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Fraud & Workers' Compensation


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Barry Zalma, Esq., CFE


According to Arizona law, only those benefits received as a result of the fraud must be forfeited, Arizonas Division One Court of Appeals ruled on February 28, 2008 in the case of Alfonso L. Obregon vs. The Industrial Commission of Arizona.

Court records show Mr. Alfonso was receiving permanent partial disability benefits totaling $167.30 per month for a 2003 back injury.  In May 2006, he was found guilty of making false statements to obtain temporary partial disability benefits, paid during 2004, for a different injury.

Following his conviction, Phoenix-based insurer SCF Arizona suspended all of his benefit payments, including those for the 2003 injury. When Mr. Alfonso protested the insurer's action, an administrative law

judge ruled that Arizona law required Mr. Alfonso to give up all workers comp benefits, both past and future.


The statute relied upon by the insurer, Section 23-1028(A), A.R.S., provides:


If in order to obtain any compensation, benefit or payment under the provisions of this chapter, either for himself or for another, any person knowingly makes a false statement or representation, such person is guilty of a class 6 felony, and, if the person is a claimant for compensation, benefit or payment, he shall in addition forfeit all right to such compensation, benefit or payment after conviction of the offense. (Emphasis added)

In an exercise in philology and sophistry the court concluded that "If the legislature had intended a complete and permanent forfeiture, it could have deleted the word "such." In so doing the court ignored the fact that "such compensation" modifies  the words "any compensation" not just the compensation obtained by fraud. Since the court has difficulty parsing English sentences the Arizona Legislature should revise the statute and the Workers' Compensation court should consider the fact that he who presents a fraudulent claim once sufficiently to be convicted of a felony workers' compensation fraud would have no compunction about committing fraud a second time.

Similarly, the Colorado statute contains this broad language, the Supreme Court of Colorado concluded that only those benefits fraudulently obtained must be forfeited. Wolford v. Pinnacol Assurance, 107 P.3d 947, 955 (Colo. 2005) that held:

We give effect to all provisions in the Workers' Compensation Act and preserve the intent of the General Assembly, a conviction under section 8-43-402 only requires the forfeiture of the compensation that was obtained as a result of false statements."


If these holdings are correct, and I submit they are not, it appears that in the workers' compensation venue, even if you are caught, tried and convicted committing fraud you get to keep those benefits you obtained fraudulently that you were not caught committing or for which you were not convicted.

Workers' Compensation Insurance Fraud in Arizona and Colorado is a no-lose situation.

Copyright 2007 The John Cooke Fraud Report