9th Arrest Ends Investigation of Insurance Fraud

A nine-month investigation into a computerized insurance fraud scheme involving former employees of the Woodland Hills office of Blue Cross of California has ended with the arrest of a North Hollywood man accused of receiving $20,000 in checks, a state official announced Monday.

Greg Johnson, 34, was the ninth person arrested in connection with the scheme in which six Blue Cross employees allegedly generated $116,000 in checks for themselves and friends by entering false information into the company’s computer system, said Rudy Cunningham, a senior investigator for the fraud unit of the California Department of Insurance.

“We can say now that this arrest has concluded the investigation,” Cunningham said.

Besides the $20,000 Johnson got from cashing the checks, Cunningham said, another $22,000 worth of claims were processed in his name but were either rejected by the company’s computer system or intercepted by investigators.

Eight People Arrested Last May

Johnson is being held in County Jail in lieu of $50,000 bail. He was charged last week with grand theft and three counts of perjury for allegedly possessing false driver’s licenses.

Eight people, including the employees, were arrested last May. One employee resigned after his arrest and the others were dismissed, a Blue Cross spokesman said. It was the sixth time in 15 years that employees have been arrested for fabricating claims, the spokesman said.

Cunningham said the former employees devised a way to override the computer system by creating false claim codes. They produced $41,000 in checks and attempted to generate another $75,000, he said.

Two former employees pleaded no contest to grand theft charges, were each sentenced to 90 days in County Jail and three years’ probation, and were ordered to pay back money they received from the scheme. A third former employee was ordered to pay back $483 or perform 200 hours of community service after pleading guilty to misdemeanor grand theft.

Another former employee is awaiting sentencing after also pleading guilty to misdemeanor grand theft. Four other suspects are awaiting preliminary hearings on grand theft charges.