Stress Benefits for Doctor Challenged : Government: Ira Reiner says physician who pleaded guilty to fraud and theft charges for bilking patients should not receive state disability payments.

A wealthy Century City physician, who pleaded guilty to 25 felony fraud and theft charges after bilking insurance carriers of up to $8 million, claimed he was stressed out after his indictments and has been receiving $266 a week in state disability payments.

On Thursday, Dist. Atty. Ira Reiner said Dr. Gershon W. Hepner, facing a 12-year-prison sentence as one of the most “prolific and blatant” perpetrators of insurance fraud in the history of Los Angeles County, should not be eligible for stress-related disability funds from the state.

“Sometimes a government agency does something so stupid you say that you can’t believe it,” Reiner said. “But now a government agency has done something so stupid, I really can’t believe it. This is totally outrageous.”

Hepner, who prosecutors said used his medical practice as “a license to steal,” has been receiving disability insurance from the state Employment Development Department since last April--six months after he was indicted by the Los Angeles County Grand Jury for his role in a massive insurance fraud scam and six months before he pleaded guilty to 25 felony counts of fraud, grand theft and tax evasion.

Reiner sent a letter Thursday to Thomas Nagle, director of the state agency, ridiculing the department’s action and demanding that it stop the disability payments and force Hepner to return all state funds he has received. Reiner said he will also seek legislation to ban payments to anyone claiming stress from prosecution.

“Admittedly, criminals may find it stressful to be caught, prosecuted, and convicted for committing their crimes,” Reiner wrote in the letter. “But I cannot imagine that EDD would compensate them for this burden. (Hepner) gets arrested and he’s going to go to prison--so he says he’s stressed out. I should hope so! Isn’t that the idea.”

But department officials say their hands are tied because the law mandates benefits for anyone who a physician certifies is stressed out--regardless of the reasons. Those who can prove that they cannot work because of a non-work-related illness or injury are eligible for state disability insurance.

“Whether it’s falling off your roof or a stress-related claim related to a (court) trial, it doesn’t matter,” said Anita MacKenzie, an agency spokeswoman. “The law doesn’t give us the authority to arbitrarily make judgments in specific cases. But we are looking at changing the regulations.”

Hepner, an internist, suffered a breakdown in court last week and tried to intimidate one of the witnesses who testified against him. A judge ordered Hepner jailed and set a March 12 hearing date to determine whether the physician is mentally competent. Hepner faces a maximum term of 12 years and $1 million in fines and restitution, prosecutors said.

In letters to Superior Court Judge Stanley M. Weisberg, two psychiatrists said Hepner has suffered from “hypomania”--a mental disorder that causes him to act in a compulsive, excessive manner--for at least the past eight years, and perhaps as long as a decade. The psychiatrists say the disorder prompted Hepner to fritter away his millions on expensive cars, art and foolish stock investments. They also say it is to blame for the fraud he committed.

“Prior to his legal problems,” wrote Dr. Franklin C. Milgrim, the Beverly Hills psychiatrist who treats Hepner, “his mood was primarily expansive, with him going on buying sprees, giving away large sums of money to charities, being involved in numerous projects socially . . . with him frequently getting very little sleep and feeling as though he had boundless energy.”

Hepner received about $1.7 million per year in phony insurance claims between 1984 and 1989, prosecutors said. He used the money to purchase a $3-million art collection, a Rolls Royce, two Jaguars and a million-dollar home in Beverlywood, authorities say.

But when Hepner ran afoul of the law, he began to suffer from serious depression. Since that time, Milgrim said, Hepner has been treated with various psychotropic drugs but has shown “little overall improvement.” At times, he has demonstrated suicidal tendencies.

The letter from Milgrim and another psychiatrist, coupled with those from Hepner’s wife and children, paint a portrait of a workaholic doctor who was overzealous in every pursuit--in establishing his private medical practice; in his devotion to Orthodox Judaism; in collecting art and artifacts from Japanese, Jewish and American Indian cultures; in his acquisition of material wealth and, most of all, in the way he spent his millions.

Hepner’s attorney, Harland Braun, called Reiner’s public announcement “a desperate case of election year politics.” Reiner is seeking reelection in June.

“Every doctor who has examined Mr. Hepner has found him medically disabled,” Braun said. “He is mentally impaired. Although his crimes were bizarre and outrageous, he is eligible for disability insurance because it’s a rule of the the law. It’s not a rule of Ira Reiner’s.”

According to court documents, Hepner was born in Leipzig, Germany, but his family fled to England in 1939, settling in a middle-class neighborhood in London. He studied at a theological seminary in Israel and returned to London for medical school. He spent the early part of his career in academia, teaching at Pennsylvania State University and the UCLA School of Medicine, and opened his practice in 1980.

His practice grew rapidly, with Hepner devoting his boundless energy to his work and opening one office after another, even when it seemed a poor business decision. By 1989, his overhead was more than $1 million a year, yet he planned that year to open a fifth office, documents showed.

His annual income soared during the mid-1980s, reaching $918,000 in 1986, according to a financial statement his accountant filed with the court. The statement says that between 1984 and 1990, the Hepners made nearly $689,000 in charitable contributions.

Prosecutor Richard Rosenthal maintains that the numbers are way off, noting that Hepner pleaded guilty to three counts of personal income tax evasion for 1986, 1987 and 1988. He maintains that Hepner has continued to hide his true wealth from investigators.

“He was a one-man crime spree,” said Rosenthal, a deputy district attorney in the major fraud division. “The courts would be hard-pressed to find a more outrageously criminal doctor in the history of the county. Yet he has continued to manipulate the system by demanding money from the state due to stress caused by his own misconduct.”

On the advice of his psychiatrists, who say he is too depressed to treat patients, Hepner closed his medical practice in November, 1990. However, he has retained his medical license.

“When something like this happens, you don’t know whether to laugh or to get angry,” Reiner said. “This is really going to give government handouts a bad name.”