A state appellate court has upheld a $479,000 judgment against two Salinas-area chiropractors who set up sham medical companies and overcharged Monterey Mushrooms on workers compensation claims.

The ruling by the 6th District Court of Appeal denied an appeal by Steven Thompson and Aster Kifle-Thompson. They were found liable in a 2002 civil trial heard by a Monterey judge for submitting hundreds of fraudulent claims against the giant mushroom company.

Monterey County Superior Court Judge Robert O'Farrell found that the couple submitted about 700 fraudulent claims for treating Monterey Mushrooms employees. They set up two medical clinics in the late 1990s with absentee physician owners in order to get patient referrals for chiropractic treatments.

O'Farrell assessed civil penalties of $479,115 and ordered the defendants to pay $1.23 million in attorney fees. The suit was filed by Monterey Mushrooms, a self-insured employer that investigated the claims, in conjunction with state authorities. The Watsonville company is the largest supplier of fresh mushrooms in the United States.

Joel Franklin, attorney for Monterey Mushrooms, said the appellate decision is significant because there were legal questions about bringing certain kinds of insurance fraud cases in superior courts.

"This is the first case in California that allows a certain type of fraud claim under the insurance code," he said. "It clarifies this area of law."

In their appeal, the Thompsons contended their actions were legal, the trial judge used the wrong standard of proof and the case should have been heard by the Worker's Compensation Appeals Board. They also contended the court's damage award was excessive and its liability findings were inappropriate.

The appellate decision, which was certified for publication Jan. 27, said the suit was properly brought under a state law aimed at curbing insurance fraud, including workers' compensation fraud.

Rejecting a contention that some defendants should have been dropped, the appellate court said: "This case was not merely about the submission of false or excessive treatment claims...; it embraced an entire scheme in which (defendants) helped defraud Monterey Mushrooms, the workers' compensation system and the public."

Steven Thompson's chiropractic license was revoked in 2000, while Kifle-Thompson still has an active license, according to the state Board of Chiropractic Examiners.

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