Workers’ compensation fraud investigations can target injured workers, employers, claims professionals, medical providers, clinic owners, billing companies, interpreters, transportation vendors, and others connected to a claim. The legal question is not simply whether a bill was challenged or a referral involved money. Prosecutors generally must prove the elements of a specific statute, including the required knowledge, materiality, or unlawful purpose.
If investigators, an insurer, a licensing board, or a prosecutor has contacted you, do not guess about what happened or alter records. Preserve the claim file, billing data, medical records, referral agreements, ownership disclosures, and communications. Contact My Rights Law’s financial crimes lawyers at 888-702-8882 or use our secure web form for a free confidential consultation.
California Insurance Code section 1871.4 prohibits knowingly false or fraudulent material statements or representations made to obtain or deny workers’ compensation. It also covers knowingly false material statements presented in support of or opposition to a claim, knowingly assisting or conspiring in a prohibited act, and knowingly false statements intended to discourage an injured worker from claiming or pursuing benefits.
The statute’s definition of a statement is broad. It can include a notice, proof of injury, bill for services, payment, hospital or doctor record, X-ray, test result, medical-legal expense, or other evidence of injury, loss, expense, or payment. That means exposure can arise on more than one side of a claim.
A claimant-side case may involve allegations that a person knowingly misstated how an injury occurred, concealed work or income, exaggerated a limitation, used a false record, or sought benefits for a condition unrelated to work. A mistake, changing medical condition, or disagreement about disability is not automatically fraud. The prosecution still must prove the charged false statement was knowing, material, and connected to obtaining compensation under the applicable law.
A provider-side investigation may focus on whether services were actually performed, records support the services billed, billing codes accurately describe the work, a service was medically necessary, or a clinic, laboratory, pharmacy, imaging center, medical equipment supplier, interpreter, or transportation vendor knowingly submitted false material information. Providers can also face scrutiny over ownership interests, referral payments, cross-referrals, marketing arrangements, or financial-interest disclosures.
These are distinct theories. A patient can have a legitimate injury even if a provider’s billing is questioned, and a denied or adjusted bill does not by itself prove a provider committed a crime.
Depending on the evidence, investigators may examine allegations involving:
Coding rules, documentation standards, utilization review, and medical necessity can be complicated. An audit finding, billing correction, overpayment demand, lien dispute, or administrative violation does not automatically establish criminal intent.
Business and Professions Code section 650 generally makes it unlawful for a person licensed under Division 2 or the Chiropractic Initiative Act to offer, deliver, receive, or accept money or other consideration as compensation or an inducement for referring patients, clients, or customers. A first conviction can carry county jail or felony punishment under Penal Code section 1170(h), a fine up to $50,000, or both; subsequent convictions have separate consequences.
Section 650 is not a blanket ban on every business relationship. The statute contains important exceptions and conditions, including some fair-value arrangements for services other than referrals, certain ownership referrals, qualifying nonmonetary technology arrangements, and compliant advertising or internet-booking services that do not recommend or endorse a particular licensee. Whether an arrangement fits an exception depends on its actual terms and operation. A referral tied to an ownership interest can still be unlawful where the prosecution proves there was no valid medical need.
Current Labor Code section 139.32 applies to a defined group of “interested parties,” including injured employees, employers and insurers, claims administrators, attorneys or law firms advising employees, their representatives or agents, and providers of medical services or products. Covered services include medical care and products, medical-bill review, document services, interpreters, transportation, utilization review, and certain compensation determinations.
The statute restricts certain referrals or uses of services where an interested party has a financial interest in the receiving entity. It also addresses cross-referral arrangements and the offer, delivery, receipt, or acceptance of a rebate, refund, commission, preference, dividend, discount, or other consideration as compensation or an inducement for a referral. It contains defined exclusions and exceptions, so the existence of a loan, lease, ownership interest, employment relationship, or legal-services referral is not automatically a violation.
Assembly Bill 1398, Chapter 640, amended Labor Code section 139.32 effective January 1, 2026. Under the current text, an interested party must disclose in writing any financial interest in an entity providing services to the third-party payer or other entity to whom a claim for payment is presented, and the disclosure must be made when that claim is presented for services furnished pursuant to a referral.
The current statute states that a violation is a misdemeanor and can also trigger civil penalties of up to $15,000 per offense, licensing consequences, and other statutory remedies. Those consequences depend on the proven violation; the amendment does not convert every undisclosed relationship or contested bill into fraud.
Insurance Code section 1871.4 provides either up to one year in county jail or imprisonment for two, three, or five years under Penal Code section 1170(h). It also authorizes a fine up to $150,000 or double the value of the fraud, whichever is greater, or both imprisonment and a fine. Restitution is required following a conviction, including restitution for medical evaluation or treatment services obtained or provided. The court may also impose investigation costs, and qualifying prior convictions can create an additional enhancement.
These are statutory possibilities, not automatic outcomes. Charging and sentencing depend on the specific subdivision, evidence, loss allegations, prior record, and other facts.
Provider-side cases are often document-heavy. Investigators may compare:
Preserving the original records matters. Deleting, backdating, recreating, or “cleaning up” documents after learning of an investigation can create additional problems.
Not every overpayment, coding disagreement, medical-necessity denial, utilization-review dispute, or documentation gap proves a crime. Criminal statutes commonly require proof that a material statement was knowingly false or that consideration was actually offered or accepted for a prohibited referral. Legitimate services, reasonable coding interpretations, clerical mistakes, third-party billing errors, disclosed financial relationships, and statutory exceptions may materially change the analysis.
At the same time, calling an issue a billing mistake does not end the inquiry. Counsel may need to trace who created the record, who knew what, how the claim was submitted, whether payment was sought or denied, and whether any referral arrangement had a lawful business purpose and fair-value terms.
The available defenses depend on the charge and evidence. Issues can include:
An attorney can compare the prosecution theory with the claim file, billing history, referral contracts, ownership records, and the exact statutory elements before advising on strategy.
Workers’ compensation health-benefit claims can also fall within Penal Code section 550(a)(6)–(10) when the evidence involves knowingly false health care benefit claims, unused benefits, duplicate claims, or the reconciliation rule for undercharges and known overcharges. For a broader discussion of private-insurer and health care benefit allegations, see our California insurance fraud defense page.
Federal employees’ compensation is governed separately. 18 U.S.C. section 1920 addresses knowing and willful false or fraudulent material statements connected to an application for or receipt of federal employees’ compensation. It does not make every California workers’ compensation dispute a federal case.
If you are an injured worker, provider, clinic owner, biller, employer, or other participant facing a fraud investigation, get advice before an interview or document production. My Rights Law can review the allegations and evidence without promising a particular result. Call 888-702-8882 or use our secure web form for a free confidential consultation.
Other financial crimes we defend include securities fraud and RICO allegations.
This page was written by the My Rights Law Editorial Team and reviewed for legal accuracy by Bobby Shamuilian.
Attorney Shamuilian is the founder and managing partner of My Rights Law and is widely recognized as a legal authority, frequently appearing as a legal analyst and TV pundit on national news outlets.
He has earned a perfect “10.0 – Top Attorney” rating on AVVO and a “10.0” rating on Justia, and has been named among the “Top 40 Under 40” and the “Top 100 Trial Lawyers” by The National Trial Lawyers.
With his proven expertise and dedication, Mr. Shamuilian is committed to protecting your rights and achieving the best possible outcome for your case.
The last modified date shows when this page was most recently reviewed.
schedule a free confidential consultation
