Lawyer Convicted of Workers’ Compensation Fraud

Post 5031

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In The People v. Jon Woods, G061948, California Court of Appeals, Fourth District, Third Division (March 18, 2025) a jury convicted Jon Woods of 37 felony counts of workers’ compensation fraud.

Woods was a worker’s compensation attorney who had made business arrangements that involved unlawful kickback and referral fees.

Woods contended that the Williamson rule (In re Williamson (1954) 43 Cal.2d 651, 276 P.2d 593) precluded convictions on counts 5 through 37. The Williamson rule states that where the Legislature has defined a specific crime with a lesser punishment, the conduct described by that crime may not be charged as a more general crime with a harsher punishment. Woods argued that his conduct was covered by a more specific statute, Labor Code section 139.32, which makes it a misdemeanor to refer work to third-party servicers in exchange for compensation.

THE WORKERS’ COMPENSATION SYSTEM

Workers’ Compensation is a scheme where employers agree to promptly compensate employees for injuries sustained on the job regardless of fault, and employees agree to the limited remedies available under the scheme.

The Legislature passed laws to protect insurers and the overall workers’ compensation system from abuse, including making it a crime to participate in a kickback scheme which was the criminal conduct of Woods, Gonzales and Arguello.

FACTS

Woods arranged with Edgar Gonzales to use copy services business called USA Photocopy, which provided subpoena services for workers’ compensation attorneys. USA Photocopy paid for some of Woods’s business expenses, including the salary of certain employees hired by Woods.

Woods’s arrangement with Arguello involved a marketing company that advertised to obtain workers’ compensation clients. Using Arguello’s copy service for subpoenas was a condition of engaging his advertising service. Woods paid Arguello’s businesses $1,425,000 in fees for advertising services over the course of their relationship.

Arguello pleaded guilty to federal criminal charges related to worker’s compensation fraud and was sentenced to four years in federal prison. He also pleaded guilty to charges brought by the Orange County District Attorney.

The Attorney General alleged four aspects of Woods’s relationships with Gonzales and Arguello that were illegal. These included operating as a runner or capper service, providing fully signed and retained clients prior to any interaction with Woods, a quid pro quo arrangement, and an illegal cross-referral service.

After conviction Woods was sentenced to four years in prison and ordered to pay restitution in the amount of $701,452.

THE APPEAL

Woods appealed, and the court reversed counts 5-37 based on the Williamson rule. Woods contended that his conduct is covered by a more specific statute that criminalizes kickback schemes, which is what Woods was accused of participating in, Penal Code Section 550.

DISCUSSION

Absent some indication of legislative intent to the contrary, the Williamson rule applies and there does not need to be perfect overlap between the general and specific statutes.

The People’s theory of how Woods violated Penal Code section 550 was precisely that he violated Labor Code section 139.32 and, therefore, the Williamson rule applies. The Court of Appeals agreed with Woods under these circumstances, and thus reversed his conviction on counts 5-37. This will also require reversal of the white-collar sentencing enhancement based on these charges, as well as a restitution award based on these charges. The restitution order of $701,452 was reversed without prejudice to the court reassessing restitution at a new sentencing hearing. In all other respects, the judgment was affirmed.

ZALMA OPINION

A lawyer committing fraud taking advantage of the Workers’ Compensation system where his crimes resulted in more than a million dollars of kickbacks and payment for cappers who illegally signed up clients for Woods. The court only found that the state overcharged Woods and required him to serve an appropriate sentence for his fraud on the Workers’ Compensation system, employers and their insurers. Jail and an appropriate amount of restitution to the defrauded insurers should be assessed.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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