Zalma`s Insurance Fraud Letter

Transcription

Zalma’s Insurance
Fraud Letter
The Essential Resource For The Insurance Fraud Professional
A ClaimSchool ™ Publication, Written by Barry Zalma, Esq., CFE
Volume 20, No. 4
© 2016 ClaimSchool, Inc. & Barry Zalma
February 15, 2016
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Quote of the Issue
“Socialist governments traditionally do make a financial mess. They always run out of other people's money. ... Then they start to
nationalize everything.”
Margaret Thatcher
No Honor Among Insurance Criminals
Lying to the FBI About Insurance Fraud is Fatal
Because it is a $300 billion a year business many amateurs believe it is easy to defraud an insurance company as
long as they have the unmitigated gall to deny all wrongful conduct. Clayton Manning learned how fatal to his
freedom is relying upon co-conspirators to complete a fraudulent claim and that there is no honor among thieves.
In U.S. v. Manning, — Fed.Appx. —- United States Court of Appeals, Eleventh Circuit, 2016 WL 425157 (Feb.
4, 2016) Manning appealed his convictions for conspiring to commit mail and wire fraud and making a false
statement on a matter within the jurisdiction of the FBI.
FACTS
In March of 2014, a federal grand jury indicted Mr. Manning on charges of conspiring to commit mail and wire
fraud and making a false statement on a matter within the jurisdiction of the FBI. The indictment alleged that Mr.
Manning conspired with Connie Darner and Noha Soliman to submit a fraudulent insurance claim on his
personal boat and then, in May of 2013, knowingly made a false statement to FBI agents when he told them the
boat had been stolen. Both Ms. Darner and Ms. Soliman, who had also been charged, pled guilty to conspiring to
commit mail and wire fraud. Mr. Manning proceeded to a jury trial.
Ms. Darner, an insurance adjuster with a boat insurance company called BoatUS, was the government’s first witness. Ms. Darner admitted
that she processed fraudulent insurance claims for Mr. Manning and his then-wife, Ms. Soliman. Ms. Darner explained that Mr. Manning
asked her to process a fraudulent insurance claim on his boat because he needed money for his struggling business. Ms. Darner agreed to
help. She instructed Mr. Manning to obtain boat insurance from BoatUS, and she told him to get rid of the boat before filing the fraudulent
insurance claim.
The same day Mr. Manning received insurance coverage, he filed a fraudulent theft claim. Ms. Darner testified that she had collaborated
with Mr. Manning and Ms. Soliman to draft the theft-of-boat claim. After the claim was filed, Mr. Manning told Ms. Darner that he buried
the boat on his uncle’s property in Georgia.
The government also called Ms. Soliman, who testified that Mr. Manning switched his boat
insurance to BoatUS so that he could profit from the fraudulent theft claim that Ms. Darner agreed to
process. According to Ms. Soliman, it was Ms. Darner who originally suggested the fraud scheme.
Ms. Soliman also testified that she traveled to Georgia with Mr. Manning to hide the boat on his
uncle’s property.
FBI Special Agent Douglas Mathews, investigated the boat insurance scheme, and interviewed Mr.
Manning. During that interview, Mr. Manning maintained that the theft-of-boat claim was
legitimate. He also claimed Ms. Soliman and Ms. Darner were framing him and that his signature
had been forged on several documents. On October 15, 2014, the jury convicted Mr. Manning on
both counts.
Zalma's Insurance Fraud Letter -- Page 1 of 19
ANALYSIS
The offenses of mail and wire fraud require that a person (1) intentionally participates in a scheme or artifice to defraud another of money
or property, and (2) uses or causes the use of the mails or wires for the purpose of executing the scheme or artifice. Proof of intent to
defraud is necessary to support convictions for mail and wire fraud. A jury may infer an intent to
defraud from the defendant’s conduct. To obtain a conviction for conspiracy to commit mail and
wire fraud, the government must prove that the defendant knew of and willfully joined in the
unlawful scheme to defraud.
To prove that Mr. Manning made a false statement to a law enforcement officer the government must
prove (1) that a statement was made; (2) that it was false; (3) that it was material; (4) that it was
made with specific intent; and (5) that it was within the jurisdiction of an agency of the United
States.
On appeal, Mr. Manning argues that the evidence was insufficient to support his convictions because
the government’s witnesses were not credible. It is well established that credibility determinations
are the exclusive province of the jury. Therefore, an appellate court cannot revisit credibility
determinations unless the testimony of the witnesses was incredible as a matter of law. For testimony to be considered incredible as a
matter of law, it must be unbelievable on its face.
Mr. Manning’s only argument with respect to his false statement conviction is that it was tied to Count 1 “in an essential fashion” because
his statement to Agent Mathews—that his boat was indeed stolen and the theft-of-boat claim was legitimate—was just the truthful denial of
his involvement in the conspiracy. Mr. Manning argues that because there was insufficient evidence to convict him of the conspiracy, there
was insufficiency evidence to convict him of making a false statement.
Drawing all reasonable inferences in favor of the government, the Eleventh Circuit held that a reasonable trier of fact could find that the
evidence established Mr. Manning’s guilt beyond a reasonable doubt. It, therefore affirmed Mr. Manning’s convictions.
ZIFL OPINION
Although insurance fraud is a fairly easy crime to commit it takes some knowledge of insurance, the strength to stick to a story, and the
ability to avoid involving weak co-conspirators. Manning was convicted because he involved people who pleaded guilty to conspiring with
him and testified to his involvement in the fraud. We can only hope that the federal government continues in its effort to defeat insurance
fraud.
Barry Zalma
Barry Zalma is the principal of Zalma Insurance Consultants. He is available for consultation on any and all insurance issues faced by
you or your clients.
Barry Zalma founded ZIC to help resolve every insurance claim problem faced by you or your clients. His experience and skill as a
consultant and expert witness can make the difference before a jury or other trier of fact. For more than 45 years as a claims person and
insurance coverage attorney, Barry Zalma has represented insurers, advised insurers on claims handling, interpreted coverages and testified
as an insurance coverage, insurance bad faith, insurance claims handling and insurance fraud
expert on behalf of insurers and policy holders’ suing insurers.
Mr. Zalma has been rated “AV Preeminent” for 25 years and is an internationally recognized
expert on insurance, insurance claims handling, insurance coverage, insurance fraud, and
insurance bad faith. Barry Zalma will promptly review your file materials and advise you
about the viability of your decision to sue or your defenses. He can help you narrow the scope
of discovery.
Consultation with Mr. Zalma and ZIC can save you or your client thousands of dollars in the
defense or prosecution of an insurance dispute. ZIC will assist you in the effort to find a solution to an insurance claims dispute that is fair,
intelligent, beneficial and economical.
ZIC is available to provide expert advice and, if needed, expert testimony to individuals and their counsel. Advice from ZIC is
indispensable to the resolution of insurance disputes. Consultation from ZIC can save you, your counsel or client hundreds of hours of
investigative and legal work.
With comprehensive knowledge of insurance and insurance claims handling Mr. Zalma understands, and can explain in language a lay jury
understands, how and why insurance claims should be resolved.
ZIC rates are all inclusive. Mr. Zalma’s hourly fee takes account of all incidentals from telephone calls and postage.
Do Insurers Get Their Money’s Worth From Fighting Fraud?
The simple answer is “yes” and “no.” The more difficult question to answer is how to quantify the savings, if any.
A report from the Insurance Services Office (ISO) commented:
1.
Insurers consider fraud “a serious problem” but their companies’ anti-fraud efforts only
“moderately effective.”
2.
Sixty-eight percent say their companies’ anti-fraud programs address claims fraud
“thoroughly,”
3.
19 percent say they address premium fraud “thoroughly,” and
4.
25 percent say they address application fraud “thoroughly.”
5.
Slightly more than one-third (37 percent) think the amount of fraud their companies have
experienced has increased over the past three years.
6.
Forty-two percent think that 21 percent or more of total claims contain “soft” fraud, but
only 6 percent think that 21 percent or more of claims contain “hard” fraud. They agree that
fraud is most prevalent in the private passenger auto and workers compensation lines of
business.
7.
Eighty-two percent of the 353 insurers responding to the survey say they have an anti-fraud
program at their companies.
8.
One hundred percent of the large insurers, 91 percent of the medium insurers, and 64
percent of the small insurers have an anti-fraud program.
