High-Level City Employee Suspended in Fraud Probe : Workers’ comp: Investigators say more than $1 million in benefits may have been paid improperly.

A high-level Los Angeles city employee has been suspended for allegedly defrauding the city of more than $1 million by funneling workers’ compensation benefits to “ghost” employees and making improper payments to doctors and private investigators, officials said Friday.

Police this week searched the home and office of the suspect, whom authorities declined to identify. Sources at City Hall, however, identified her as Thelma Bowman, a senior supervisor in the city’s Personnel Department who handled workers’ compensation payments.

Officers found $50,000 in cash in her home safe, and she was carrying a loaded weapon when confronted at work by authorities, sources said. The Los Angeles Police Department’s bunco-forgery section seized several boxes of evidence from Bowman’s home and office, a police source said, but had not yet reviewed all the materials.

Bowman, who has not been arrested, was put on administrative leave Thursday pending the completion of the investigation, officials said. She could not be reached for comment Friday.

“We are saddened at the thought that any city employee could possibly be involved in such an activity,” said Faye Washington, the general manager of the Personnel Department.

The investigation comes as city officials are scrutinizing the workers’ compensation program. Payments have spiraled in recent years, reaching $71 million in the last fiscal year. A private task force recommended major reform last month after finding that claims for workers’ injuries often go unchecked before they are paid.

Evidence of abuse was discovered about a month ago when an internal city audit discovered more than 25 separate cases of fraud. The audit by the city’s Peronnel Department was independent of the study by the task force.

“As one suspicious payment was investigated, it led to others until we had amassed evidence of substantial questionable payments,” Washington said.

Bowman was monitored for a short time and then confronted with the information. She offered a “bumbling response,” one source said.

The investigation found that temporary disability payments were issued to nonexistent city employees over the past 18 months, Washington said. In addition, payments were made to doctors and private investigators without any record that they worked or that work was needed.

“Clearly more than one individual has been involved in these questionable payment practices,” Washington said. “Our investigation will continue into not only the specific actions of the one employee who has been placed on administrative leave, but also into the actions of any other individual who may be involved. We will be working closely with the Los Angeles Police Department to determine if there is sufficient evidence to warrant criminal prosecution and conviction of all participants.”

Washington estimated the amount of fraudulent claims to be more than $1 million. One City Hall source said the total could reach several million dollars.

City officials reacted angrily to the allegations, with some demanding that any stolen money be returned to the city coffers.

“If this all is indeed true, I am outraged that anyone would take the public money that could be used for more police, libraries, graffiti removal and parks and recreation,” Mayor Richard Riordan said.

Riordan also praised Washington for ferreting out the alleged abuse. The mayor appointed her as head of the Personnel Department in January.

Last month, the private task force found that Los Angeles suffers a much higher rate of claims for workers’ injuries than other cities and counties and does insufficient investigation before paying most of the demands.

The study by a group of attorneys, accountants, insurers and consultants was made at the behest of Riordan and City Atty. James K. Hahn. City policies are so in need of reform that some employees make more money on disability than they do if they work, the task force found. About $32 million could be saved on workers’ compensation if the city’s rate of claims was reduced to the national average, the report said.

“I can’t comment on the details of the case but I can assure the taxpayers that the (city) will spare no effort when it comes to uncovering and putting a stop to the kind of fraud that is alleged in this case,” said Joe Gellman, president of the Civil Service Commission, the Riordan-appointed group that oversees the Personnel Department.

“I seriously hope that this will be a catalyst for serious workers’ compensation reform,” Gellman said.

The last allegation of major fraud in City Hall involved a high-ranking official accused in 1992 of improperly authorizing as much as $88,000 in overtime pay for himself over a three-year period. The district attorney’s office is deciding whether to file criminal charges.

Times staff writer James Rainey contributed to this story.