Group Issues Ultimatum on Workers’ Comp : Government: Valley Industry and Commerce Assn. warns 17 state legislators it will launch a newspaper ad campaign against them if the system is not reformed.

Taking its strongest stand ever on a single issue, the Valley Industry and Commerce Assn. has sent letters to 17 local legislators threatening to indict them in full-page newspaper ads if they don’t reform California’s workers’ compensation system.

“Never in the 43-year history of VICA has the business community been as incensed as it is today over the crime that is euphemistically known as workers’ compensation in California,” says the letter, mailed last week by the 300-member Valley-based business group.

The two-page letter written by David Fleming, chairman of VICA’s Government Relations Committee, promises to run pictures in The Times and Daily News of legislators who “fail to support meaningful workers’ compensation reform.”

The pictures will be accompanied by a text that will say the legislators’ inaction “is costing hundreds of jobs in the San Fernando Valley every day. Yours could be next. Remember that--come November.”

The letter was sent to all members of the Legislature who represent areas of northern Los Angeles and eastern Ventura counties.

The Democratic author of a key reform package that VICA criticized as not going far enough responded Tuesday, saying that his bill contains many things designed to satisfy employers. Assemblyman Burt Margolin (D-Los Angeles) also scolded business leaders for making vague threats instead of sitting down with him at the negotiating table.

Assemblyman Richard Katz (D-Sylmar), a co-author of the Margolin bill, reacted even more strongly. “What’s upsetting is there is no recognition of how far we have moved,” he said. “I think this is excessive and chest-beating.”

VICA contends that the workers’ compensation system is riddled by fraud and abuse by crooked doctors and attorneys, who encourage workers to file dishonest stress claims. Fleming said the system isn’t even very rewarding for the claimants. Of $11 billion in settlements paid out each year, only $5 billion goes to the workers the system was founded to help, with much of the rest going to attorneys and doctors, he said.

With time running out on the legislative session, Margolin’s bill, AB 51X, is being hashed out in a conference committee of the state Senate and Assembly. Fleming is scheduled to testify before the committee today in Sacramento.

But he isn’t optimistic about the chances for reform, or about influencing it. Fleming said Margolin is trying to “walk a middle ground” but fears the influence of lobbyists for attorneys and doctors.

“This Legislature is bought and paid for by the lawyers who represent workers’ compensation cases,” Fleming said.

One thing he criticized most strongly in the Margolin bill was a provision allowing some workers to take their cases to court if they are prohibited from seeking relief in the workers’ compensation system. “The Margolin bill gives us crumbs,” Fleming said.

He said the effects of workers’ compensation fraud are felt everywhere. The fiscally strapped Los Angeles Unified School District received $58 million in California Lottery funds last year, he said. At the same time, the school district’s workers’ compensation bill was $59 million.

Margolin said he has worked hard to satisfy the business community. He said his legislation incorporates several of Gov. Pete Wilson’s recommendations for clamping down on abuse. One of those is language requiring that for a stress claim to succeed, the majority of the stress must have originated in the workplace.

Wilson also wanted stress claims barred in personnel actions such as firings and layoffs. The Margolin bill “does what the governor asked for,” he said.

He also said the much-reviled provision allowing workers’ compensation cases to go to court is no longer even in the bill.

“It’s gone,” he said. “The outrage of this is that I have moved a long way in the direction of meeting employers’ concerns. Employers should look at the good in 51X.”

Margolin said the prospects for a workers’ compensation reform bill are uncertain. The continuing battle over the budget is occupying the full attention of the governor and most of the Legislature, he said. He said some opponents have begun talking seriously about an agreement on workers’ compensation reform in recent days, but complained that such negotiations should have begun two months ago.

“We’re facing an uphill battle,” he said.

Katz also reacted with disappointment at what he perceived as a failure to recognize the reforms in the bill. “The fact that VICA is threatening to put my picture in the paper is not going to motivate me,” he said. “The impact of fraud on the business community is what’s going to motivate me.”

Katz said he has gone further than some in the business community, supporting the elimination of stress claims, for instance.

Sen. David A. Roberti (D-Van Nuys) also received one of the letters.

“He is well aware of the problem that faces businesses,” said Sandy Miller, a spokeswoman for Roberti. “We’re doing all we can for workers’ compensation reform.”

Roberti arranged for Fleming to testify before the conference committee.

A spokeswoman for state Sen. Ed Davis (R-Santa Clarita) said she thought the office had received the VICA letter but did not think Davis had seen it.