9.
Sixty-three percent of the companies say that the state or states in which their companies do business require an
anti-fraud plan.
10.
However, only 13 percent of insurers doing business in these states (n=213) consider state requirements and guidelines
“very useful.”
Because fewer than one-third of respondents answered questions about their companies’ expenditures, estimates of
industry-wide spending on anti-fraud efforts are not reliable. The response rate suggests that insurers are unable to
isolate anti-fraud expenditures in their budgets or unwilling to share what figures they have with other insurers and
the general public.
The Coalition Against Insurance Fraud reported that:
•
More than one of every three bodily-injury claims from car crashes involve fraud. Insurance
Research Council (1996)
•
17-20 cents of every dollar paid for bodily injury claims from auto policies involves fraud or claim
buildup. Insurance Research Council (1996).
•
Fraud adds $5.2-$6.3 billion to the auto premiums that policyholders pay each year. Insurance Research Council (1996)
•
Claims for bodily injuries under the Personal Injury Protection portion of New York’s no-fault auto coverage rose 79
percent between 1999 and 2000, compared to 25 percent in all no-fault states. Insurance Research Council (2001) Since
then reports indicate that New York PIP losses are growing to an insufferable amount.
•
Insurers increased auto premiums up to 25 percent for New York City in 2001. Insurance Information Institute (2001)
•
The average PIP claim is $7,950 in New York State — 47 percent higher than the national average. Insurance
Information Institute (2001). Fraud costs each insured driver in New York State $75-$115 per year. Insurance
Information Institute (2001)
•
PIP claims in New York State rose nearly one third in 2000, more than twice
as fast as second-place Florida. Insurance Information Institute (2001)
•
The average PIP claim in New York State jumped 19 percent over the first
nine months of 2000, and 64 percent between 1995 and 3Q 2000. This
compares to a 33-percent increase for other states. Insurance Information
Institute (2001)
•
Auto insurers in New York pay out nearly twice as much in PIP claims as
they collect in premiums. For every $100 auto insurers received, they paid
$177 in claims through 3Q 2000. Insurance Information Institute (2001)
It also reported that:
•
Criminal convictions increased 31 percent. Coalition Against Insurance Fraud (2004)
•
Cases presented for prosecution rose 14 percent. Coalition Against Insurance Fraud (2004)
•
Investigations initiated increased by nearly 18 percent. Coalition Against Insurance Fraud (2004)
•
Referrals of suspected fraudulent actions were up 4.5 percent.
In addition the Insurance Research Council (IRC) in 2013 reported that twenty-four percent of Americans believe it is acceptable to
increase an insurance claim by a small amount to make up for deductibles they are required to
pay. That is lower than the 33 percent found in 2002, according to new findings from an online
IRC public opinion study. Additionally, 18 percent believe it is acceptable to increase a claim to
make up for premiums paid in previous years when they had no claims, the lowest percentage
since the question was first asked in a 1981 in-home survey.
Younger respondents, especially young men, were much more likely to view claim padding as
acceptable. For example, among males age 18-34, 23 percent agree it is all right to increase claim
amounts to make up for premiums, compared with just 5 percent of their older male counterparts
and just 8 percent of females aged 18-34.
The IRC study, “Insurance Fraud: A Public View, 2013 Edition,” also found that 86 percent of Americans agree with the statement
“insurance fraud leads to higher rates for everyone,” while 10 percent agree that “insurance fraud doesn’t hurt anyone.”
Respondents showed support for fraud-fighting efforts. Two-thirds (66 percent) approved of legislation to limit attorney and medical
provider access to police accident reports for the purposes of soliciting new clients or patients, a marked increase from 2002. Eight in 10
were willing to participate in claim processes that could help insurers detect and prevent fraud, such as examinations under oath (85
percent) or independent medical exams (80 percent).
Eighty-two percent agreed that persons who commit insurance fraud should be prosecuted to the fullest extent of the law, although the
consequences favored for specific fraud activities were generally less severe than in 2002.
The 2012 results are from an online survey conducted in June 2012 among 2,005 adults countrywide. Survey results were weighted by
known demographic distributions to ensure that the final results were representative of the total U.S. adult population. For more detailed
information on the methodology and findings from this study or previous IRC studies of insurance fraud attitudes, contact David Corum, at
(484) 831 - 9046, or by e - mail at [email protected]. Copies of the study are available for $300 for an electronic version, or $400 for a
printed copy. Visit IRC’s website at www.insurance-research.org for more information.
Arrests and Prosecutions
The Coalition Against Insurance Fraud reported in 2004 that the Fraud Bureaus and Fraud Divisions in the various states were delivering
record results in combating insurance swindles. The positive figures mask deeper weaknesses in some areas of
performance. A study of 47 state agencies by the Coalition Against Insurance Fraud revealed that, for the most
part, fraud fighters are priming the pipelines with fresh cases that could create a new generation of convictions
in the years ahead. Still, the lack of growth in convictions and cases opened is a cause for concern. The study
reported that arrests and convictions are up. On the downside, however, 18 fraud bureaus reported declines in
convictions. Fraud convictions across the country rose 6.4 percent overall.
The average docket of new cases also has stayed flat since 2001. New cases increased 6.4 percent overall
mainly because two new units started feeding cases into the pipeline. Despite the clear warning signals, fraud
bureaus are making progress and may be setting the stage for even stronger results over the next several years.
Convictions — the bottom line for insurance fraud-fighting — may spike in the next few years as growing investigations mature into
full-blown prosecutions, reported the coalition’s executive director.
While the total cases presented for prosecution — 5,467 — rose 6.5 percent, most of the growth
appears to come from newer fraud bureaus as their early cases wind through the pipeline. Fraud
bureaus with dedicated prosecutors, such as Florida, had the largest growth in cases.
The problem with these favorable statistics of fraud conviction and arrest growth is that the total
number presented for prosecution across the country is so small. Assuming that insurance fraud
is no less than three percent of all claims presented the number of cases presented for
prosecution is infinitesimal.
In California alone $51,275,187,902 in premium was collected for property and casualty
insurance and $27,606,239,353 in losses were incurred in 2010. If only three percent of the
losses were fraudulent California fraud would have taken $828,187,180.59. This enormous annual number should have resulted in
thousands of investigations, arrests and convictions in California alone but did not.
Convictions
California continues to convict more insurance swindlers than any other state — one of every three convictions in the U.S. The Golden
State’s fraud bureau logged a record 1,546 conviction which could not have put a dent in the potential
$828,187,180.59 in fraudulent property and casualty claims. California is still well ahead of runners up Florida
(493), New York (450) and New Jersey (354). The Coalition’s report concludes that:
though fraud bureaus show encouraging gains on several important fronts,
fraud fighters should be wary of too much celebration. The sobering truth
is that America’s fraud problem may be much larger than people realize…
The amount of money potentially taken by fraud perpetrators, between three to ten percent of premium
collected is beyond imagination of the common man. Billions of dollars are taken every year from the
insurance buying public and little is being done to stop the theft.
What Do The Results Really Show?
Insurance fraud prosecutions and investigations are anemic. What the reports do not tell is that most of those convicted were sentenced to
probation. Few made full restitution and those who served time were few and far between. Insurance criminals are laughing at the
insurance industry, the police agencies, the Fraud Divisions and the prosecutors. If they are one of the few criminally convicted, they face
an average sentence of only five years probation and 60 days in jail. Jail time is usually served on weekends so that the convicted fraud
perpetrators can still ply their fraudulent trade on weekdays.
Contrary to the belief of many prosecutors, even though people are seldom physically injured by insurance fraud, it is a major crime with a
statutory maximum punishment in most of those states where it is a crime, of five years in state prison. In addition, staged auto accidents
and arson-for-profit schemes often result in real injuries and the death of innocent motorists not involved in the fraud. The amount of
money is so massive that organized crime figures from every part of the world are joining into the crime with the usual vicious activities
that organized crime brings to everything with which it is involved.
Specialists who know insurance and insurance fraud investigate it. It is, at least in California and those states that have criminal insurance
fraud statutes, a rather simple crime to prove. It should be the type of case a prosecutor would want to file and
try to a jury.
Instead, as an ex-prosecutor said to me: “insurance fraud is a crime prosecutors run away from because the
cases are usually heavy with documentary evidence and are complex.”
