BILL NUMBER: AB 1300 CHAPTERED 07/16/93 BILL TEXT CHAPTER 120 FILED WITH SECRETARY OF STATE JULY 16, 1993 APPROVED BY GOVERNOR JULY 16, 1993 PASSED THE SENATE JULY 16, 1993 PASSED THE ASSEMBLY JULY 16, 1993 CONFERENCE REPORT NO. 1 PROPOSED IN CONFERENCE JULY 15, 1993 AMENDED IN SENATE MAY 5, 1993 AMENDED IN ASSEMBLY APRIL 12, 1993 INTRODUCED BY Assembly Member Willie Brown (Principal coauthor: Assembly Member Brulte) (Principal coauthors: Senators Leonard and Lockyer) MARCH 3, 1993 An act to amend Section 6154 of, to add Section 730 to, and to add Chapter 2.7 (commencing with Section 5499.30) to Division 3 of, the Business and Professions Code, to amend Sections 750.4, 750.5, 1871.4, and 1877.5 of, and to add Sections 1871.5, 1871.6, and 1871.7 to, the Insurance Code, to amend Sections 3217, 4628, 4906, and 5703 of, to add Section 3219 to, and to add Article 5 (commencing with Section 3820) to Chapter 4 of Division 4 of, the Labor Code, to amend Section 550 of, and to add Section 1191.10 to, the Penal Code, and to amend Section 2714 of the Unemployment Insurance Code, relating to workers' compensation, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1300, W. Brown. Workers' compensation. Existing law requires qualified medical evaluators to be, among other things, board certified. This bill would prohibit a healing arts licensee from performing any medical evaluation for which the evaluator is required to be certified as a qualified medical evaluator without having first obtained that certification. A violation of that requirement would constitute unprofessional conduct and grounds for disciplinary action. Existing law provides that any contract for professional services secured by any attorney or law firm through a runner or capper is void. It provides for the recovery of certain compensation and fees with respect to a violation of that provision. This bill would provide that any fees recovered be allocated in a specified manner. Existing law provides that it is unlawful to, among other things, make or cause to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying workers' compensation benefits. This bill would require that advertising of legal services for obtaining workers' compensation benefits, as specified, include the name of at least one attorney associated with the provision of those legal services. A violation of this requirement would be a misdemeanor. By creating a new crime the bill would impose a state-mandated local program. Under existing law, it is a crime to employ runners, cappers, steerers, or other persons to procure clients or patients to perform or obtain services or benefits pursuant to the workers' compensation laws. This bill would also impose a civil penalty for those acts. It would permit the Attorney General or a district attorney to bring that civil action, and also permit the action to be brought by an interested person, subject to various restrictions. Existing law prohibits certain false or fraudulent practices in connection with workers' compensation claims. The commission of any of these practices is a crime punishable as specified. This bill would additionally authorize restitution to be ordered, including restitution for any medical evaluation or treatment services obtained or provided. It would prohibit any person convicted of workers' compensation fraud, as defined, from receiving or retaining compensation, as defined, where the compensation was owed or received as a result of certain unlawful conduct for which the recipient of the compensation was convicted. Existing law contains provisions relating to insurance fraud investigation. This bill would provide that any person who knows or in good faith believes he or she has knowledge of a fraudulent act relating to any workers' compensation claim, policy, or premium, may notify the local district attorney's office or the Bureau of Fraudulent Claims. Existing law provides immunity for civil actions for certain reports by insurers and agents relating to fraudulent insurance claims. This bill would specify that those provisions apply to reports concerning workers' compensation. Existing law prohibits rebates or other consideration for referrals for workers' compensation services, but excepts physicians and attorneys. This bill would eliminate that exception, and would make related changes. The bill would also provide that except as otherwise permitted, any person who offers or delivers any rebate, refund, commission, preference, patronage, dividend, discount, or other consideration to any adjuster of claims for workers' compensation as inducement or reward for the referral or settlement of any claim, is guilty of a felony, and would similarly prohibit acceptance or receipt of such consideration by an adjuster of workers' compensation claims. Since it would create new crimes, it would impose a state-mandated local program. This bill would also provide that any contract for professional services secured by any health care provider in violation of various provisions prohibiting false or fraudulent insurance or workers' compensation claims is void, and would provide for the divestiture of any fees received in connection with the contract. Existing law makes certain false or fraudulent acts done in connection with a claim for workers' compensation a crime. This bill would, in addition, provide a civil penalty for those acts and related acts to be assessed by the Director of Industrial Relations, as specified. The fines would be deposited into the Workers' Compensation Fraud Account in the Insurance Fund. The bill would require a physician making a medical-legal report, upon request of a party, to provide a curriculum vitae and a statement concerning the percent of the physician's total practice time devoted to medical treatment. Under existing law, it is a crime to make certain false or fraudulent insurance-related claims. Under existing law, it is a crime to knowingly present for payment any undercharges for health care benefits on behalf of a specific claimant unless any known overcharges for health care benefits for that claimant are presented for reconciliation at that same time. This bill would specify that workers' compensation benefits are included as health care benefits for the purpose of that provision. The bill would also define the term "victim" to include insurers and employers who are victims of workers' compensation fraud, for purposes of appearances and statements at sentencing proceedings, as specified. The bill would require certain statements to be filed under penalty of perjury. Because the bill would expand the scope of the existing crime of perjury, it would impose a state-mandated local program. