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Shehata v. Salvation Army

Supreme Court of Alaska

March 12, 2010

Victor SHEHATA, Appellant,
v.
SALVATION ARMY and Northern Adjusters, Appellees.

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Phillip J. Eide and Laura S. Gould, Eide & Gingras, P.C., Anchorage, for Appellant.

Colby J. Smith and Krista M. Schwarting, Griffin & Smith, Anchorage, for Appellees.

Before: FABE, Chief Justice, EASTAUGH, CARPENETI, and WINFREE, Justices.

OPINION

CARPENETI, Justice.

I. INTRODUCTION

This appeal concerns reimbursement for fraudulent receipt of workers' compensation benefits. An employee worked part-time for five weeks while he was receiving workers' compensation benefits for a shoulder injury but did not inform his former employer that he was working. On his last day at the part-time job, the employee untruthfully told the workers' compensation claims adjuster that he was not working. The Alaska Workers' Compensation Board ordered the employee to reimburse his employer for workers' compensation benefits he received during the entire time he was working, finding that he obtained benefits fraudulently by telling the adjuster that he was not working. The board assessed over $14,000 in attorney's fees against him as well. The Alaska Workers' Compensation Appeals Commission affirmed the board rulings. In a separate decision, the commission ordered the employee to pay an additional $5,270 in attorney's fees to the employer, finding that his appeal was frivolous or unreasonable. We conclude that the workers' compensation fraud statute requires a causal link between a false statement and the benefits obtained; here, cause is lacking for any benefits paid before the false statement. We therefore reverse the order for reimbursement of benefits paid before the date of the statement. We affirm the order requiring repayment of one week of benefits. Finally, we conclude that the employee's appeal was not frivolous and reverse the commission's decision awarding attorney's fees for the appeal.

II. FACTS AND PROCEEDINGS

Victor Shehata injured his shoulder at his job for the Salvation Army in December 2003. The Salvation Army accepted the compensability of the injury and initially paid medical benefits. Shehata had shoulder surgery in July 2005. He received temporary total disability (TTD) benefits from February 1, 2005 through April 7, 2006.[1] He also got a lump sum permanent partial impairment (PPI) payment in April 2006.

In September 2005 Shehata began to work part-time at Totem Equipment & Supply, Inc. doing clerical work. According to Shehata, he decided to try to work at Totem after the owner, who was a friend of his, asked for his help. Shehata earned about $280 a week from Totem; he also received $411.95 a week in TTD benefits from the Salvation Army. He did not inform the Salvation Army or the insurance adjuster that he was working part-time.

In early October 2005, the Salvation Army hired an investigator to follow Shehata. According to the insurance adjuster, she hired the investigator because the Salvation Army was considering an offer of light duty work to Shehata and she wanted information about his physical capacity as she had noticed references to refereeing soccer in Shehata's medical records. The investigation indicated that Shehata was working at Totem. The adjuster testified that she knew by October 14, 2005, that Shehata was working part-time. That day, the adjuster taped part of a telephone conversation she had with Shehata. In the call, she said, " as I understand it, you're not actually working?" Shehata answered, " No." At the time he was talking to

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the adjuster, Shehata was standing outside Totem's office, being videotaped by the investigator. Shehata's last day of work with Totem was October 14, 2005. On October 17, 2005, the adjuster again talked to Shehata on the phone and recorded the call. Their conversation contained the following exchange:

[Adjuster]: ... we just have to know whether you're earning wages, whether you're earning ...
[Shehata]: Oh, no, no, no, no. I don't earn no wages, I don't get no unemployment. I don't get no Social Security [ ] Disability, I think that's what you're saying, or otherwise.

Earlier in the conversation, Shehata affirmed that he had told her in the previous conversation that he was not working, but was looking for work.

The Salvation Army confirmed Shehata's employment with Totem in mid-November. It filed a notice of controversion on November 30, 2005, controverting Shehata's receipt of TTD benefits from September 12, 2005 through October 15, 2005. It continued to pay Shehata TTD benefits until April 6, 2006, without withholding the TTD benefits it had controverted in November.

The Salvation Army sent Shehata written discovery requests related to his employment on December 13, 2005. Two days later it sent a notice that it planned to take Shehata's deposition on January 6, 2006. Shehata and his attorney appeared at the scheduled deposition. At the deposition, the Salvation Army's attorney indicated that Shehata's attorney had told him that Shehata would not contest the controversion. Shehata's attorney confirmed this and said that Shehata was " prepared to submit information with respect to what his earnings were during the time of controversion." He also stated that Shehata's work " may result in no TTD benefits, it might result in [temporary partial disability] benefits, but it's not going to be a claim on our part." Shehata's attorney said that Shehata would " prefer not to go through the questioning" of a deposition because of health concerns,[2] that he would give written responses to the Salvation Army and " then hopefully resolve this claim down the road." The Salvation Army noted for the record that Shehata was also unwilling to participate in the deposition because he had not filed a claim; it then cancelled the deposition. Shehata answered the Salvation Army's written discovery requests on January 10, 2006. He described his work at Totem and supplied copies of his check stubs from Totem.

On April 7, 2006, a physician evaluated Shehata on behalf of the Salvation Army. The physician reported that in his opinion Shehata had reached medical stability and had a nine percent whole person permanent partial impairment (PPI) rating. Based on this report, the Salvation Army controverted Shehata's eligibility for continuing TTD benefits, and on April 24, 2006, it paid Shehata $15,930 as a lump sum PPI benefit, again without withholding the TTD benefits it had paid while Shehata was working at Totem.[3]

On June 27, 2006, the Salvation Army filed a petition to compel Shehata to attend a deposition.[4] On July 24, 2006, the Salvation Army filed a petition for reimbursement under AS 23.30.250(b), which authorizes the board to order repayment of fraudulently obtained workers' compensation benefits. In its petition, the Salvation Army asked for " full reimbursement for temporary total disability benefits paid from September 21, 2005 through October 15, 2005 and all reasonable costs and attorney's fees incurred in obtaining these benefits." It also noted difficulties in obtaining discovery and stated that its claim for reimbursement might " be amended

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after the appropriate discovery occurs." [5] On the same day, it filed a separate petition requesting that the board compel Shehata to sign tax and employment releases.

Shehata answered the petition for reimbursement by admitting that he had worked part-time from September 12, 2005 through October 15, 2005. He also answered that the Salvation Army had been advised as early as January 2006 that he would not contest controversion of TTD benefits for that period, so that the Salvation Army was " entitled to adjust Mr. Shehata's benefits to Temporary Partial Disability benefits for the relevant time period." Shehata declared that the petition for reimbursement was unnecessary because the Salvation Army could recover any overpayment through an offset of future compensation. He asked that the board deny the petition. Shehata also answered the petition to compel him to attend a deposition, noting that because he had not contested the controversion of TTD benefits or filed a written claim, he disputed whether he could be made to ...


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