Consider the public outcry if gangs of bank robbers took $300 billion a year from banks in the U. S. every
year. Would the public stand for groups of criminal stockbrokers looting their 401k and
other pension plans? What would happen if a motorcycle gang went across the country and stole $300 billion every
year from convenience stores across the country? There would be a hue and cry for the heads of the police and
prosecutors who failed to stop the crime spree. Yet, when the public is told that a group of criminals steals $300
billion every year from the insurance industry the response is either a yawn or a cheer for the criminals who make
Bernie Madoff, the Ponzi Schemer, seem an amateur.
I have heard the following odd responses from prosecutors to whom insurance fraud cases were presented:
•
“A confession on the record with five corroborating witnesses is not enough to support a
fraud prosecution.”
•
“An insurance company can’t be a victim of a crime.”
•
“You have a good case but I don’t have time to prepare an indictment or take the case to a grand jury.”
•
“Juries don’t like insurance companies.”
•
“Are you bringing this case because you don’t want to pay a legitimate claim?”
•
“I don’t understand what the claimant did wrong.”
•
“I don’t see a crime.”
•
“I didn’t know crimes existed in the Insurance Code.”
Proformative Academy
I have prepared webinars for Proformative Academy on various subject that might be of interest to you. You can get a discount for the
programs I have prepared by using the coupon code. Your coupon code is: Zalma10. Go to http://bit.ly/1kFabsE?ccode=Zalma10 to try
Proformative. directly (no spaces in between, and include the question mark “?”) to the URL you send them, and, just as before, your
coupon code will be automatically entered even if they look at your course first, tool around the site a bit, and then finally go to buy a
subscription. Simple! They include:
Insurance Fraud - An Overview
I have created for Proformative Academy two webinars called “Insurance Fraud - An Overview” that is available at
http://www.proformative.com/courses/insurance-fraud-prevention and “How to Read and Understand Business Insurance policies. Both
come with a 10% Discount for my friends and clients who sign up and enter the discount code: Zalma10.
Insurance Fraud is estimated to take between $80 and $300 billion a year from the property and casualty insurance
industry, raising the prices each person pays for insurance by more than $300 a year. It explains to those attending
what insurance fraud is, various methods by which insurance fraud is perpetrated, and the various weapons provided
by statutory law, legal precedent and professional claims handling to work to reduce the amount stolen by fraud
perpetrators. It explains the use of red flags or indicators of insurance fraud and the use of an insurance company
Special Investigation Unit (SIU) to gather the evidence necessary to assist in the defeat of insurance fraud.
How To Successfully Present a Commercial Property Insurance Claim
No business can operate profitably without insurance to protect it against contingent or unknown catastrophic losses. By spreading the risk
among many businesses, insurers can charge reasonable sums to protect against losses to the business or its real and personal property. As
you listen to an internationally recognized insurance coverage lawyer, author, consultant and expert witness explain how to gather the
information necessary to present a claim to your insurance company and collect the information required to effectively present a claim to
gain full indemnity, you will be convinced you can do so with minimal or no assistance.
http://www.proformative.com/courses/how-successfully-present-commercial-property-insurance-claim
How to Read & Understand Business Insurance Policies
No business can operate profitably without insurance to protect it against contingent or unknown catastrophic
losses. By spreading the risk among many businesses, insurers can charge reasonable sums to protect against
losses to the business or its real and personal property. In this course you will listen to an internationally
recognized insurance coverage lawyer, author, consultant and expert witness explain why and how an insurance
policy provides protection for the business. A business person with the ability to read and understand the
insurance policies they acquire has an advantage over every other business person who cannot read and
understand a such policies.
Continuing Education Credit available for many, including Certified Fraud Examiners with 1.5 CPE Credits, in
Fraud Prevention and Deterrence. I hope you find it interesting and informative.
http://www.proformative.com/courses/how-to-read-understand-business-insurance-policies
Good News From the
* Nightmarish sequence of attacks, though fake. Stephanie Settle was attacked and robbed too often to be credible. A burglar armed with
a knife assaulted Settle in her home, she claimed. The thief stole nearly $15,000 of jewelry and other items, the Asbury, Iowa woman said.
Her insurer paid nearly $5,900. Settle then claimed a man with a sharp object attacked her in her garage. No insurance was involved. She
invented the incidents. Her wounds weren’t fresh and didn’t match her versions of the attacks, emergency responders said. Settle copped a
plea. She received 2-5 years of probation.
* Sex and scams don’t mix. Psychologist Richard Scott Lenhart re-traumatized abuse victims under his care. The State College, Pa. man
did “touching therapy” with the women. So-called “therapy” often started with hugging, then graduated to stroking, sexual contact and
genital rubbing. Lenhart made nearly 700 claims for more than $71,500. He used codes suggesting proper therapy was conducted. He
received 3-6 years in prison.
* It’s the space heater’s fault, Tina Shonk tried to convince her insurer why the house she rented had burned down in Kansas City,
Mo. In fact Shonk did the deed with 2 cohorts — ruining an innocent landlord’s house for an insurance score. She owed $10,356 in back
rent, the gas was shut off for non-payment and eviction was underway. Shonk insured the
contents for $60,000 — far more than their value. She moved her best possessions into a storage
unit. She dumped damaged and broken electronic equipment and appliances into the house to
make it seem valuable goods were ruined. Shonk then turned on a space heater, covered it with a
blanket and left. Her insurer paid $57,364. Shonk and co-conspirator Roy Thieman then planned
to burn down another rental home. “...there can be no evidence, nor signs of foul play, or
accelerant,” Thieman wrote in a letter outlining the plan. Shonk pleaded guilty and could spend
the next 25 years in federal prison without parole when sentenced. No word on Thieman’s fate.
* Burning down their home with a gasoline-fueled fire netted a Sacramento-area couple 15
years in the federal pen. Alexander and Larisa Sakhanskiy removed most of their personal belongings before starting the fire. They
somehow thought investigators would overlook the obvious absence of charred possessions in the rubble. The pair also disabled their
sprinkler system and smoke detector. The house was ruined and the Sakhanskiys claimed around $540,000 worth of property was wrecked.
Fortunately fire fighters contained the fire before it could spread to surrounding dwellings.
* A reputed mob sports bookie tried to burn down his pizzeria in the Hartford, Conn. area.
John A. Barile decided Enzo’s had to go. Business was good during the holiday season, so he waited
until afterward to scorch the place. He sprayed cooking oil around the deep fryer then set the fire at
midnight on a Sunday. One cohort was drunk inside the place. Barile didn’t see him and locked the
guy inside after starting the fire. He was rescued by fire fighters. Barile received $190,000 from his
insurer. He also admitted Tasering a deadbeat gambler who owed him $50,000. Barile faces at least
5 years in federal prison for the arson and Taser attack. He once worked for Tony Volpe, who ran
the Genovese crime family’s Hartford operation.
* The school principal was handed fraud demerits. Perette Walker headed up Olmstead School
64, in Buffalo, N.Y. She had shoulder surgery and collected around $2,000 a month while off work
in June, July and August 2014. She returned to work, but kept taking in disability benefits from her private insurer through December 2014.
Walker collected about $9,000 overall from First Unum. She pleaded guilty and is on paid administrative leave. Walker has repaid the
money, and could spend up to a year in jail when sentenced Feb. 10.
* Disability scamming was a laughing matter to Lynwood Williams. The Greenwood, Fla. man said he had an “organic brain disorder.”
He pretended he was mentally disabled to falsely collect $63,284 of federal disability money. A friend
lied that Williams couldn’t take care of his daily needs and required supervising like a child. Williams
was caught moonlighting as a comedian with zero signs of impairments. Williams must figure out how to
laugh his way through 6 months in federal prison.
* Did Stephen Scharf push his wife Jodi off a cliff for a $1-million life-insurance score? Or did Jodi
slip after too many wine coolers? New Jersey’s highest court will review Scharf’s 2011 life jail sentence.
He bought the policy just months before Jodi died. He then became enraged when Jodi said she planned to
divorce him. They took a hike to a 120-foot sheer cliff at a scenic overlook in Palisades Interstate Park.
They’d planned the hike to help reconcile their troubled marriage and Jodi slipped after drinking wine
coolers, Scharf claimed. Yet the trip made no sense to friends, who said Jodi was afraid of heights. She
also landed 50 feet out from the cliff base, suggesting she was pushed. Scharf was convicted largely by hearsay evidence without witnesses.