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. This bill would become operative only if AB 110 and 119 and SB 484 and 983 are also enacted. The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 730 is added to the Business and Professions Code, to read: 730. Any person licensed under this division or under any initiative act referred to in this division shall not perform any medical evaluation for which the evaluator is required to be certified as a qualified medical evaluator pursuant to Section 139.2 of the Labor Code without having first obtained that certification. A violation of this section constitutes unprofessional conduct and grounds for disciplinary action. SEC. 2. Section 6154 of the Business and Professions Code is amended to read: 6154. (a) Any contract for professional services secured by any attorney at law or law firm in this state through the services of a runner or capper is void. In any action against any attorney or law firm under the Unfair Practices Act, Chapter 4 (commencing with Section 17000) of Division 7, or Chapter 5 (commencing with Section 17200) of Division 7, any judgment shall include an order divesting the attorney or law firm of any fees and other compensation received pursuant to any such void contract. Those fees and compensation shall be recoverable as additional civil penalties under Chapter 4 (commencing with Section 17000) or Chapter 5 (commencing with Section 17200) of Division 7. (b) Notwithstanding Section 17206 or any other provision of law, any fees recovered pursuant to subdivision (a) in an action involving professional services related to the provision of workers' compensation shall be allocated as follows: if the action is brought by the Attorney General, one-half of the penalty collected shall be paid to the State General Fund, and one-half of the penalty collected shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund; if the action is brought by a district attorney, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half of the penalty collected shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund; if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half of the penalty collected shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund. Moneys deposited into the Workers' Compensation Fraud Account pursuant to this subdivision shall be used in the investigation and prosecution of workers' compensation fraud, as appropriated by the Legislature. SEC. 2.5. Chapter 2.7 (commencing with Section 5499.30) is added to Division 3 of the Business and Professions Code, to read: CHAPTER 2.7. ADVERTISING FOR WORKERS' COMPENSATION LEGAL SERVICES 5499.30. (a) Any individual, firm, corporation, partnership, organization, or association which prints, displays, publishes, distributes, or broadcasts or causes or permits to be advertised, printed, displayed, published, distributed, or broadcast any advertising which purports to provide legal services for obtaining workers' compensation benefits shall include the name of at least one attorney associated with the individual, firm, corporation, partnership, organization, or association in all such advertising. (b) As used in this section, the term "legal services" includes any service which refers potential clients to any attorney. (c) A violation of this section is a misdemeanor, punishable by imprisonment in the county jail for not more than one year, or by a fine not exceeding ten thousand dollars ($10,000), or both. SEC. 2.6. Section 750.4 of the Insurance Code is amended to read: 750.4. Section 750 of the Insurance Code, Sections 3215 and 3219 of the Labor Code, or Section 549 of the Penal Code shall not apply to any person, corporation, partnership, association, or firm, which both of the following: (a) Operating on behalf of an insurer or self-insured person, company, association, or group. (b) Operating pursuant to and within the scope of a certificate of consent issued pursuant to Section 3702.1 of the Labor Code or pursuant to and within the scope of a license issued pursuant to Article 3 (commencing with Section 14000) of Chapter 1 of Division 5. SEC. 2.7. Section 750.5 of the Insurance Code is amended to read: 750.5. Nothing in Section 750 of the Insurance Code, Section 549 of the Penal Code, or Section 3215 of the Labor Code shall be construed to prevent an attorney or law firm from the following: (a) Dividing fees for legal services with a lawyer under circumstances expressly permitted by Rule 2-200 of the Rules of Professional Conduct of the State Bar. (b) Offering or giving an incidental nonmonetary gift or gratuity to a person who has made a recommendation resulting in the employment of the attorney or law firm, provided that the gift or gratuity was not offered in consideration of any promise, agreement, or understanding that the gift or gratuity would be forthcoming or that referrals would be made or encouraged in the future. (c) Offering or giving a bonus to an employee who has made a referral or recommendation resulting in the employment of the attorney or law firm, provided that the bonus was not offered in consideration of any promise, agreement, or understanding that the bonus would be forthcoming or that referrals or recommendations would be made or encouraged in the future. SEC. 3. Section 1871.4 of the Insurance Code is amended to read: 1871.4. (a) It is unlawful to do any of the following: (1) Make or cause to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code. (2) Present or cause to be presented any knowingly false or fraudulent written or oral material statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code. (3) Knowingly assist, abet, conspire with, or solicit any person in an unlawful act under this section. (4) Make or cause to be made any knowingly false or fraudulent statements with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim. For the purposes of this subdivision, "statement" includes, but is not limited to, any notice, proof of injury, bill for services, payment for services, hospital or doctor records, X-ray, test results, medical-legal expense as defined in Section 4620 of the Labor Code, other evidence of loss, injury, or expense, or payment. (b) Every person who violates subdivision (a) shall be punished by imprisonment in county jail for one year, or in the state prison, for two, three, or five years, or by a fine not exceeding fifty thousand dollars ($50,000) or double the value of the fraud, whichever is greater, or by both imprisonment and fine. Restitution shall be ordered, including restitution for any medical evaluation or treatment services obtained or provided. The court shall determine the amount of restitution and the person or persons to whom the restitution shall be paid. (c) Any person who violates subdivision (a) and who has a prior felony conviction of that subdivision, of former Section 1871.1, or of Section 548 or 550 of the Penal Code, shall receive a two-year enhancement for each prior conviction in addition to the