Pitching Workers’ Comp : Insurance: ‘Cappers’ work the streets, trying to get passersby to pursue workers’ compensation claims. Authorities say the practice increases fraudulent filings.

Victor A. Hernandez spends most days outside the state employment office on Venice Boulevard in downtown Los Angeles, passing out business cards, talking to the down and out, touting medical and legal “referral services.”

He is part of a small army of front men for doctors and lawyers, street-corner pitchmen who investigators say are contributing to Southern California’s growing workers’ compensation fraud problem.

Their “offices” are the sidewalks outside closing factories and even homeless camps. Authorities say the pitchmen coax the poor and unemployed to pursue workers’ compensation claims--often illegitimate--despite a 3 1/2-month-old state law intended to eliminate the practice.

Working with near impunity on the streets of Los Angeles, they are visible symbols of the growing workers’ compensation problem. At the same time, the individual pitchmen usually are too small-time and often operate in legal waters too murky to trigger a quick crackdown by law enforcement.

Often called cappers, runners or steerers, these pitchmen are simply the “little guys,” said William P. Molmen, general counsel for the California Workers’ Compensation Institute, a trade group. “What district attorney is going to file charges against a single capper?

“You’ve got to trace the thing to its roots,” he added. “You’ve got to get to the doctors and lawyers.”

California businesses paid more than $10 billion in workers’ compensation claims last year, triple the amount of a decade ago. Industry officials say 10% to 40% of the claims may be fraudulent or abusive.

And the pitchmen play a role in the workers’ compensation crisis, which is driving up the cost of getting insurance--and doing business--in the state. For some doctors, medical clinic owners and lawyers, the pitchmen bring in customers who somehow have not been snared by the blizzard of newspaper, television and radio advertising for workers’ compensation “hot lines” and referral services.

While advertising the services is legal--if no false statements are made--state law bars the use of pitchmen who actively “solicit” or “procure” business for doctors or lawyers. The legal distinction between advertising and soliciting, fuzzy even to lawyers, riles Hernandez, a curly-haired 21-year-old from El Salvador.

“I explain to everyone, if they want to, they can make a complaint and, if they don’t want to, they don’t have to. I don’t make their decision for them,” Hernandez said.

“I’m not forcing nobody,” he added. “The TV is not forcing nobody.”

In many cases, the ads and the pitchmen probably make some truly injured workers aware of benefits to which they are legitimately entitled. But, critics say, all too often cappers use the promise of easy money and even gifts to induce workers to break the law by filing workers’ compensation insurance claims for nonexistent injuries or for injuries suffered off the job.

The workers’ claims can be used to bilk insurance companies. Among other things, critics say, doctors run up hefty medical bills by ordering unnecessary tests on these patients and then billing workers’ compensation insurance companies for the costs.

Insurance firms forced to cover the medical and legal expenses, in turn, pass along the costs to hard-pressed employers by increasing their premiums.

While doctors, lawyers and middlemen can reap fortunes from the scams, the workers filing illegitimate claims generally pocket relatively small sums, investigators say. The street-corner pitchmen rarely make much money either.

One of the main local hangouts for the workers’ compensation pitchmen is in front of the California Employment Development Department building on Venice Boulevard. Almost any weekday, there are about half a dozen pitchmen handing out business cards and asking passersby if they are out of work or if they have suffered job-related stress.

“They’re like salesmen getting you to buy a product,” said Anjetta Venters-Bowles, assistant manager of the EDD office. The difference in this case, Venters-Bowles said, is that the pitchmen are trying to get people to “buy” the idea of filing a workers’ compensation claim.

Even though they operate in broad daylight, many pitchmen appear to fear a possible crackdown. When police come by their haunts outside EDD offices, the pitchmen scatter, and some state officials say there has been a slight drop in their activity.

Still, most pitchmen keep coming back. Hernandez said he would like to find another way to earn a living. But, he said, pitching for lawyers “is the only job I have.”