An appeals court ordered a retrial, finding the state’s evidence “by no means overwhelming.” The state Supreme Court has agreed to review
that decision at the AG’s urging.
* Ryan Shover and Michael Eman may have struck out with the law. The Enola, Pa. duo allegedly was hired to kill Wayne Cappelli for
insurance money, authorities say. They used a stolen aluminum baseball bat, prosecutors charge. Cappelli was last seen leaving a local
supermarket. His body was found in a roadside ditch 2 days later. Shover and Eman supposedly bludgeoned him with the bat, authorities
say. Cappelli bought a large life-insurance policy months before his death. An unnamed friend was the beneficiary, investigators say. The
AG still must explain who hired the pair for the murder. Shover and Eman are charged with insurance fraud and first-degree murder.
* Insurance plotters who dunk their cars in a Houston bayou could find themselves dunked by prosecutors. Police are dredging up at
least 127 sunken vehicles discovered during a 2011 search for an elderly woman who’d disappeared. The bayou’s steep, slippery sides
create an ideal place for abandonment. It’s part of a 2-week pilot project called “Operation Submerge.” Some cars are being connected to
boats, which drag them to a towing company’s crane on the bank. The pilot program will test what’s needed to extract cars from the muck,
preserve them for police processing, and contain environmental effects of removal.
Threatening Your Wife With Arson Unwise
Arsonists are seldom as wise as a Rhodes Scholar. They often say and do stupid things that result in their eventual conviction for the crime
of insurance fraud and arson-for-profit. In The People of the State of New York v. Travis Howard, 134 A.D.3d 1153 Supreme Court,
Appellate Division, Third Department, New York, (Dec. 3, 2015) a truly imprudent criminal
sealed his conviction by telling many people what he intended to do and how he intended to do
it, including his wife.
Facts
Defendant Travis Howard was convicted in the County Court, Clinton County, of arson in the
third degree and insurance fraud in the second degree, was sentenced to concurrent prison
terms of three to nine years, and was ordered to pay $150,667.06 in restitution.
Defendant was charged with arson in the third degree and insurance fraud in the second degree
arising from allegations that he intentionally set fire to his house in the Town of West Chazy,
Clinton County and tried to obtain the insurance proceeds. Following a jury trial, he was
convicted as charged. County Court denied defendant’s motion to set aside the verdict, sentenced him to concurrent prison terms of 3 to 9
years on each count, and ordered him to pay $150,667.06 in restitution.
Analysis
Don’t Tell Your Wife You Were Going to Burn Down Your House
Initially, the court found no error in County Court’s decision to admit the testimony of defendant’s wife that defendant had said that he was
going to burn the house down. The privilege that precludes a spouse from disclosing a confidential communication made during marriage by
the other spouse does not protect every remark between spouses during a marriage. Instead, “the privilege attaches only to those statements
made in confidence and that are induced by the marital relation and prompted by the affection, confidence and loyalty engendered by such
relationship. The wife testified that her marriage to defendant began to deteriorate during the months before the fire, in part because
defendant wanted to relocate to Colorado while the wife wanted to remain in New York and
continue living in the marital home with her children. She stated that, as the relationship
worsened, defendant told her “many” times that he would burn the house down to prevent her
from taking possession of it when they separate.
The privilege was never designed to forbid inquiry into the personal wrongs committed by one
spouse against the other” and, thus, does not apply here, as defendant’s statements were not
prompted by trust or confidence in the marital relationship, but, instead, constituted threats of
criminal activity directed at the wife. Further,
the privilege does not apply when the
substance of a communication is revealed to
third parties. Here, the wife testified that several of defendant’s threats were made in the
presence of other people, including mutual friends and the couple’s children, and these
statements were not privileged.
The Importance of an Insurance Investigator’s Testimony of Investigation
Contrary to defendant’s arguments, County Court did not improperly admit hearsay
testimony by permitting an insurance investigator to testify about interviews he conducted
while investigating the fire. The investigator testified that, following his investigation, he
concluded that the fire was caused by human action and that this opinion was based, in part, upon his communications with an independent
electrical consultant who assisted him in the investigation, and also with one of the wife’s children. Although neither of these individuals
testified at trial, the professional reliability exception to the hearsay rule permits an expert witness to rely upon out-of-court information that
would otherwise be inadmissible if it is of a kind accepted in the profession as reliable in forming a professional opinion. Here, the People
laid the necessary foundation for allowing introduction of the information obtained from the consultant through the testimony of the
investigator, who described the consultant’s qualifications as a retired master electrician who had assisted the investigator in many prior fire
investigations, had likewise assisted other companies and investigators and had previously been qualified as an expert in state and federal
court. Defendant was free to cross-examine the investigator and, thus, was not deprived of the opportunity for cross-examination relative to
the consultant’s credentials.
The investigator testified that his initial investigation revealed that the fire had originated inside an upstairs bedroom belonging to one of the
children and that, after ruling out other potential sources of the fire, the investigator identified a damaged electric receptacle in the wall of
this bedroom. The investigator then contacted the electrical consultant and the two of them inspected the receptacle together. The
investigator thereafter concluded that the damage in the receptacle had been caused by the fire and did not result from an electrical defect or
failure that could have been the original source of the fire.
As to the interview with the child, the investigator stated that, in response to questioning as to any potential cause of the fire, defendant
advised that he had altered the wiring in a charging unit belonging to the child, and that this charger had been plugged into the damaged
receptacle in the child’s bedroom at the time of the fire. The investigator testified that interviews with a home’s occupants were part of his
methods of investigation, thus providing the requisite foundation for his reference to the interview.
The People were not required to prove the precise mechanism by which the fire was caused, and they presented ample evidence from which
the jury could conclude that defendant intentionally started the fire. In addition to the previously-described statements to his wife, defendant
told several other witnesses that he planned to move to Colorado and to burn down the house to prevent the wife from keeping it. One
witness testified that, after describing these plans, defendant said that “you can’t split a pile of ashes.” Another witness testified that she
heard defendant say that he would “burn the house down before [the wife] gets it,” and two additional witnesses testified that they heard
defendant make similar statements. One of these witnesses further testified that defendant had asked the witness
questions about the flammability of grease and whether it would be possible to start a house fire by heating
cooking oil. As to motive, the wife testified that defendant had made several comments to the effect that if the
house burned down, the insurance proceeds would provide financing for his planned move to Colorado.
On the day before the fire, defendant told the wife that he no longer wished to fight, was willing to sell the
house and divide the proceeds, and was moving out that day. He removed some of his clothing, left the house
and spent that night with a friend. During his absence, the wife searched the Internet history on the family
computer and discovered that defendant had made numerous searches regarding house fires, including searches
for common causes of household fires, grease fires and kitchen fires. Police later conducted a forensic
examination of the computer that revealed multiple searches on defendant’s account during the weeks before
the fire for subjects such as the causes of house fires, grease fires and “untraceable fire starters”; a report of this
examination was admitted into evidence at trial. At trial, defendant claimed that someone else could have
accessed his account, but acknowledged that he had conducted some of the searches.
Based on the evidence that defendant concealed the cause of the fire when he submitted an insurance claim for
his share of the policy proceeds the verdict on the insurance fraud conviction was not against the weight of the evidence. County Court did
not err in denying defendant’s motion to set aside the verdict pursuant to CPL 330.30(1).
Finally, defendant asserts that the sentence imposed by County Court was harsh and excessive as he had no adult criminal history before the
current convictions and no fatalities or injuries resulted from the fire. However, the record reveals that defendant’s crimes had devastating
emotional and economic effects upon the lives of his wife and family. In view of the seriousness of his crime and his failure to express
remorse or take responsibility for the consequences of his actions, the court found no abuse of discretion or extraordinary circumstances
warranting a reduction. The conviction was affirmed.
ZIFL OPINION
When a claims person does a thorough investigation including relying upon an expert and even interviewing the insured’s child, it can - and
in this case was - used to convict a person who attempted to profit from an arson-for-profit. Claims and SIU investigators must complete
thorough investigations and document their files so that if a prosecution ensues they will have the information needed by the prosecution to
establish the crime.