sentence provided in subdivision (b). The existence of any fact that would subject a person to a penalty enhancement shall be alleged in the information or indictment and either admitted by the defendant in open court, or found to be true by the jury trying the issue of guilt or by the court where guilt is established by plea of guilty or nolo contendere or by trial by the court sitting without a jury. (d) This section shall not be construed to preclude the applicability of any other provision of criminal law that applies or may apply to any transaction. SEC. 3.1. Section 1871.5 is added to the Insurance Code, to read: 1871.5. Any person convicted of workers' compensation fraud pursuant to Section 1871.4 or Section 550 of the Penal Code shall be ineligible to receive or retain any compensation, as defined in Section 3207 of the Labor Code, where that compensation was owed or received as a result of a violation of Section 1871.4 or Section 550 of the Penal Code for which the recipient of the compensation was convicted. SEC. 3.2. Section 1871.6 is added to the Insurance Code, to read: 1871.6. The provisions of Section 781 of the Penal Code are applicable to any prosecutions for violations of Section 1871.4. This section is declaratory of existing law and shall not be interpreted to limit the applicability of Section 781 of the Penal Code to any other criminal provisions. SEC. 3.3. Section 1871.7 is added to the Insurance Code, to read: 1871.7. (a) It is unlawful to knowingly employ runners, cappers, steerers, or other persons to procure clients or patients to perform or obtain services or benefits pursuant to Division 4 (commencing with Section 3200) of the Labor Code. (b) Every person who violates any provision of this section shall be subject, in addition to any other penalties that may be prescribed by law, to a civil penalty of not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000), plus an assessment of not more than three times the amount of each claim for compensation, as defined in Section 3207 of the Labor Code, submitted in connection with violation of this section. (c) Any person who violates subdivision (a) and who has a prior felony conviction of an offense set forth in Section 1871.1 or 1871.4, or in Section 549 of the Penal Code, shall be subject, in addition to the penalties set forth in subdivision (b), to a civil penalty of five thousand dollars ($5,000) for each item or service with respect to which a violation of subdivision (a) occurred. (d) The Attorney General or district attorney may bring a civil action under this section. (e) (1) Any interested persons may bring a civil action for a violation of this section for the person and for the State of California. The action shall be brought in the name of the state. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting. (2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the state. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Attorney General or local district attorney may elect to intervene and proceed with the action within 60 days after he or she receives both the complaint and the material evidence and information. If both the Attorney General and the district attorney elect to intervene, the Attorney General shall have precedence. (3) The Attorney General or district attorney may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under paragraph (2). The motions may be supported by affidavits or other submissions in camera. The defendant shall not be required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served upon the defendant. (4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Attorney General or district attorney shall either: (A) Proceed with the action, in which case the action shall be conducted by the Attorney General or district attorney. (B) Notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action. (5) When a person brings an action under this section, no person other than the Attorney General or district attorney may intervene or bring a related action based on the facts underlying the pending action. (f) (1) If the Attorney General or district attorney proceeds with the action, he or she shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action. That person shall have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2). (2) (A) The Attorney General or district attorney may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Attorney General or district attorney of the filing of the motion, and the court has provided the person with an opportunity for a hearing on the motion. (B) The Attorney General or district attorney may settle the action with the defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good cause, the hearing may be held in camera. (C) Upon a showing by the Attorney General or district attorney that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the Attorney General's or district attorney's prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the court may, in its discretion, impose limitations on the person's participation, including, but not limited to, the following: (i) Limiting the number of witnesses the person may call. (ii) Limiting the length of the testimony of such witnesses. (iii) Limiting the person's cross-examination of witnesses. (iv) Otherwise limiting the participation by the person in the litigation. (D) Upon a showing by the defendant that unrestricted participation during the course of the litigation by the person initiating the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court may limit the participation by the person in the litigation. (3) If the Attorney General or district attorney elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. If the Attorney General or district attorney so requests, he or she shall be served with copies of all pleadings filed in the action and shall be supplied with copies of all deposition transcripts, at the Attorney General's or district attorney's expense. When a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the Attorney General or district attorney to intervene at a later date upon a showing of good cause. (4) Whether or not the Attorney General or district attorney proceeds with the action, upon a showing by the Attorney General or district attorney that certain actions of discovery by the person initiating the action would interfere with the Attorney General's or district attorney's investigation or prosecution of a criminal or civil matter arising out of the same facts, the court may stay such discovery for a period of not more than 60 days. A hearing on a request for the stay shall be conducted in camera. The court may extend the 60-day period upon a further showing in camera that the Attorney General or district attorney has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings. (5) Notwithstanding subdivision (e), the Attorney