In a major blow to prosecutors and state insurance officials, a jury Wednesday acquitted four men who were accused of running California's biggest workers' compensation fraud mill.
Among those found not guilty were James W. Eisenberg, a 58-year-old Santa Monica doctor who headed a medical chain called Amerimed Medical Corp., and Michael J. Lightman, 49, of Rancho Palos Verdes, who ran a network of legal, marketing and bill-collection businesses.
Two personal injury attorneys, Robert Yale Libott of San Pedro and Ray Jones of Loomis, alleged participants in the mill, were also found not guilty.
During a nine-week trial in Los Angeles County Superior Court, prosecutors alleged that Eisenberg and Lightman meshed their businesses to form one of the most sophisticated fraud mills that--at its peak--raked in $43 million in a single year.
State officials have pursued the case since 1992. When the men were arrested four years ago, California Insurance Commissioner Chuck Quackenbush accused them of operating "a machine for turning paper into money."
But after two weeks of deliberations, jurors decided they could not convict the men, who faced charges ranging from conspiracy to grand theft to insurance fraud.
"We were pushing, pulling and arguing," said 54-year-old Erman Holmes, the jury's foreman. "We didn't all feel they were innocent, but because of the jury instructions, we had no choice."
The legal battle is far from over.
Jurors deadlocked on five personal tax evasion counts against Eisenberg and Lightman, and prosecutors say they plan to refile those charges.
But Eisenberg and Lightman proclaimed victory.
"This ends seven years of an ordeal that has taken over my life," Eisenberg said.
Said Lightman: "This is the first day of the rest of my life."
Deputy Dist. Atty. Elizabeth Munisoglu, the prosecutor, said she was disappointed.
"It was a complicated case, and it clearly was not an easy decision for [jurors] to make," she said.
During the trial, Munisoglu called 65 witnesses, attempting to show that the men used patients--mainly immigrants--to generate massively inflated insurance claims and referral fees for medical testing and treatment.
Patients would initially be referred to the Civil Law Center--a Lightman-affiliated law firm with offices in Los Angeles, Van Nuys, Santa Ana and San Diego--or to a secondary network of lawyers in other parts of the state.
The lawyers would then route patients to one of Amerimed's eight clinics around the state or to other affiliated medical offices that would bill insurance companies for the maximum amount allowed, regardless of whether the patients had multiple fractures or--as in one case--a small wound from a thorn in a finger.
In 1995, authorities arrested Eisenberg, Lightman and nine others. Three pleaded guilty to insurance fraud and related charges, while the remainder received immunity to testify against Eisenberg and the three others.
At the end of the prosecution's case, lawyers for Eisenberg and the three other defendants declined to call a single witness.
Donald Re and Leonard Levine, who represented Lightman and Eisenberg, contended during cross-examination of prosecution witnesses that the charges were instigated by the insurance industry.
Workers' compensation insurers that owed Amerimed $5 million in unpaid claims for treating injured workers would not have to part with that money if the men were convicted, Re and Levine argued.
"From the beginning, it was clear that this company, Amerimed, was operating legitimately, helping injured workers," Re said. "These charges should never have been brought."