire, June 19, 2009).

The top five writers of workers' compensation in California in 2008, according to A.M. Best state/line data, were: State Compensation Insurance Fund of California, with 22.6% market share; American International Group Inc., with 7.6%; Liberty Mutual Insurance Cos., with 6.7%; Travelers Group, with 6.3%; and Berkshire Hathaway Insurance Group, with 5.7%.