General or district attorney may elect to pursue its claim through any alternate remedy available to the Attorney General or district attorney. If any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in that proceeding as the person would have had if the action had continued under this section. Any finding of fact or conclusion of law made in the other proceeding that has become final shall be conclusive on all parties to an action under this section. For purposes of the preceding sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court, if all time for filing an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to judicial review. (g) (1) If the Attorney General or district attorney proceeds with an action brought by a person under subdivision (e), that person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. Where the action is one that the court finds to be based primarily on disclosures of specific information, other than information provided by the person bringing the action, relating to allegations or transactions in a criminal, civil, or administrative hearing, in a legislative or administrative report, hearing, audit, or investigation, or from the news media, the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the action in advancing the case to litigation. Any payment to a person under the first or second sentence of this paragraph shall be made from the proceeds. Any such person shall also receive an amount for reasonable expenses that the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. All of those expenses, fees, and costs shall be awarded against the defendant. (2) If the Attorney General or district attorney does not proceed with an action under this section, the person bringing the action or settling the claim shall receive an amount that the court decides is reasonable for collecting the civil penalty and damages. The amount shall not be less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of the proceeds. That person shall also receive an amount for reasonable expenses that the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs. All of those expenses, fees, and costs shall be awarded against the defendant. (3) Whether or not the Attorney General or district attorney proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of this section, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. The dismissal shall not prejudice the right of the Attorney General or district attorney to continue the action on behalf of the state. (4) If the Attorney General or district attorney does not proceed with the action, and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorneys' fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment. (h) (1) In no event may a person bring an action under subdivision (e) that is based upon allegations or transactions that are the subject of a civil suit or an administrative civil money penalty proceeding in which the Attorney General or district attorney is already a party. (2) (A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing in a legislative or administrative report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. (B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Attorney General or district attorney before filing an action under this section which is based on the information. (i) The Attorney General or district attorney is not liable for expenses that a person incurs in bringing an action under this section. (j) In civil actions brought under this section by the Attorney General or district attorney, the court shall award to a prevailing defendant reasonable attorneys' fees and expenses unless the court finds that the position of the Attorney General or district attorney was substantially justified or that special circumstances make an award unjust. (k) Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole. That relief shall include reinstatement with the same seniority status the employee would have had but for the discrimination, two times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees. An employee may bring an action in the appropriate superior court for the relief provided in this subdivision. The remedies under this section are in addition to any other remedies provided by existing law. SEC. 3.6. Section 1877.5 of the Insurance Code is amended to read: 1877.5. No insurer, or agent authorized by an insurer to act on its behalf, who furnishes information, written or oral, pursuant to this article, and no authorized governmental agency or its employees who (a) furnishes or receives information, written or oral, pursuant to this article, or (b) assists in any investigation of a suspected violation of Section 1871.1, 1871.4, 11760, or 11880, or of Section 549 of the Penal Code, or of Section 3215 or 3219 of the Labor Code conducted by an authorized governmental agency, shall be subject to any civil liability in a cause or action of any kind where the insurer, authorized agent, or authorized governmental agency acts in good faith, without malice, and reasonably believes that the action taken was warranted by the then known facts, obtained by reasonable efforts. Nothing in this chapter is intended to, nor does in any way or manner, abrogate or lessen the existing common law or statutory privileges and immunities of an insurer, agent authorized by that insurer to act on its behalf, or any authorized governmental agency or its employees. SEC. 3.7. Section 3217 of the Labor Code is amended to read: 3217. (a) Section 3215 shall not be construed to prevent the recommendation of professional employment where that recommendation is not prohibited by the Rules of Professional Conduct of the State Bar. (b) Section 3215 shall not be construed to prohibit a public defender or assigned counsel from making known his or her availability as a criminal defense attorney to persons unable to afford legal counsel, whether or not those persons are in custody. (c) Any person who commits an act that violates both Section 3215 and either Section 650 of the Business and Professions Code or Section 750 of the Insurance Code shall, upon conviction, have judgment and sentence imposed for only one violation for any act. SEC. 4. Section 3219 is added to the Labor Code, to read: 3219. (a) (1) Except as otherwise permitted by law, any person acting individually or through his or her employees or agents, who offers or delivers any rebate, refund, commission, preference, patronage, dividend, discount, or other consideration to any adjuster of claims for compensation, as defined in Section 3207, as compensation, inducement, or reward for the referral or settlement of any claim, is guilty of a felony. (2) Except as otherwise permitted by law, any adjuster of claims for compensation, as defined in Section 3207, who accepts or receives any rebate, refund, commission, preference, patronage, dividend, discount, or