L.A. Charges Doctor in Big Workers’ Comp Fraud Case : Insurance: County says the fugitive surgeon ran a $4.2-million tax-fraud and money-laundering scheme.

A neurosurgeon who founded one of the biggest and most controversial workers’ compensation medical enterprises in Southern California during the early 1990s has been charged in what authorities are calling a $4.2-million tax-fraud and money-laundering conspiracy.

The Los Angeles County district attorney’s office announced Wednesday that it filed five felony counts against David G. Gardner, the Los Angeles doctor who founded the chain of workers’ compensation clinics known as Primedex Corp.

As of late Wednesday, Gardner remained at large and was considered a fugitive from justice. Investigators sent to arrest Gardner could not find him when they showed up at 7 a.m. Tuesday at his 13,000-square-foot home in Bel-Air. The district attorney’s office later negotiated, unsuccessfully, with Gardner’s attorney to persuade the physician to surrender.

Richard A. Moss, the Pasadena lawyer representing Gardner, disputed all of the tax-fraud, money-laundering and conspiracy charges. Moss said that if Gardner underpaid on any of his taxes, it was done “without intent.”

Moreover, Moss noted that after 2 1/2 years of investigation, the district attorney’s office has not filed any charges against Gardner related to patient care or dealings with insurance companies. But prosecutors said Gardner remains under investigation for possible insurance and securities fraud.

The charges against Gardner, 53, follow recent legal action against officials of two other major workers’ compensation medical operations that flourished in Southern California in the late 1980s and early ‘90s.

Four months ago, the two principals of Amerimed Medical Corp. were arrested and charged with fraud. In addition, a former Beverly Hills doctor named Mark Kaplan was sentenced in April to eight years in prison for bilking insurance companies out of at least $30 million. Kaplan and his ex-wife, Polina Ioffe, also were ordered to pay fines and restitution totaling $7.5 million.

Major employers, insurance companies and law enforcement authorities contended that so-called medical mills plundered the state’s workers’ compensation system by encouraging people to file bogus job-injury claims and submit inflated medical bills.

The issue inflamed political debate and raised questions about California’s business climate, prompting the Legislature to pass a major package of workers’ compensation reforms in 1993. Those reforms, and other measures, have been credited with dramatically reducing fraud and abuse in the system over the last two years.

Gardner’s chain began withdrawing from the workers’ compensation business within weeks after the 1993 reform package was passed and shut down all of its operations last year. During its nine years in operation, however, the company used a heavy daytime television advertising campaign to become well-known to Southern Californians under the name Injury Central.

The commercials featured a helicopter newsman “reporting” on workplace injuries and encouraging viewers to call a toll-free number to get “all the medical and monetary benefits available through your employer’s insurance.”

The arrest warrant issued for Gardner focuses on allegations that he tried to evade state income taxes and banking requirements.

According to the warrant and spokesmen for the district attorney’s office, Gardner cashed checks totaling $4.2 million from the company for his own use without reporting the money as taxable income.

In addition, $3.7 million of the money came from 391 or more checks, each made out for slightly less than $10,000 and processed at a check-cashing service. Prosecutors said the intent of those transactions was to illegally evade banking requirements calling for transactions of $10,000 or more to be reported to authorities.

If convicted, Gardner would face up to six years in prison and fines and restitution totaling as much as $8.9 million, said Richard A. Rosenthal, the deputy district attorney in charge of the case.

Although Gardner’s Primedex Corp. enterprise is closed, its parent company, Primedex Health Systems, continues to run diagnostic imaging centers in California under the name Radnet Management. However, neither Primedex Health nor Radnet was involved in the investigation into Gardner’s activities.

Nor was any action taken against two other controversial figures with previous ties to Primedex. One of the two had been the controlling shareholder of Primedex, Robert E. Brennan, a financier who has battled with federal authorities for years. In June, a federal judge ordered Brennan to pay $71.5 million to settle charges that he defrauded thousands of investors while heading the First Jersey Securities investment firm.

The other is former Primedex consultant Stanley Goldblum, who served four years in prison in the 1970s after pleading guilty to fraud and other charges related to the collapse of Equity Funding Corp. of America.