7 Accused of Defrauding Blue Cross

Two people were arrested Friday morning in connection with a $57,000 insurance fraud scheme that also involved at least five employees of the Woodland Hills office of Blue Cross of California, state authorities said.

The Blue Cross employees, arrested Wednesday, allegedly generated checks over a seven-month period for themselves and friends by entering false claims into the company’s computer system, authorities said.

The two people arrested Friday, believed to be friends of the employees, were identified as Cynthia Fowlers, 20, and Michael Clark, 20, both of Pasadena. They were arrested on suspicion of grand theft for receiving falsely generated checks, said Rudy Cunningham, a senior investigator for fraud unit of the California State Department of Insurance.

The employees, four data keyers and one claim examiner, were arrested at Blue Cross’s main office on Oxnard Street after a two-month investigation by the the Department of Insurance.

More Arrests Expected

The five were identified as Kevin Collins, 20, and Mark Mitchell, 28, both of Los Angeles; Edward Curtis Jones, 26, of Canoga Park; Teshami Reid-Carter, 20, of Altadena, and Karen McLeod, 33, of Hollywood.

More arrests are expected, Cunningham said. He declined to say if more employees are suspects in the alleged computer scheme.

The employees’ job entailed entering information into the Blue Cross claim-processing computer which, in part, produces medical reimbursement checks. Cunningham said they all were hired last July and records indicated that several had lived at the same address for short periods during the past year.

All seven suspects were arrested on suspicion of grand theft and released on $1,500 bail each, except Mitchell, who also was charged with possession of a stolen check and released on $500 bail, Cunningham said. Arraignment is pending in Van Nuys Municipal Court.

Four employees were placed on administrative leave and one resigned, a Blue Cross spokeswoman said.

Since November, the five allegedly had devised a way to override the computer system by creating false claim codes that produced 25 checks for a total of $15,264. Some employees are suspected of using their personal Blue Cross insurance benefit identification codes to create phony claims, Cunningham said.

The checks, which were made out in the employees’ names, were mailed to their homes or to commercial mail drops, Cunningham said.

Another $42,000 in fraudulent claims and checks were processed through the computer, but the checks never were received by the employees, Cunningham said.

Some of those claims, he said, were rejected by the computer before the issuance of checks because of incorrect data entries, he said. Others were retrieved from mail bins during the state’s investigation.

Examiner Questions Claim

Joyce Armstrong, head of the loss prevention department of Blue Cross of California, said the scheme was uncovered in mid-December by a claims examiner who questioned a $500 check issued for drug reimbursement. The high dollar amount of the check alerted the examiner to investigate whether the excessive claim was in keeping with the client’s medical history.

“It turned out to be an isolated claim with no history to it,” Armstrong said. “We were sending a check for drugs to someone who never saw a doctor or had any other medical claims.”

The case was turned over to the state in mid-February after Armstrong came to believe she had substantial reason to believe a crime had been committed.

Initially, Cunningham said, checks were issued for small amounts--about $100 or $200--and then the amounts grew to $2,000 and $4,000. “They tested the system first and then greed took over,” Armstrong said. “They started with drug claims, then professional claims, because you can get more money. One became a doctor and another started performing surgery,” she said in reference to the service charges on the phony claims.

This is the sixth time in 15 years that employees have been either arrested or convicted of filing fraudulent claims, said Larry Rodriggs, spokesman for Blue Cross of California, which processes $24 million in claims statewide every working day.

“The fact that this has not occurred very often shows we really don’t have a problem,” Rodriggs said. “This is unusual because it involved a group of employees.”

About 2,500 people are employed at the Woodland Hills office, 280 of whom work as data keyers, he said.