other consideration, as compensation, inducement, or reward for the referral or settlement of any claim, is guilty of a felony. (b) Any contract for professional services secured by any medical clinic, laboratory, physician or other health care provider in this state in violation of Section 550 of the Penal Code, Section 1871.4 of the Insurance Code, Section 650 or 651 of the Business and Professions Code, or Section 3215 or subdivision (a) of Section 3219 of this code is void. In any action against any medical clinic, laboratory, physician, or other health care provider, or the owners or operators thereof, under Chapter 4 (commencing with Section 17000) or Chapter 5 (commencing with Section 17200) of Division 7 of the Business and Professions Code, any judgment shall include an order divesting the medical clinic, laboratory, physician, or other health care provider, and the owners and operators thereof, of any fees and other compensation received pursuant to any such void contract. Those fees and compensation shall be recoverable as additional civil penalties under Chapter 4 (commencing with Section 17000) or Chapter 5 (commencing with Section 17200) of Division 7 of the Business and Professions Code. The judgment may also include an order prohibiting the person from further participating in any manner in the entity in which that person directly or indirectly owned or operated for a time period that the court deems appropriate. For the purpose of this section, "operated" means participated in the management, direction, or control of the entity. (c) Notwithstanding Section 17206 or any other provision of law, any fees recovered pursuant to subdivision (b) in an action involving professional services related to the provision of workers' compensation shall be allocated as follows: if the action is brought by the Attorney General, one-half of the penalty collected shall be paid to the State General Fund, and one-half of the penalty collected shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund; if the action is brought by a district attorney, one-half of the penalty collected shall be paid to the treasurer of the county in which the judgment was entered, and one-half of the penalty collected shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund; if the action is brought by a city attorney or city prosecutor, one-half of the penalty collected shall be paid to the treasurer of the city in which the judgment was entered, and one-half of the penalty collected shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund. Moneys deposited into the Workers' Compensation Fraud Account pursuant to this subdivision shall be used in the investigation and prosecution of workers' compensation fraud, as appropriated by the Legislature. SEC. 4.5. Article 5 (commencing with Section 3820) is added to Chapter 4 of Division 4 of the Labor Code, to read: Article 5. Workers' Compensation Misrepresentations 3820. (a) In enacting Sections 1871.5 and 1871.6, the Legislature declares that there exists a compelling interest in eliminating fraud in the workers' compensation system. The Legislature recognizes that the conduct prohibited by these sections is, for the most part, already subject to criminal penalties pursuant to other provisions of law. However, the Legislature finds and declares that the addition of civil money penalties will provide necessary enforcement flexibility. The Legislature, in exercising its plenary authority related to workers' compensation, declares that these sections are both necessary and carefully tailored to combat the fraud and abuse that is rampant in the workers' compensation system. (b) It is unlawful to do any of the following: (1) Willfully misrepresent any fact in order to obtain workers' compensation insurance at less than the proper rate. (2) Present or cause to be presented any knowingly false or fraudulent written or oral material statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207. (3) Knowingly solicit, receive, offer, pay, or accept any rebate, refund, commission, preference, patronage, dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for soliciting or referring clients or patients to obtain services or benefits pursuant to Division 4 (commencing with Section 3200) unless the payment or receipt of consideration for services other than the referral of clients or patients is lawful pursuant to Section 650 of the Business and Professions Code or expressly permitted by the Rules of Professional Conduct of the State Bar. (4) Knowingly operate or participate in a service that, for profit, refers or recommends clients or patients to obtain medical or medical-legal services or benefits pursuant to Division 4 (commencing with Section 3200). (5) Knowingly assist, abet, solicit, or conspire with any person who engages in an unlawful act under this section. (c) For the purposes of this section, "statement" includes, but is not limited to, any notice, proof of injury, bill for services, payment for services, hospital or doctor records, X-ray, test results, medical-legal expenses as defined in Section 4620, or other evidence of loss, expense, or payment. (d) Any person who violates any provision of this section shall be subject, in addition to any other penalties that may be prescribed by law, to a civil penalty of not less than two thousand dollars ($2,000) nor more than five thousand dollars ($5,000), plus an assessment of not more than three times the amount of the medical treatment expenses paid pursuant to Article 2 (commencing with Section 4600) and medical-legal expenses paid pursuant to Article 2.5 (commencing with Section 4620) for each claim for compensation submitted in violation of this section. (e) Any person who violates subdivision (b) and who has a prior felony conviction of an offense set forth in Section 1871.1 or 1871.4 of the Insurance Code, or in Section 549 of the Penal Code, shall be subject, in addition to the penalties set forth in subdivision (d), to a civil penalty of two thousand dollars ($2,000) for each item or service with respect to which a violation of subdivision (b) occurred. (f) The penalties provided for in subdivisions (d) and (e) shall be assessed and recovered In a civil action brought in the name of the people of the State of California by any district attorney. (g) In assessing the amount of the civil penalty the court shall consider any one or more of the relevant circumstances presented by any of the parties to the case, including, but not limited to, the following: the nature and seriousness of the misconduct, the number of violations, the persistence of the misconduct, the length of time over which the misconduct occurred, the willfulness of the defendant's misconduct, and the defendant's assets, liabilities, and net worth. (h) All penalties collected pursuant