Wisdom
“Your days are numbered. Use them to throw open the windows of your soul to the sun. If you do not, the sun will soon set, and you with
it.” - Marcus Aurelius
“What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value.” — Thomas
Paine
“We are all apprentices in a craft where no one ever becomes a master.” - Ernest Hemingway
“Adaptability is about the powerful difference between adapting to cope and adapting to win.” - Max McKeown
“Nobody owes nobody nothin’. You owe yourself.” — Rocky Balboa
“I am not influenced by the expectation of promotion or pecuniary reward. I wish to be useful, and every kind of
service necessary for the public good, become honorable by being necessary.” — Nathan Hale
E. Hemmingway
“Life around us is ever changing, and I believe that one should try to change one’s slant accordingly—at least once
every ten years.” — Boris Pasternak
Insurance Professionals Defrauded UK Lawyers
Insurance fraud is an equal opportunity crime that is involved in every aspect of the insurance business and performed in every country, by
every race, religion, sexual preference, gender, or national origin. In the United Kingdom, the Financial Conduct Authority (FCA) issued a
press release that reported it has fined five individuals and two firms a total of £15.5 million, in addition to banning from ever working in
the UK insurance industry the four of those individuals because of a significant failure of integrity and competence.
Shay Reches
The FCA found that Shay Reches, one of the brokers who issued malpractice or errors and omissions insurance to UK lawyers, performed
the Director controlled function at Coverall Worldwide Limited (Coverall), with responsibility for
a managing general agent, Aderia UK Limited (Aderia), and conducted regulated activities, which
were central to setting up and operating insurance facilities (called “schemes” in the UK), despite
not being approved by the FCA to do so. In doing so, the FCA concluded that Mr Reches recklessly
directed payments of insurance premiums to parties other than the insurers and reinsurers
responsible for paying claims, increasing the risk that policyholders’ claims would not be paid.
This misconduct contributed to the failure of several insurance schemes as well as to three insurers
failing financially and going into administration. As a result, the Financial Services Compensation
Scheme (the FSCS) – similar to U.S. based Guarantee Associations – has had to pay substantial claims, totaling £12.7 million as at the end
of 2015.
The FCA fined Mr Reches £1,050,000. Mr Reches also agreed to pay a sum of £13,130,000 to the three insurers, which will make a
substantial contribution towards the liabilities to the FSCS and UK policyholders. If he fails to pay this amount or any part of it, the fine will
be increased by the amount unpaid. These payments to insurers will deprive Mr Reches of the indirect benefit that the FCA considers he has
gained from his misconduct. Mr Reches has also been prohibited by the FCA from performing any function in relation to any regulated
activity.
Since Mr. Reches agrees to pay the enormous sum equal to more than $18 million U.S. dollars it is an easy speculation that his profits from
the restrictive activities much more than he is willing to pay.
Colin McIntosh, Millburn Insurance Company Limited (Millburn), Coverall, Robert Bygrave, Andrea
Sadler, Wayne Redgrave and Bar Professions Limited (Bar)
Actions were taken against Colin McIntosh, Millburn Insurance Company Limited (Millburn), Coverall, Robert Bygrave, Andrea
Sadler, Wayne Redgrave and Bar Professions Limited (Bar) as a result of a joint investigation by the FCA and the Prudential
Regulation Authority (PRA). The PRA will also be publishing Final Notices against Colin McIntosh and Millburn separately.
Mark Steward, director of enforcement and market oversight, said: “This was a hugely complex case with the
FCA liaising with over 20 regulators and agencies around the world.
The report concluded that Mr Reches’ misconduct led to many solicitors (lawyers) and others being left
without adequate insurance. He treated policyholders’ funds and their interests with reckless indifference and
his misconduct was facilitated by an absence of proper controls by key persons at important stages of the
insurance process. The FCA has also taken action against those responsible for poor controls and oversight.
This case not only demonstrates the consequences of poor controls but also what can happen when the
distribution chain becomes overly complex, participants fail to ask obvious questions or take rudimentary
precautions, including those insurance intermediaries and brokers checking whether Mr Reches was approved to carry out the functions he
was performing.
BACKGROUND
The investigations followed early intervention action taken jointly by the FCA and PRA between July and September 2013 following
concerns raised about the validity of solicitors’ professional indemnity insurance (Solicitors’ PII) arranged for over 1,300 solicitors’ firms
across England and Wales. Without such insurance solicitors are unable to carry on business. As a result of that early intervention action,
the regulated activities of the various entities were halted and client money was protected by being ring-fenced (protected
and only able to be used for a particular purpose by governmental order).
The insurance schemes that caused concern, and are the subject the FCA action, were all linked to Mr Reches. These
schemes used binding authorities issued by a London-based managing general agent, Aderia, to various coverholders,
including to specialist insurance broker, Bar, which sold Solicitors’ (lawyers) Protection and Indemnity Insurance (A
version of what the U.S. calls legal malpractice insurance). Aderia was an appointed representative of a UK insurer,
Millburn, and a UK insurance intermediary, Coverall.
For this complex system to work, security needed to be available from a number of insurers and reinsurers based in the UK,
Europe and offshore. The principal risk carrier, Sinclair Insurance Company Limited (Sinclair), is registered in the Union of
the Comoros and owned and controlled by Mr Reches.
The failings in the management oversight throughout these distribution chains and the failure of the reinsurance
arrangements contributed to three of the insurers - Millburn, European Risk Insurance Company (ERIC) an Icelandic
insurer, and Balva Insurance Company AAS (Balva) a Latvian insurer - going into administration, in part due to debts owed by Sinclair. As
a result, they were unable to honor the insurance they had ultimately offered, through cover-holders to solicitor customers and other
policyholders, which risked those customers being left uninsured.
Wider Significance of Outcomes
These outcomes highlight a number of wider concerns identified in supervisory and thematic work, in particular the findings of the thematic
review TR15/7 Delegated Authority: outsourcing in the general insurance market, including: the lack of due diligence applied by market
participants when selecting potential insurance and reinsurance security; poor understanding and scrutiny of appointed representatives and
those carrying out other delegated authority functions; the need for clarity and certainty about roles and responsibilities; the responsibilities
of intermediaries used in the distribution chain; the lack of understanding and correct application of the client money rules; and the lack of
adequate systems and controls in ensuring client money is protected.
Details of the Sanctions Imposed
Shay Reches - an unapproved person, has been fined £1,050,000. In addition, Mr Reches has
proposed to pay £13,130,000 to the three insurers (Milburn, ERIC and Balva) that have been
declared in default by the FSCS. Should Mr Reches fail to pay any of this sum, the outstanding
amount will be payable to the FCA as an additional fine. Mr Reches has also been prohibited by
the FCA from performing any function in relation to any regulated activity.
Colin McIntosh - the chief executive at Millburn and a director at Coverall, has been fined
£51,600 by the FCA. Mr McIntosh has also had his FCA approval withdrawn, and been
prohibited from performing any FCA controlled functions.
Mr McIntosh failed to deal with the FCA in an open and cooperative way in his role at Millburn, and failed to take reasonable steps to
ensure that the business of Coverall complied with the relevant requirements and standards of the regulatory
system. Mr McIntosh demonstrated a lack of integrity because he failed to mitigate the risks to potential
Solicitors’ PII policyholders from contracts entered into by Aderia.
Millburn - a UK insurance company, which is now in administration, has been declared in default by the
FSCS. The FCA fined Millburn £1,137,500 for failing to deal with the FCA in an open and cooperative way
and disclose appropriately information in relation to Millburn of which the FCA would reasonably expect
notice. This was in respect of Millburn’s responses to the FCA’s requests for information about a reinsurance
treaty which it had seemingly entered into with Balva, the scope of which was outside of Millburn’s
permission. As Milburn is in administration, the FCA will become a creditor of the firm. However,
policyholder financial claims against Milburn will be given precedence over the FCA’s fine.
Coverall - a UK insurance intermediary, has been fined £36,800 by the FCA, and had its authorization
cancelled. Coverall has been sanctioned for recklessly failing to mitigate the risks to policyholders arising from
the contracts entered into by its appointed representative, Aderia. It also failed to take reasonable care to ensure
that it established and implemented adequate controls over its appointed representative, and failed to arrange adequate protection for client
money.
Robert Bygrave - held the FCA director function at Coverall with responsibility for managing Aderia’s finances. He has been fined
£37,400 by the FCA and prohibited from undertaking any FCA significant influence functions. Mr Bygrave has been sanctioned for not
appropriately managing the business for which he was responsible as director, in that he failed to take reasonable steps to adequately inform
himself about the way insurance premiums received as client money should be treated. He also allowed premiums to be paid to third parties
as instructed by Mr Reches, an unapproved person, rather than to the insurer.
