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Lack of Progress in State Fund Investigation Causing Concern

In recent workers' compensation defense news, the absence of any discernible movement by state officials investigating allegations of malfeasance at the State Compensation Insurance Fund has drawn the attention and criticism of both lawmakers and industry insiders.

Specifically, the criminal investigation, launched in 2006, was meant to explore allegations of conflicts of interests, misuse of nearly $1 billion and self-dealing by certain board members at the State Compensation Insurance Fund.

However, there has been no action in the investigation for a year and a half, when a board member was served with a search warrant.

"It's time for the Legislature to check in with the district attorney's office," said Assemblyman Jose Solorio (D-Santa Ana), chairperson of the Assembly's Insurance Committee. "Everyone deserves to know whether this case is being resolved or if it's still being investigated."

The State Compensation Insurance Fund is run by the state of California and provides affordable workers compensation policies to employers - mostly small and medium sized - that are otherwise unable to secure such mandated coverage due to cost restrictions.

The rapidly aging investigation into alleged malfeasance was lead by San Francisco District Attorney (and newly-appointed California Attorney General) Kamala Harris who formed a task force comprised of the state's Department of Insurance and California Highway Patrol to investigate the matter.

However, Harris is slated to begin her work as the Attorney General in a few weeks, leaving the status of the investigation somewhat unclear. (A spokesperson from her office declared, "this is an open and active investigation by the task force.")

"[The investigation] seems to have dropped off the face of the Earth," said Mark Webb, vice president of Pacific Compensation Insurance Company. "When you think of how much this played out publicly, it would seem that there would be at least enough to take this to a grand jury."

The primary concern is that the statutes of limitations for bringing certain criminal or civil lawsuits are close to expiring. For example, under California law, there is a three-year statute of limitations on fraud.

"If you have the Department of Insurance, the California Highway Patrol and the San Francisco district attorney all contributing resources to an investigation, they should know where they stand after four years," said Robert Fellmeth, a professor of law at the University of San Diego. "Those three agencies have a lot of power."

Stay tuned for further developments in this story and other areas of workers' compensation defense law ...

This post was provided for informational purposes only and is not to be construed as legal advice.

Related Resources:

State Fund Inquiry Has Gone Very Quiet (The Los Angeles Times)

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