to this section shall be paid to the Workers' Compensation Fraud Account in the Insurance Fund pursuant to Section 1872.83 of the Insurance Code. All costs incurred by district attorneys in carrying out this article shall be funded from the Workers' Compensation Fraud Account. It is the intent of the Legislature that the program instituted by this article be supported entirely from funds produced by moneys deposited into the Workers' Compensation Fraud Account from the imposition of civil money penalties for workers' compensation fraud collected pursuant to this section. All moneys claimed by district attorneys as costs of carrying out this article shall be paid pursuant to a determination by the Fraud Assessment Commission established by Section 1372.83 of the Insurance Code and on appropriation by the Legislature. SEC. 5. Section 4628 of the Labor Code is amended to read: 4628. (a) Except as provided in subdivision (c), no person, other than the physician who signs the medical-legal report, except a nurse performing those functions routinely performed by a nurse, such as taking blood pressure, shall examine the injured employee or participate in the nonclerical preparation of the report, including all of the following: (1) Taking a complete history. (2) Reviewing and summarizing prior medical records. (3) Composing and drafting the conclusions of the report. (b) The report shall disclose the date when and location where the evaluation was performed; that the physician or physicians signing the report actually performed the evaluation; whether the evaluation performed and the time spent performing the evaluation was in compliance with the guidelines established by the Industrial Medical Council or the administrative director pursuant to paragraph (5) of subdivision (j) of Section 139.2 or Section 5307.6 and shall disclose the name and qualifications of each person who performed any services in connection with the report, including diagnostic studies, other than its clerical preparation. If the report discloses that the evaluation performed or the time spent performing such evaluation was not in compliance with the guidelines established by the Industrial Medical Council or the administrative director, the report shall explain, in detail, any variance and the reason or reasons therefor. (c) If the initial outline of a patient's history or excerpting of prior medical records is not done by the physician, the physician shall review the excerpts and the entire outline and shall make additional inquiries and examinations as are necessary and appropriate to identify and determine the relevant medical issues. (d) No amount may be charged in excess of the direct charges for the physician's professional services and the reasonable costs of laboratory examinations, diagnostic studies, and other medical tests, and reasonable costs of clerical expense necessary to producing the report. Direct charges for the physician's professional services shall include reasonable overhead expense. (e) Failure to comply with the requirements of this section shall make the report inadmissible as evidence and shall eliminate any liability for payment of any medical-legal expense incurred in connection with the report. (f) Knowing failure to comply with the requirements of this section shall subject the physician to a civil penalty of up to one thousand dollars ($1,000) for each violation to be assessed by a workers' compensation judge or the appeals board. (g) A physician who is assessed a civil penalty under this section may be terminated, suspended, or placed on probation as a qualified medical evaluator pursuant to subdivisions (k) and (l) of Section 139.2. (h) Knowing failure to comply with the requirements of this section shall subject the physician to contempt pursuant to the judicial powers vested in the appeals board. (i) Any person billing for medical-legal evaluations, diagnostic procedures, or diagnostic services performed by persons other than those employed by the reporting physician or physicians, or a medical corporation owned by the reporting physician or physicians shall specify the amount paid or to be paid to those persons for the evaluations, procedures, or services. This subdivision shall not apply to any procedure or service defined or valued pursuant to Section 5307.1. (j) The report shall contain a declaration by the physician signing the report, under penalty of perjury, stating: "I declare under penalty of perjury that the information contained in this report and its attachments, if any, is true and correct to the best of my knowledge and belief, except as to information that I have indicated I received from others. As to that information, I declare under penalty of perjury that the information accurately describes the information provided to me and, except as noted herein, that I believe it to be true." The foregoing declaration shall be dated and signed by the reporting physician and shall indicate the county wherein it was signed. (k) The physician shall provide a curriculum vitae upon request by a party and include a statement concerning the percent of the physician's total practice time that is annually devoted to medical treatment. SEC. 6. Section 4906 of the Labor Code is amended to read: 4906. (a) No charge, claim, or agreement for the legal services or disbursements mentioned in subdivision (a) of Section 4903, or for the expense mentioned in subdivision (b) of Section 4903, is enforceable, valid, or binding in excess of a reasonable amount. The appeals board may determine what constitutes a reasonable amount. (b) No attorney or agent shall demand or accept any fee from an employee or dependent of an employee for the purpose of representing the employee or dependent of an employee in any proceeding of the division, appeals board, or any appellate procedure related thereto until the amount of the fee has been approved or set by the appeals board. (c) Any fee agreement shall be submitted to the appeals board for approval within 10 days after the agreement is made. (d) In establishing a reasonable attorney's fee, consideration shall be given to the responsibility assumed by the attorney, the care exercised in representing the applicant, the time involved, and the results obtained. (e) At the initial consultation, an attorney shall furnish the employee a written disclosure form promulgated by the administrative director which shall clearly and prominently describe the procedures available to the injured employee or his or her dependents. The disclosure form shall describe this section, the range of attorney's fees customarily approved by the appeals board, and the attorney's fees provisions of Section 4064 and the extent to which an employee may receive compensation without incurring attorney's fees. The disclosure form shall include the telephone