Andrea Sadler - held the FCA director function at Coverall with responsibility for managing Aderia’s day-to day operations. She has been
fined £18,700 by the FCA and prohibited from undertaking any FCA significant influence functions. Mrs Sadler has been sanctioned for not
appropriately managing the business for which she was responsible as director. Mrs Sadler failed to ensure that appropriate contractual
arrangements were in place for insurance cover to be provided before signing agreements committing Aderia and insurers to offer that
insurance cover. She also failed to put in place appropriate systems and controls to prevent Mr Reches from giving her instructions in
relation to the regulated business and allowing him to take lead roles in key negotiations and materially influencing business operations.
Bar - a specialist London based insurance broker predominantly providing Solicitors’ PII (it is now
in liquidation), has been publicly censured by the FCA. Bar has been sanctioned for negligently
failing to conduct adequate due diligence concerning insurance arrangements for policyholders and
sending a letter to over 1,300 customers inducing them to enter into contracts of insurance on the
basis of materially inaccurate and misleading information.
Wayne Redgrave - an experienced broker, a director and the controller at Bar, has been fined
£38,600 by the FCA. Mr Redgrave has been sanctioned for being personally responsible as director
and the main decision maker at Bar for its above failings, including that he drafted and signed the
letter, which was sent to over 1,300 of Bar’s solicitor customers.
The Prudential Regulation Authority (PRA) has on February 1, 2016 imposed a £25,173 fine on
Colin McIntosh, CEO of Millburn Insurance Company Limited (‘Millburn’) and has banned him
from holding any controlled functions at any PRA-authorized firm. The PRA has also fined Millburn
£2,863,066 for failing to run the business with due skill, care and diligence between 26 December
2010 and 18 September 2013.
In late 2010, Millburn, a small general insurer, changed its business strategy so that it could be actively marketed for sale. As part of the
change of strategy, Millburn entered into an agreement with a Managing General Agent (MGA) which allowed the MGA to write business
on Millburn’s behalf. However, the agreement failed to include appropriate contractual restrictions on the type of the business that could be
underwritten or requirements to supply basic data and management information on that business. This meant that the information available
to Millburn was insufficient to gain insight into the business being written on its behalf and the risks it posed to the firm and its
policyholders.
This significant failing in systems and controls meant that Millburn did not know whether it was in compliance with even basic regulatory
requirements, such as having adequate financial resources and insight into its major sources of risk. The PRA has therefore fined Millburn
£2,863,066 for its failure to carry out adequate due diligence in arranging its reinsurance and to implement appropriate systems and controls.
Mr McIntosh's failures were particularly significant as he was the only person at Millburn who was in a position to
implement the measures that would have been required to ensure that Millburn had an appropriate degree of
resilience. Mr McIntosh personally designed and implemented agreements and processes which were fundamentally
flawed, and failed to improve them to the required standard despite some Board pressure to do so. It is therefore
appropriate to hold Mr McIntosh to account for his role in Millburn's breaches. The imposition of both a fine and
ban by the PRA denotes the seriousness of Mr McIntosh’s failings which were a contributory factor in Millburn
entering administration.
Andrew Bailey, Deputy Governor for Prudential Regulation and CEO of the Prudential Regulation Authority said:
Insurance firms which are not well governed have the potential to cause significant losses to policyholders.
It is therefore vital that they have robust systems and controls for understanding and managing risk.
Millburn’s systems and controls were wholly inadequate, which is why we have taken the step of
enforcing in this case. As CEO of Millburn, Mr McIntosh should have ensured that Millburn was fully
aware of its sources of key risk, and that it had sufficient capital to mitigate those risks. He failed to do so.
Senior managers can delegate their duties, but cannot delegate their responsibility. Mr McIntosh’s actions
had a significant impact on both Millburn’s safety and soundness, and the interests of the firm’s
policyholders. He fell a long way short of the standards the PRA expects from senior managers, which is
why we have decided that a prohibition is warranted in this case.
CONCLUSION
This report shows that insurance fraud is not limited to people defrauding insurers. In this case the insurers and brokers set up multiple
fraudulent schemes to provide fake or underfunded insurance for British lawyers’ errors and omissions insurance leaving them exposed to
any client who claims they were damaged by the actions or malpractice of the lawyers.
Books from Barry Zalma
“Insurance Fraud and Weapons to Defeat Fraud”
Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number
because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United
States range from $87 billion to more than $300 billion every year.
Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims.
Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud
criminals are not detected. Those that are detected do so because they became greedy, sloppy and
unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.
No one will ever be able to place an exact number on the amount lost to insurance fraud. Everyone who has
looked at the issue knows – whether based on their heart, their gut or empirical fact determined from convictions for the crime of insurance
fraud – that the number is enormous.
When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers
and the pseudo-government-based or funded insurers drops logarithmically.
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“Getting the Whole Truth”
The interview is an essential form of fact gathering for every type of human interaction. Interviews happen everywhere; they are performed
by almost everyone. Interviewing is also an art, and the most effective interviews are conducted by those who are knowledgeable and
skilled in this art.
The purpose of an interview is to uncover the truth; the method of uncovering the truth is the art of the
interview. The standard interview does not have, nor should it be given, the pejorative sense conveyed by the
expression “giving someone the third degree.” Interview professionals do not use rubber hoses or hot lights, or
subject the interviewee to torture. In their limited arsenal, professionals do not have the power of the state, the
reputation of the FBI, the majesty of a court trial, nor the intimidation of a search warrant.
Civil interviewing professionals are, therefore, compelled to get the information they need by intelligence, wit,
skill, and experience. They must be masters of the social graces; they must know how to put people at ease.
The skill of the professional causes the person being interviewed to actually want to give information to the
interviewer. When the interview is successful, the subject becomes a virtual partner with the professional in the
effort to uncover the truth, the whole truth, and nothing but the truth.
This ebook will help anyone who needs to obtain information from anyone else gain the information needed whether a business person,
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The book will be delivered to you by e-mail shortly after purchase.
“Random Thoughts on Insurance - Vol. III”
Since 2010 I have been writing a blog post at least five days a week. This e-book is a collection of those posts that reveal my interest in
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Health Insurance Fraud Convictions
Nurse Convicted For Role In Multi-Million Dollar Hospice Health Care Fraud
Patricia McGill, 68, of Philadelphia was convicted by a federal jury February 8, 2016 against
McGill, a registered nurse who took part in a multi-million dollar fraud on Medicare that involved
hospice care. The jury found McGill guilty of four counts of health care fraud. U.S. District Court
Judge Eduardo C. Robreno scheduled a sentencing hearing for May 24, 2016. McGill faces a potential
advisory sentencing guideline range of 33 to 41 months in prison, a possible fine, and a $400 special
assessment.
As the Director of Professional Services for Home Care Hospice (“HCH”), between 2005 and 2008,
McGill authorized and supervised the admission of inappropriate and ineligible patients for hospice
services, resulting in approximately $9.32 million in fraudulent claims. HCH, co-owned by Matthew
Kolodesh and Alex Pugman, who were convicted separately, was a for-profit business located at 1810
Grant Avenue, and later 2801 Grant Avenue, in Philadelphia. HCH billed Medicare for hospice services allegedly provided by HCH nurses
and health aides for patients at nursing homes, hospitals, and private residences. However, the government’s evidence established that many
HCH patients did not meet the Medicare criteria for hospice care, and that HCH billed Medicare for hospice care that was not provided to
the patients.
Five Years Probation for Personal Assistant Fraud
Jessica A. Teets, 28, of Granite City, Illinois, pleaded guilty on February 9, 2016. Teets was sentenced in the U.S. District Court in East
Saint Louis on the charge that she engaged in a scheme to defraud a health care program. The district court
sentenced Teets to five years of probation. She was also ordered to pay $1,292.62 in restitution to the Home
Services Program.
During her plea hearing, Teets admitted that she had submitted false and fraudulent bills in relation to her
alleged performance of personal assistant services in the Illinois Home Services Program, a Medicaid Waiver
Program designed to allow individuals to stay in their homes instead of entering a nursing home. Teets admitted
to falsely billing the program between December 7, 2012 and June 30, 2014, claiming that she had rendered
personal assistant services to a customer when, in fact, she had not. As a result, Teets improperly billed 111
hours of services and obtained $1,312.05 in payments for services not performed.
