New Jersey Officials Recover $3.5M, Allstate $20M in PIP Fraud Cases

New Jersey insurance officials said they have recovered $3.5 million in a personal injury insurance fraud case involving chiropractors, physicians, medical facilities, billing companies and others.

In a case connected to the same operation, Allstate Insurance recovered more than $20 million in damages, attorneys’ fees and costs from settlements, judgments and trial, according to officials.

Insurance Commissioner Richard J. Badolato said the $3.5 million in fines, penalties and attorneys’ fees came in a case against Gregorio Lajara of Perth Amboy and a host of individuals, health care practitioners and facilities who allegedly defrauded Allstate and other insurance companies through an “injury mill”  that collected personal injury protection (PIP) benefits.

Lajara, who operated 10 chiropractic facilities through his firm, Medico Management, allegedly was the mastermind of the scheme that included physicians and chiropractors, medical imaging and pain management practices, medical equipment and billing companies, employees, owners and shareholders of those practices.  It also included individuals who acted as “runners” who recruited individuals involved in motor vehicle accidents and referred them to doctors and lawyers in violation of the New Jersey Insurance Fraud Prevention Act, according to officials.

According to officials, the defendants performed services in violation of medical professional regulations; billed for services that were unnecessary, or provided by unlicensed personnel; engaged in unlawful fee-splitting and paid kickbacks for patient referrals.

Once auto accident victims were recruited by “runners,” they were referred to Lajara’s chiropractic facilities for treatment and were then referred for mandatory MRI tests, acupuncture treatments, neurological and pain management testing and durable medical equipment orders, officials said.

Medico Management allegedly controlled chiropractic facilities through disguised ownership arrangements with licensed chiropractors Lajara hired in exchange for minimum percentages of gross revenues. Using false sales contracts, Lajara transferred apparent ownership to the chiropractors without exchanging funds and maintained effective control so that he could receive kickbacks from them.

Allstate New Jersey Insurance Co. and its affiliated companies Encompass Insurance and Commercial Insurance of Newark filed a civil suit against Lajara and more than 60 other defendants in the case in December 2008.

The state insurance department joined the case in 2012. The cases of Allstate and the department were heard together before Judge James Hely in the Superior Court of New Jersey, Union County with the penalty phase being resolved on June 29.

“This case will act as a strong deterrent to potential fraudsters in New Jersey. We will come after you, no matter how complex the case or how long it takes to resolve,” said Badolato.

Source: New Jersey Department of Banking and Insurance