number of the Office of Benefit Assistance and Enforcement together with the statement that the employee may receive answers at that number to questions concerning entitlement to compensation or the procedures to follow to receive compensation. A copy of the disclosure form shall be signed by the employee and the attorney and sent to the employer, or insurer or third-party administrator, if either is known, by the attorney within 15 days of the employee's and attorney's execution thereof. (f) The disclosure form set forth in subdivision (e) shall contain, prominently stated, the following statement: "Any person who makes or causes to be made any knowingly false or fraudulent material statement or representation for the purpose of obtaining or denying worker's compensation benefits or payments is guilty of a felony." (g) The employee, the insurer, the employer, and the attorneys for each party shall sign and file with the board a statement, with the application or answer, under penalty of perjury that they have not violated Section 139.3 and that they have not offered, delivered, received, or accepted any rebate, refund, commission, preference, patronage dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for any referred examination or evaluation. SEC. 7. Section 5703 of the Labor Code is amended to read: 5703. The appeals board may receive as evidence either at or subsequent to a hearing, and use as proof of any fact in dispute, the following matters, in addition to sworn testimony presented in open hearing: (a) Reports of attending or examining physicians. (1) Statements concerning any bill for services are admissible only if made under penalty of perjury that they are true and correct to the best knowledge of the physician. (2) In addition, reports are admissible under this subdivision only if the physician has further stated in the body of the report that there has not been a violation of Section 139.3 and that the contents of the report are true and correct to the best knowledge of the physician. The statement shall be made under penalty of perjury. (b) Reports of special investigators appointed by the appeals board or a workers' compensation judge to investigate and report upon any scientific or medical question. (c) Reports of employers, containing copies of timesheets, book accounts, reports, and other records properly authenticated. (d) Properly authenticated copies of hospital records of the case of the injured employee. (e) All publications of the Division of Industrial Accidents. (f) All official publications of state and United States governments. (g) Excerpts from expert testimony received by the appeals board upon similar issues of scientific fact in other cases and the prior decisions of the appeals board upon similar issues. SEC. 8. Section 550 of the Penal Code is amended to read: 550. (a) It is unlawful to do any of the following: (1) Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss, including payment of a loss under a contract of insurance. (2) Knowingly present multiple claims for the same loss or injury, including presentation of multiple claims to more than one insurer, with an intent to defraud. (3) Knowingly cause or participate in a vehicular collision, or any other vehicular accident, for the purpose of presenting any false or fraudulent claim. (4) Knowingly present a false or fraudulent claim for the payments of a loss for theft, destruction, damage, or conversion of a motor vehicle, a motor vehicle part, or contents of a motor vehicle. (5) Knowingly prepare, make, or subscribe any writing, with the intent to present or use it, or to allow it to be presented in support of any false or fraudulent claim. (6) Knowingly assist, abet, solicit, or conspire with (A) any person who knowingly presents any false or fraudulent claim for the payment of a loss, including payment of a loss under a contract of insurance; (B) any person who knowingly presents multiple claims for the same loss or injury, including presentation of multiple claims to more than one insurer, with an intent to defraud; (C) any person who knowingly causes or participates in a vehicular collision, or any other vehicular accident, for the purpose of presenting any false or fraudulent claim; and (D) any person who knowingly prepares, makes, or subscribes any writing, with the intent to present or use it, or to allow it to be presented in support on any claim. (7) Knowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit. (8) Knowingly submit a claim for a health care benefit which was not used by, or on behalf of, the claimant. (9) Knowingly present multiple claims for payment of the same health care benefit with an intent to defraud. (10) Knowingly present for payment any undercharges for health care benefits on behalf of a specific claimant unless any known overcharges for health care benefits for that claimant are presented for reconciliation at that same time. (11) For purposes of paragraphs (7) to (10), inclusive, a claim or a claim for payment of a health care benefit also means a claim or claim for payment submitted by or on the behalf of a provider of any workers' compensation health benefits under the Labor Code. (b) (1) Every person who violates paragraph (1), (2), (3), (4), (5), or (6) of subdivision (a) is punishable by imprisonment in the state prison for two, three, or five years, or by a fine not exceeding fifty thousand dollars ($50,000), or by both that imprisonment and fine, unless the value of the fraud is fifty thousand dollars ($50,000) or more. Whenever the value of the fraud is fifty thousand dollars ($50,000) or more, the fine may be double the amount of the value of the fraud. Except in the interest of justice, a person placed on probation for violating any provision of this section shall be required by the court to perform some community service, specifically, the removal of graffiti. (2) Every person who violates paragraph (7), (8), (9), or (10) of subdivision (a) is guilty of a public offense. (A) Where the claim or amount at issue exceeds four hundred dollars ($400), the offense is punishable by imprisonment in the state prison for two, three, or five years, by a fine not exceeding fifty thousand dollars ($50,000), or by both that imprisonment and fine, unless the value of the fraud exceeds fifty thousand dollars ($50,000), in which event the fine may not exceed the value of the fraud, or by imprisonment in a county jail not to exceed one year, by a fine of not more than one thousand dollars ($1,000), or by both that imprisonment and fine. (B) Where the claim or amount at issue is four hundred dollars ($400) or less, the offense is punishable by imprisonment in a county jail not to exceed six months, by a fine of not more than one thousand dollars ($1,000), or by both that imprisonment and fine unless the aggregate amount of the