Calif. Corrections Sergeant Arrested for Workers’ Comp Fraud

California Insurance Commissioner John Garamendi announced the arrest of Sacramento resident and California Department of Corrections and Rehabilitation Correctional Sergeant Steven Michael Shadden, 32, on April 4, 2006, on workers’ compensation insurance fraud charges.

Shadden was booked into the Sacramento County Jail with $115,000 bail. He was charged with one felony count of knowingly preparing or making a false written or oral statement in support of an insurance claim; one felony count of knowingly concealing an event that would affect a person’s right to an insurance benefit; and one felony count of knowingly making or representing a false or fraudulent statement or representation for the purpose of obtaining insurance compensation.

On March 28, 2003, Shadden, a correctional sergeant at San Quentin State Prison, filed a workers’ compensation injury claim for his left ankle. Upon receiving the claim, the workers’ compensation carrier, State Compensation Insurance Fund (SCIF), hired a private investigator to track Shadden’s activities for a two-day period from Aug. 26-28, 2003. During that time, the private investigator discovered that Shadden was working as a real estate agent. Furthermore, he was videotaped performing activities inconsistent with his work restrictions advised by his doctors.

On March 2, 2004, Shadden submitted a disability retirement election application to CalPERS, which stated he was not working. The California Department of Corrections and Rehabilitation’s Office of Internal Affairs Unit subsequently received information from the CalPERS Investigation Unit which verified Shadden was working for Century 21 Real Estate in Elk Grove, Calif. Shadden earned approximately $130,000 selling real estate and continued to write loans while collecting benefits from SCIF – all the while claiming he was unable to work as a correctional sergeant at San Quentin. Shadden mailed his report of income earnings to SCIF, documenting $100,000 less than what he really earned while working as a real estate agent.

From the time Shadden filed his workers’ compensation claim in March 2003 through December 2005, SCIF paid approximately $115,000 in benefits for his injury. Approximately $97,000 was paid directly to Shadden for temporary and industrial disability leave, while another $18,000 was paid for medical bills.

The continuing investigation is being conducted by the California Department of Insurance’s Fraud Division, the California Department of Corrections and Rehabilitation’s Office of Internal Affairs, CalPERS’ Investigations Unit and SCIF’s Special Investigative Unit. The Sacramento County District Attorney’s Office is prosecuting the case.