Teets further admitted that her customer (who was her mother) was found on July 1, 2014 in an incoherent state,
partially covered in dried excrement, by a friend checking on her welfare. Emergency responders transported the
customer to a hospital and she was hospitalized for multiple days. Teets had not performed personal assistant
services for the customer for more than a week prior to July 1, 2014.
Miami Physician Pleads Guilty For Role in $20 Million Health Care Fraud Scheme
Henry Lora, 51, A Miami physician pleaded guilty February 9, 2016 for his role in a Medicare fraud scheme that caused more than $20
million in losses.
Lora pleaded guilty before U.S. District Judge Federico A. Moreno of the Southern District of Florida to one count of conspiracy to commit
health care fraud and one count of conspiracy to defraud the United States, receive health care kickbacks and make false statements relating
to health care matters.
According to the factual basis of the plea agreement, Lora was the medical director of Merfi Corporation, a
Miami-area clinic that employed physicians, physician assistants and other medical professionals. Lora
admitted that in exchange for kickbacks and bribes, he and his co-conspirators wrote prescriptions for home
health care and other services for Medicare beneficiaries that were not medically necessary or not provided.
Lora and his co-conspirators also falsified patient records to make it appear as if the beneficiaries qualified for
these services, he admitted.
Lora admitted that his and his co-conspirators’ actions caused multiple Miami-Dade home health care agencies
and other providers to bill Medicare for services that were not medically necessary or not provided, and
Medicare made payments on these fraudulent claims.
In March 2014, Isabel Medina, the owner of Merfi, was sentenced to nine years in prison for conspiracy to commit health care fraud.
Guilty of $250,000 fraud as a Personal Assistant
Kiara Hopkins, 24, of Belleville, Illinois, pled guilty in federal court to charges that she engaged in a scheme to steal from a health care
program. Sentencing has been set for May 5, 2016. Hopkins will face up to 10 years in prison, a fine of up to $250,000, and up to 3 years of
supervised release.
During her plea hearing, Hopkins admitted that she had submitted false and fraudulent claims in relation to her alleged performance of
personal assistant services in the Home Services Program, a Medicaid Waiver Program designed to allow individuals to stay in their homes
instead of entering a nursing home. Hopkins admitted to falsely billing the program between July 22, 2013 and
November 26, 2013, when she purportedly rendered personal assistant services to a customer when, in fact, she
had not been caring for the customer during those times.
Former Owner and Operator of California Medical Equipment Supply Company
Sentenced for Their Roles in $1.5 Million Medicare Fraud Scheme
Amalya Cherniavsky, 41, and her husband, Vladislav Tcherniavsky, 46, both of Long Beach, California, the
former owner and the former operator of a durable medical equipment supply company based in Long Beach,
California, were sentenced January 29, 2016 for their roles in a $1.5 million Medicare fraud scheme.
Amalya and Tcherniavsky were ordered to pay $614,418 in restitution. U.S. District Judge Terry J. Hatter Jr. of
the Central District of California ordered Tcherniavsky to serve 51 months in prison. On Oct. 15, 2015, a federal
jury convicted both defendants of one count of conspiracy to commit health care fraud and five counts of health
care fraud.
The evidence at trial demonstrated that Cherniavsky owned JC Medical Supply, a purported durable medical equipment supply company
that she co-operated with Tcherniavsky. Evidence further showed that the defendants paid illegal kickbacks to patient recruiters in exchange
for patient referrals and paid kickbacks to physicians for fraudulent prescriptions—primarily for expensive, medically unnecessary power
wheelchairs—which the defendants then used to support fraudulent bills to Medicare.
Between 2006 and 2013, the defendants submitted $1,520,727 in claims to Medicare and received $783,756 in reimbursement for those
claims, according to evidence presented at trial.
5 Years Probation for Health Care Personal Assistant Services
Lisa Jorden, 50, of Cottage Hills, Illinois, pled guilty and was sentenced in the U.S. District
Court in East Saint Louis, Illinois, on the charge that she engaged in a scheme to steal from a
health care program. The district court sentenced Jorden to five years of probation. She is also
ordered to pay $16,828.00 in restitution to the Home Services Program and a $100.00 special
assessment.
Court records indicate that Jorden admitted that she had submitted false and fraudulent bills
in relation to her alleged performance of personal assistant services in the Home Services
Program, a Medicaid Waiver Program designed to allow individuals to stay in their homes
instead of entering a nursing home. Jorden admitted to falsely billing the program between
February 14, 2013 and August 15, 2014, when she purportedly rendered personal assistant services to customers when, in fact, she had not.
As a result, Jorden improperly billed hours of services and obtained $16,828.00 in payments for services not performed.
Books from the American Bar Association
The Insurance Fraud Deskbook
Barry Zalma, Esq., CFE, 2014 Paperback, 638 Pages, 7x10
The Insurance Fraud Deskbook is a valuable resource, peer reviewed by the American Bar Association, for those
who are engaged in the effort to reduce expensive and pervasive occurrences of insurance fraud. It explains the
elements of the crime and the tort to claims personnel, and it provides information for lawyers who represent
insurers so they can adequately advise their clients. Prosecutors and their investigators can use this book to
determine what is required to prove the crime and win their case.
The full text of decisions from courts of appeal and supreme courts across the country are provided so the reader can
understand what happens after the investigation is completed and can apply that information to undertake their own
thorough investigations. It allow claims personnel and their lawyers to understand what errors would cause a defect
or a not-guilty verdict.
The effort to reduce insurance fraud requires the assistance of both civil and criminal courts. The Insurance Fraud Deskbook can help the
prudent fraud investigator, insurance adjuster, insurance attorney, insurance Special Investigation Unit and insurance company management
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Available from the American Bar Association at:
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Diminution in Value Damages
How to Determine the Proper Measure of Damage to Real and Personal Property
This book was written to provide sufficient information to those who became interested in the issue since the Georgia Supreme Court
decided State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (Ga. 11/28/2001) and includes cases dealing
with the use of diminution in value as a method of determining the amount of loss incurred by a plaintiff seeking
indemnity for damage to real or personal property.
Because confusion has reigned across the United States concerning the proper measure of damages for property
damage to property that has been repaired, Diminution In Value Damages assists the reader in answering the questions
concerning the proper measure of damage in each of the fifty United States and federal United States jurisdictions
This edition has been totally rewritten and expanded, providing the most extensive and detailed coverage of the issue
and a thorough explanation of how to apply diminution in value damages to losses to property.
ISBN: 978-1-63425-295-8, Product Code: 5190524, 2015, 235 pages, 7 x 10, Paperback
Available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972
Zalma’s Insurance 101
Zalma Insurance Consultants and ClaimSchool Inc. have launched “Zalma’s Insurance 101,” a new online resource that provides videobased insurance training on http://www.zalma.com/videoblog/. Each educational video, which is about three minutes each, offers free
commentaries on insurance, insurance claims handling, and insurance coverage.
Designed for people in the insurance business, whether they are working as an insurance agent, insurance
broker, insurance claims person or insurance lawyer, the video series teaches the basics and beyond. It starts
with a definition of insurance, moves through methods to read and understand an insurance policy, and
continues on to deal with the claim and use of investigative techniques.
Said Zalma, “It is my intent in creating these videos to provide anyone interested in insurance a means to
painlessly learn everything there is to know about property and casualty insurance in three-minute
increments. If you start at Video Volume 1 and watch a new video every day, three minutes a day, five days
a week, you will have 12.5 hours of insurance education at the end of a year.”
There are now more than 400 videos with 3 to 5 new videos added every day. If you view, starting with the first video, one each day, five
days a week for 50 weeks you will have painlessly educated yourself without a need to prove you did so to a regulator, 12.5 hours of real
insurance education. The videos were adapted from my book, Insurance Claims: A Comprehensive Guide, available the National
Underwriter Company and is available at the Zalma Insurance Claims Library at
http://www.nationalunderwriter.com/reference-bookstore/property-and-casualty/zalma-insurance-claims-library.html.