Hernandez said the payments he receives from the lawyers he represents vary, but on a fairly typical workers’ compensation referral, he can make about $150. He said he passes out about 50 to 75 of his business cards every morning to people heading into the EDD office and, on a good week, gets maybe two or three successful referrals.

Lately, business has been slow. “I only make the money for my rent and food,” he said.

Cappers are hardly unique to the workers’ compensation field. They “have been around as long as there have been lawyers,” said James M. Robbins, a lawyer for the California Industrial Relations Department. He cited stories of police officers and ambulance drivers who worked as cappers, soliciting business for personal injury lawyers.

“There probably still are tow truck drivers handing out lawyers’ cards at accident scenes,” Robbins said, “but the big problem now is in workers’ comp.”

Stiffened penalties for capping were just one part of a workers’ compensation anti-fraud law authored by State Sen. Robert Presley (D-Riverside) that took effect Jan. 1.

Under the law, a capper who recruits customers while showing “reckless disregard” for whether the doctors or lawyers he represents are committing fraud can receive up to a year in jail. For subsequent offenses, the maximum penalties are three years of imprisonment and a $10,000 fine.

Doctors, lawyers and anyone else found guilty of workers’ compensation fraud can receive up to five years in prison and fines of up to $50,000 or twice the amount of the fraud.

A variety of other workers’ compensation anti-fraud provisions also were adopted as part of the law, known as Senate Bill 1218. It has raised hopes that California eventually will curb workers’ compensation fraud. But, meanwhile, the street-corner pitchmen--and the major workers’ comp scam artists they often answer to--are at work.

A key reason for the lax enforcement against workers’ comp fraud in general is the newness of SB 1218. The California Insurance Department and local district attorneys haven’t yet gotten the money they are supposed to receive under the law for investigations and prosecutions.

Yet even when the money comes in, few experts expect authorities to crack down on the cappers.

If authorities concentrate instead on eliminating big-time fraud artists, the pitchmen “won’t have jobs,” said Casey L. Young, administrative director of the state’s Division of Workers’ Compensation.

For his part, Edward G. Feldman, assistant head deputy of the Los Angeles County district attorney’s major fraud division, said “we’re going after everybody,” including cappers. But, Feldman added, if his office develops a case against a small group of cappers, “I’m not sure the wisest thing to do is to arrest them on the spot.”

He suggested that his office would track their activities to pursue a “broader investigation” of workers’ compensation fraud.

Still, other fraud investigators say, it would be very difficult and probably prohibitively expensive to develop evidence against cappers that would hold up in court.

Eugene P. Taylor, a lawyer specializing in fraud whose firm represents 17 workers’ compensation insurers in California, said surveillance is complicated by the fact that many cappers never actually meet the doctors and lawyers for whom they are recruiting. Instead, the pitchmen may refer unemployed workers and other potential clients to intermediaries who, in turn, send them to the medical and legal clinics.

The Coalition of Medical Providers--which represents doctors, chiropractors, physical therapists and medical clinic owners involved in treating workplace injuries--says it strongly supports SB 1218 as a way of deterring fraud. But Michael Franchetti, a lobbyist for the group, said a “small number” of the group’s 1,000 members in California may employ people who hand out literature on the street in possible violation of the law.

“This is something the association will have to look into,” he said.

For Presley, the author of the state law, the obstacles to taking pitchmen off the street are disturbing. “When you’ve got something that visible and that atrocious, you should go after that,” he said. “It’s a very visible part of the fraud.”

Worker’s Compensation Claims Climbs

The number of workers’ compensation claims in California has been rising through the last decade. Many businesses attribute the rise to an increasing number of fraudulent claims and are alarmed by the subsequent jump in workers’ comp coverage.

Claims made against insured employers in 1989: $920,651,000

Source: Workers’ Compensation Insurance Rating Bureau