Officials Arrest Alleged Heads of Workers’ Comp Scheme : Insurance: Eight others are held as part of two-year probe into what authorities call biggest-ever such scam in state.

Two years to the day after a massive sweep in which documents were seized from more than 150 locations, authorities Thursday arrested the two alleged kingpins of what they called California’s biggest-ever workers’ compensation fraud, a complex statewide operation that at its peak raked in billings of up to $2 million a month.

Arrested at their homes Thursday morning on 49 felony counts were Dr. James W. Eisenberg, 54, of Santa Monica, who headed a medical chain called Amerimed Medical Corp., and Michael J. Lightman, 46, of Rancho Palos Verdes, who ran a web of legal, marketing, real estate and bill-collection businesses that investigators say meshed with Eisenberg’s clinics to form one of the most sophisticated fraud mills ever constructed in the region.

Eight alleged accomplices were also arrested Thursday, and warrants were issued for two others.

“It was a machine for turning paper into money,” said state Insurance Commissioner Chuck Quackenbush, whose office conducted the three-year probe along with the office of Los Angeles County Dist. Atty. Gil Garcetti and the FBI.

Lawyers for Lightman issued a statement protesting the “outrageous bail” of $2.5 million on which he and Eisenberg were being held. They added, “We have not seen the charges but expect to vigorously defend Mr. Lightman in court.”

Eisenberg could not be reached for comment.

The pair face up to 12 years in prison if convicted.

The point of the enterprise, authorities allege, was to use workers whose injuries for the most part were legitimate as a vehicle to generate massively inflated insurance claims and referral fees for medical testing and treatment.

For example, the Amerimed-affiliated clinics provided more than 1,000 injury victims with small appliances called transcutaneous electrical nerve stimulators that consisted of an electrode attached to a nine-volt battery pack and were meant to reduce pain through tiny electrical shocks.

The devices retail for about $60 each, but insurers were billed $1,020 apiece for them, investigators said. To induce clinics to prescribe the devices, Amerimed gave practitioners commissions of up to $300 per item, Quackenbush said Thursday at a news conference in Los Angeles, where the arrests were announced.

Some patients would be referred to a Lightman-controlled company called Accurate Imaging Inc., which would route them to various clinics for expensive magnetic resonance imaging or CAT-scan tests, authorities said. Accurate Imaging paid the clinics flat fees of $500 to $700 per test but billed insurers $1,600 to $1,700, they said.

At its peak, in 1990 and ‘91, the enterprise collected $43 million, with monthly revenues ranging from $855,000 to $2 million, said Deputy Dist. Atty. Elizabeth Munisoglu, co-prosecutor in the case.

For the two years since they served search warrants on offices of the Eisenberg-Lightman network, investigators have pored over hundreds of boxes of seized records to try to understand and document how it worked.

They said the hub of the operation was a converted former furniture store in San Pedro, where about 60 low-paid employees worked under extreme pressure to gather incoming patient referrals, send patients to clinics, process insurance claims and collect bills.

The patient referrals poured in from the Injury Claims Center, an affiliated marketing venture that touted its toll-free hot line in television and radio ads, offering fast legal and medical help for injured workers.

Patients would initially be referred to the Civic Law Center--a Lightman-affiliated law firm with offices in Los Angeles, Van Nuys, Santa Ana and San Diego--or to a secondary network of lawyers in other parts of the state, investigators said.

The lawyers would route patients to one of Amerimed’s eight clinics around the state or to other medical offices under contract to the Eisenberg-Lightman organization, investigators said.

Doctors, chiropractors and other medical personnel would fill out forms indicating what tests had been performed and what diagnosis reached. Amerimed would bounce patients from clinic to clinic and use the forms to generate insurance claims, always for the maximum amount allowed, Munisoglu said, regardless of whether the patient had multiple fractures or--as in one case--a small wound from a staple in a finger.

A real estate partnership between Eisenberg and Lightman owned many of the operation’s medical, legal and collection offices, and charged them rents that were about one-third higher than those paid by other tenants in the same buildings, investigators said.

Also arrested Thursday were Eisenberg’s wife, Deborah Eisenberg; San Pedro lawyer Robert Yale Libott; Susan Woodward of Los Angeles; Lynette Overcamp of Rancho Palos Verdes; William Downer of Harbor City; lawyer Dennis Sommese of Carmichael, Calif.; lawyer Ray Jones of Loomis, Calif., and Sunny Pace of Los Angeles.

Being sought on warrants were lawyer Leon Brush of San Diego and Marilyn Minott of Carmichael.