Other Insurance Fraud Convictions
Crooked Agents Lose Licenses in Tennessee
Richard Wayne Davis, Jr. of Winchester, Tenn, Betty S. and Jeffrey B. Lackey of N. Charleston, S.C. but licensed in Tennessee were
disciplined by the Tennessee Department of Commerce & Insurance (TDCI) for the intentional misrepresentation of policy terms, forgery,
and the use of fraudulent conduct in the business of insurance.
The punishments were the result of months of work by TDCI’s Insurance Fraud Investigations team.
Details of the cases include:
Davis had his insurance producer license revoked by a final order, effective Nov. 18, 2015, and was assessed a
$10,000 civil monetary penalty as a result of an Aug. 6, 2015 hearing. Davis was found to have willfully
committed 40 violations of insurance law, and assessed a fine of $250 per violation. The violations stemmed
from Davis’ misconduct involving the replacement of a policyholder’s existing policy through impersonation and
forgery with a new policy from a different carrier (commonly referred to as “twisting”) without the policyholder’s consent. Davis was found
to be in violation of Tennessee law by obtaining approximately 40 new policies through “twisting” without the consent of the policyholder.
Davis had been a licensed insurance producer for 20 years and therefore, as stated in the Order, “should have known that his conduct was
inappropriate and illegal”.
A consent order was finalized, effective September 24, 2015, between TDCI and, revoking Betty’s license and assessing a $2,500 civil
monetary penalty to both Betty and Jeffrey individually. Both held a Tennessee non-resident insurance producer license at varying periods
of time. Jeffrey’s license had been previously revoked by the Division in October, 2007 and he
remained unlicensed with the TDCI ever since. The penalties were a result of violations of insurance
law on two separate occasions, occurring in Kingsport and Telford, Tennessee, during which the
Lackeys were involved in the misrepresentation of the terms of annuity contracts. During both
occasions Jeffrey Lackey was not a licensed agent. On one occasion such misrepresentations of the
terms of the annuity contract resulted in the consumer’s loss of approximately $10,142 in surrender
charges.
15 Years in Prison for Insurance Fraud
Mikhail Zemlyansky, 39, a Long Island, New York, man was led out of a Manhattan courtroom
Thursday, January 28, in shackles after U.S. District Judge J. Paul Oetken sentenced the Hewlett
resident a year after a jury convicted him of racketeering conspiracy and other charges at a month long trial to serve 15 years in prison and
pay a $35 million fraud .
The judge said Zemlyansky spent millions of dollars from investors’ on vacations and fancy cars and watches.
Oetken called him “sophisticated, deliberate and premeditated” as he carried out frauds that prosecutors said stretched from 2007 through
2012.
Prosecutors labeled him a leader in the largest single no-fault car insurance fraud scheme ever prosecuted. And they say two investment
fraud schemes caused nearly 300 victims, some of them elderly, to lose about $17 million. In all, multiple frauds that included illegal
gambling caused losses of nearly $36 million, prosecutors said.
Prosecutors said Zemlyansky and co-conspirators transferred millions of dollars from investors overseas to shell companies in Eastern
Europe, where money was converted into cash and returned to the United States.
They said Zemlyansky defrauded car insurance companies of hundreds of millions of dollars by creating and operating medical clinics that
provided unnecessary or excessive medical treatments to take advantage of a no-fault insurance law that requires prompt payment for
medical treatment.
In court papers, prosecutors said Zemlyansky lived a lavish life, spoiling himself with $100,000 luxury cars and $50,000 watches.
Oetken ordered Zemlyansky to pay a $50,000 fine and $29.5 million restitution. The insurers, unfortunately, will have little opportunity to
collect on the restitution order unless the court allows them to seize the luxury cars and watches.
Arson-for-Profit Fails
Tina Shonk pleaded guilty to two federal counts after she admitted to helping set an April 2014 fire in a home
she was renting. She also admitted to helping to burn down one home and plotting to burn another for insurance
money.
The U.S. attorney’s office says her landlord had been seeking to evict Shonk because she owned more than
$10,000 in rent.
Beforehand, she helped haul broken electronics and appliances into the home so it would appear valuable items were destroyed. She shared
the $57,364 insurance payment with two other people. The home’s owner received a $173,100 insurance payment.
Prosecutors say Shonk later plotted to burn down another home.
Corrections Officer Convicted of Workers’ Compensation Fraud
John Alfonzo Smiley and Cynthia Ann Biasi were each found guilty of four fraud-related counts, including concealing events that affect
insurance benefits by Sacramento Superior Court Judge James McFetridge in the court trial that ended February 9, 2016.
The couple claimed in depositions that Smiley, shot in the back on April 27, 2008, was gunned down by a parolee who recognized him as a
corrections officer as the couple left a San Francisco restaurant. They sought $4 million in workers’ compensation, claiming the injuries
were work-related. Sacramento County prosecutors said the couple weres at the sex club, not a restaurant, and that an off-duty Smiley was
shot following an argument with another couple after the four had swapped partners.
Smiley and Biasi had previously been convicted of related charges in Sacramento Superior Court in
connection with the case. Jurors in 2012 found the pair guilty of attempted perjury, but deadlocked on
the four fraud charges argued at the just-concluded court trial. Sacramento County prosecutors refiled
the case in 2014, and sentencing on the attempted perjury charge was put on hold pending Tuesday’s
verdict.
John Smiley & Wife Cynthia Ann Biasi
Smiley and Biasi could face as much as eight years, eight months in state prison on the two guilty
verdicts. Sentencing is set for March 4 before McFetridge.
Mulcahy said Tuesday that Smiley and Biasi could have escaped prosecution early on with an apology
after their initial claim was denied. Instead, the couple face a possible prison sentence.
Provides the Following Services to its Clients
•
Acting as a consultant or expert witness on behalf of
insurers and insureds in litigation.
•
Consultation with insurance claims personnel on methods
to avoid charges of bad faith.
•
Acting as a consultant to the insured in the presentation of
a first party claim.
•
•
Analysis of claims file material to allow the party to
present evidence to establish and document bad faith or
the existence of a genuine dispute between the insurer and
insured.
Consultation with insurers and insureds on insurer
compliance with Fair Claims Practices laws and
regulations.
•
Training on insurance and insurance law for all insurer
•
Acting as a mediator to help resolve insurance claims short
of litigation.
•
Analysis of insurance policy wording.
•
Litigation advice to defense or plaintiffs’ counsel.
•
Review of policy wording and claims files to determine if
there is a basis for payment or denial of a claim.
•
Analysis of insurance litigation for the insurer and the
insured.
Consultation from Zalma Insurance Consultants can save you or your client thousands of dollars in the defense or prosecution of an
insurance dispute. Zalma Insurance Consultants will find a solution to your insurance claims dispute that is fair, intelligent, beneficial and
Economical.
If you only need an opinion letter I will review your entire claim file and policy wording and prepare a coverage opinion letter for the flat
fee of $4,000.00. Otherwise, my services are billed at $500.00 per hour, portal to portal.
Zalma Insurance Consultants provides expert advice to counsel for insurers and plaintiffs’ counsel. Advice from Zalma Insurance
Consultants is indispensable to the resolution of insurance disputes. Consultation from Zalma Insurance Consultants can save you, your
counsel or client hundreds of hours of investigative and legal work. Call Barry Zalma at 310-390-4455 or e-mail at [email protected].
Zalma’s Insurance Fraud Letter
© 2016 by Barry Zalma & ClaimSchool, Inc.
4441 Sepulveda Blvd, CULVER CITY CA 90230-4847
http://www.zalma.com # [email protected] # http://zalma.com/blog
ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a
general understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no
attorney client relationship between you and the publisher. ZIFL should not be used as a substitute for competent legal
advice from a licensed professional attorney in your state.
As readers of ZIFL are aware, Barry Zalma is an insurance coverage consultant and expert witness. Mr.
Zalma limits his practice to issues involving coverage matters, providing consultation to insurers, those
in the business of insurance, policyholders and their counsel. Mr. Zalma has qualified as an expert in
various state and federal courts across the U.S. and as far away as the British Cayman Islands.
The comments made in each issue of ZIFL are for information only and are not intended as legal
advice. If you need legal advice, contact a local attorney. If you need an insurance claims handling, insurance coverage or insurance bad
faith consultant and expert testimony contact Mr. Zalma at Zalma Insurance Consultants, 310-390-4455 or e-mail to [email protected].

Zalma`s Insurance Fraud Letter

Transcription

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