claims or amount at issue exceeds four hundred dollars ($400) in any 12 consecutive month period, in which case the claims or amounts may be charged as in subparagraph (A). (c) Notwithstanding any other provision of law, probation shall not be granted to, nor shall the execution or imposition of a sentence be suspended for, any adult person convicted of felony violations of this section who previously has been convicted of felony violations of this section as an adult under charges separately brought and tried two or more times. The existence of any fact which would make a person ineligible for probation under this subdivision shall be alleged in the information or indictment, and either admitted by the defendant in an open court, or found to be true by the jury trying the issue of guilt or by the court where guilt is established by plea of guilty or nolo contendere or by trial by the court sitting without a jury. Except where the existence of the fact was not admitted or found to be true or the court finds that a prior felony conviction was invalid, the court shall not strike or dismiss any prior felony convictions alleged in the information or indictment. This subdivision shall not prohibit the adjournment of criminal proceedings pursuant to Division 3 (commencing with Section 3000) of, or Division 6 (commencing with Section 6000) of, the Welfare and Institutions Code. (d) Any person who violates subdivision (a) and who has a prior felony conviction of the offense set forth in that subdivision or in Section 548 shall receive a two-year enhancement for each prior felony conviction in addition to the sentence provided in subdivision (b). The existence of any fact which would subject a person to a penalty enhancement shall be alleged in the information or indictment and either admitted by the defendant in open court, or found to be true by the jury trying the issue of guilt or by the court where guilt is established by plea of guilty or nolo contendere or by trial by the court sitting without a jury. (e) This section shall not be construed to preclude the applicability of any other provision of criminal law that applies or may apply to any transaction. SEC. 9. Section 1191.10 is added to the Penal Code, to read: 1191.10. The definition of the term "victim" as used in Section 1191.1 includes any insurer or employer who was the victim of workers' compensation fraud for the crimes specified in Section 549 of this code, Sections 2314 and 6152 of the Business and Professions Code, Sections 1871.4, 11760, and 11880 of the Insurance Code, and Section 3215 of the Labor Code. SEC. 10. Section 2714 of the Unemployment Insurance Code is amended to read: 2714. (a) All medical records of the department obtained under this part, except to the extent necessary for the proper administration of this part, for subdivision (t) of Section 1095, or as provided herein, or to the extent necessary for the proper administration of public social services pursuant to the Welfare and Institutions Code, shall be confidential and shall not be published or be open to public inspection in any manner revealing the identity of the claimant, or the nature or cause of his or her disability. These records are not admissible in evidence in any action or special proceeding other than one arising under this division or one arising under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code to determine entitlement to, and directly connected with and limited to the administration of, public social services. The department may reveal its records to the Director of Social Services or his or her representatives, and may reveal the identity only of the claimant to the Department of Rehabilitation, but the information shall remain confidential and shall not be disclosed except as provided herein. (b) The department shall, to the extent permitted by federal law and regulations, and to the extent the information is available and accessible within the constraints and configurations of existing department records, provide any law enforcement agency with the name, address, telephone number, birth date, social security number, physical description, and names and addresses of present and past employers, of any victim, suspect, missing person, potential witness, or person for whom a felony arrest warrant has been issued, when a request for this information is made by any investigator or peace officer as defined by Sections 830.1 and 830.2 of the Penal Code and designated by the head of the law enforcement agency and who requests this information in the course of and a part of an investigation into the commission of a crime where there is a reasonable suspicion that the crime is a felony and that the information would lead to relevant evidence. Any person who receives any information under this subdivision shall make a written report of the information to the law enforcement agency that employs him or her, for filing under normal procedures of that agency. Any officer or employee of the department who discloses information in violation of this subdivision is guilty of a misdemeanor. Any person who obtains information in violation of this subdivision is guilty of a misdemeanor. (c) The department shall notify all applicants for benefits that release of confidential information from their records will not be protected should there be a felony arrest warrant issued against the applicant or in the event of an investigation by a law enforcement agency into the commission of a felony. (d) This section shall not be construed to authorize the release of a general list identifying individuals applying for or receiving benefits to any law enforcement agency. (e) The department shall maintain records pursuant to this section only for periods required under regulations or statutes enacted for the administration of its programs. (f) This section shall become operative on January 1, 1988. SEC. 11. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs which may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, changes the definition of a crime or infraction, changes the penalty for a crime or infraction, or eliminates a crime or infraction. Notwithstanding Section 17580 of the Government Code, unless otherwise specified in this act, the provisions of this act shall become operative on the same date that the act takes effect pursuant to the California Constitution. SEC. 12. This act shall become operative only if Assembly Bills 110 and 119 and Senate Bills 484 and 983 of the 1993-1994 Regular Session are all enacted and become effective on or before January 1, 1994. SEC. 13. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to make changes to California's workers' compensation system that are needed to provide immediate relief to California businesses and workers, it is necessary for this act to take effect immediately.