It’s Designed Not to Be Detected! How Fraudulent Staffing Operators Are Still Gaming California’s Workers’ Comp System
Workers’ compensation fraud in California is no longer about isolated bad actors or sloppy paperwork. It has evolved into a sophisticated, high-volume business model—one that deliberately blends into the system it exploits.
That reality was laid bare at the recent Workers' Compensation Insurance Rating Bureau Annual Conference, where former Senior Deputy District Attorney Shaddi Kamiabipour delivered a warning that echoed what frontline watchdogs like P.O.W.E.R. have been documenting for years: the fraud hasn’t stopped—it has simply become harder to see.
Fraud That Looks Legitimate by Design
During her years prosecuting workers’ compensation fraud in Orange County, Kamiabipour dismantled numerous schemes. Yet her most sobering insight was this:
“A lot of the scams that I prosecuted for years are still ongoing. There’s other people in the business doing it.”
These are not fly-by-night operators. They are temporary staffing entities built to appear compliant—with payroll systems, insurance paperwork, employee rosters, and tax filings that look legitimate on the surface. Underneath, however, many are structured specifically to defraud the workers’ compensation system while undercutting honest employers.
P.O.W.E.R. sees this pattern repeatedly in the field:
Layered corporate entities
Shell payroll companies
Fake or “borrowed” insurance coverage
Strategic misclassification of workers
Deductions disguised as wellness or benefits programs
The goal is simple: extract profit while shifting risk and liability elsewhere.
From Small Scams to High-Volume Profit Models
One of the most critical shifts Kamiabipour identified is scale.
“All they’re doing is, they’re just hitting people in volume on a higher level.”
This is no longer about stealing thousands. It is about skimming pennies across tens of thousands of workers, turning minimal per-employee fraud into massive aggregate profit. And in California, where enforcement penalties are often modest relative to the gains, the math works.
“Even pennies of the dollar is worth it… the punishment for it is de minimis.”
This explains why workers’ compensation fraud in California continues to thrive despite prosecutions: the system still incentivizes risk-taking for bad actors.
Industry Insiders Are Fueling the Problem
Perhaps the most alarming revelation was who is behind many of the most effective fraud schemes.
“The most prolific frauds in the system right now are people who came from the industry.”
These are former insurance professionals, staffing executives, and payroll insiders. They understand compliance frameworks, audit thresholds, and reporting blind spots. That knowledge allows them to engineer fraud that passes initial scrutiny and delays intervention until the damage is extensive.
By the time law enforcement steps in, Kamiabipour explained, the situation is often catastrophic:
“It’s literally a dumpster fire… a fire behind you can’t ignore.”
Why Law Enforcement Can’t Be the First Line of Defense
A critical takeaway from Kamiabipour’s remarks aligns directly with P.O.W.E.R.’s mission:
law enforcement is often the last responder, not the first protector.
“Typically for detection and fighting it are the carriers.”
Insurance carriers, employers, and industry watchdogs are the ones who see irregularities early—if they are equipped to look for them. Without coordination, shared intelligence, and civil enforcement mechanisms, fraudulent staffing operators can operate for years before criminal cases are even viable.
P.O.W.E.R.’s Role - Early Detection, Coalition Action, Real Consequences
This is precisely why P.O.W.E.R. exists.
Rather than waiting for criminal prosecutions after widespread harm, P.O.W.E.R. focuses on:
Early fraud detection
Cross-sector intelligence sharing
Coalition building between ethical businesses, insurers, and regulators
Civil enforcement tools, including actions under California Business & Professions Code §17200
Policy advocacy that reflects the modern scale and sophistication of fraud
Kamiabipour’s comparison was striking but accurate: organized fraud in workers’ compensation now mirrors the operational discipline once associated with drug trafficking or weapons smuggling. The difference is the camouflage—it hides in plain sight.
The Fraud Has Evolved. The Response Must Too.
Workers’ compensation fraud in California is not a legacy problem. It is a living system of abuse, constantly adapting to enforcement tactics and regulatory gaps.
But so is the response.
Coalitions like P.O.W.E.R. represent the next phase of oversight—one that combines intelligence, enforcement, and ethical business leadership to protect workers, honest employers, and the integrity of the system itself.
If there has ever been a moment to modernize detection and accountability, this is it.
Learn more, join the coalition, or report suspected fraud at POWERaction.org
Resources
📝 Transcript Quotes: Kamiabipour’s remarks cited from WCIRB Conference (2023)
⚖️ Relevant Law: California Business & Professions Code §17200
📄 Enforcement Example: California DIR – Workers’ Compensation Fraud
🤝 Join or Report: Visit POWERACTION.org to join the coalition, report fraud, or access enforcement support.
