Published in Adobe pdf format effective September 15

Zalma’s Insurance
Fraud Letter
The Essential Resource For The Insurance Fraud Professional
A ClaimSchool ™ Publication, Written by Barry Zalma, Esq., CFE
© 2016 ClaimSchool, Inc. & Barry Zalma
Volume 20, No. 18
September 15, 2016
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Quote of the Issue
“I will not change just to court popularity.”
Margaret Thatcher
Barry Zalma Speaks on Fraud in October
Atlantic Claims Executives Association
I will be speaking to the Atlantic Claims Executives Association at the meeting on Hilton Head,
South Carolina at the Omni Hilton Head Oceanfront Resort, October 9 through 11, 2016 on
Resources to Defeat Insurance Fraud.
The ACEA meets twice a year, in the spring and the fall in cities located throughout the Atlantic and
Gulf States. The spring meeting takes place in a conference setting and is opened to members &
others who may not meet the criteria for membership, but play a supportive role for the member
companies. The fall meeting is designed as a workshop for members only unless otherwise
announced.
The workshop and conference speakers include a variety of experts such as attorneys, lobbyist,
regulators, medical and mental health doctors, weather and climate analyst, fire and fraud investigators.
The relevance of the topics and the quality of the association’s speakers have consistently created an excellent learning environment while
still maintaining a small group setting for more productive networking among attendees.
Southern California Fraud Investigators Association
I will be speaking on Rescission as a Defense to Fraud on October 26, 2016 at the Riviera Palm Springs Hotel. The full conference
schedule is available at http://scfia.org/wp-content/uploads/2015/08/SCFIA-Conference-Schedule-2016.pdf.
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” 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.
Zalma's Insurance Fraud Letter -- Page 1 of 16
$2.3 Million to Allstate From Chiropractor For Fake Billing
Sometimes the best defense to an insurance fraud scheme is an offence. If an insurer has evidence that a fraud has been attempted or has
succeeded, it is incumbent on the insurer to seek redress. Since there is a minimal chance that the fraud
perpetrators will be arrested and tried for the crime of insurance fraud, the insurer must be proactive and sue
the fraud perpetrators.
Allstate successfully did so in a suit against a chiropractor when California Superior Court Judge Terry A.
Green awarded Allstate Insurance Co. $2.3 million in a lawsuit the company brought against Los Angeles
chiropractor Byum Suk Kim for fraudulent billing at two defunct medical clinics.
Judge Green ordered chiropractor Byum Suk Kim to pay $1.8 million in penalties, plus $582,000 in
assessments and fees for a total judgment of $2.3 million, according to a statement from the company.
In the complaint, Allstate alleged the two clinics, Wilshire Spinal Disc Clinic, Inc. and Allied Medical, Inc.,
were owned illegally by Kim. Neither clinic are now operating.
The judgment was based on evidence submitted by Allstate showing Kim engaged in clinical and billing fraud in connection with claims
submitted to Allstate. The company proved to Judge Green that the billing records for the treatment were fraudulent and the evidence
showed there was systemic “up-coding” (charging a higher CPT code for services actually provided), according to the evidence the
company said it presented at trial.
In August Allstate won a separate judgment in a case involving fraudulent claims. The company and the New Jersey Department of
Banking and Insurance recovered more than $23.5 million linked to a broad scheme to defraud Allstate and other insurers of personal
injury protection benefits. Allstate, if it collects on either of the judgments will make a dent where it hurts the fraudsters the most, in their
bank accounts.
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
Zalma's Insurance Fraud Letter -- Page 2 of 16
Immunity for Insurers
Recognizing the fear insurers have of punitive actions by insureds for accusations of fraud, the Legislature, by section
1872.5 provides an immunity to the insurer from civil liability for “libel, slander, or any other relevant tort cause of
action,” if the report is made without malice. In California, even more immunity is provided by an ancient statute that
sets forth the litigation privilege. As interpreted in a number of cases, section 47 of the Civil Code protects persons
who report potential criminal activity to the police or local prosecutor from lawsuits, even if the report is made with
malice. The 1996 decision of the California Court of Appeal, Fremont Compensation Ins. Co. v. Superior Court,
(Gopinath), 44 Cal. App. 4th 867, 52 Cal. Rptr. 2d 211 (Cal. App. 4 Dist. 1996) is important to every person involved
in the fight against insurance fraud. It emphasizes the importance of the common law right and obligation of every
citizen to report a crime without fear of civil or criminal penalties.
In Fremont, a lawsuit filed by a doctor alleged that two workers’ compensation insurers acted in bad faith in reporting the doctor to the
authorities for over billing. The Court of Appeal found that IFPA does not provide insurers with any less protection to report insurance
fraud to police and prosecutors than they had before the legislation was enacted, and that California Civil Code section 47 provides
absolute immunity for a report to the police.
The legislation that was the subject of the Fremont case resulted in the addition of section 1877.5 to the Insurance Code in 1991. Section
1877.5 affords insurers a qualified immunity to report workers’ compensation fraud to a local prosecutor or the Department of Insurance.
The qualified immunity applies only to reports made in good faith. Similar immunities can be found at California Insurance Code sections
1872.5; 1873.1; 1874.4; 1875.4; 1876.4; and 1879.5 as part of the IFPA.
Insurance Code section 1877.5 does not lessen the immunity insurers had prior to its enactment to report
insurance fraud. Section 1877.5 and similar sections of the IFPA limits the immunity it establishes to reports
made without malice. The statute broadly exempts insurers from “any civil liability in a cause or action of any
kind where the insurer … acts in good faith, without malice, and reasonably believes that the action taken was
warranted by the then known facts.”
The Court of Appeal found section 1877.5 consists of two sentences. The good faith language is set forth in the
first. The second sentence, which was not addressed by the trial court, states:
Nothing in this chapter—that certainly includes the part about acting in good faith—is either “intended to, nor does in
any way or manner, abrogate or lessen the existing common law or statutory privileges and immunities of an insurer.”
The Court of Appeal, dealing with Dr. Gopinath’s argument that the reports of over-billing were made in “bad faith” noted that the last
sentence in section 1877.5 provides that “existing common law or statutory privileges and immunities of insurers were not to be lessened
by the statute.” It concluded that California Civil Code section 47 already gives everybody—including insurers—the right to report crimes
to the police, the local prosecutor, or the appropriate regulatory agency, even if the report is made in bad faith. A writ of the mandate was
issued commanding the superior court to sustain the demurrer of the insurers.
Until Fremont, no published decision had addressed the specific question of whether section 47 provides unqualified immunity to insurers
for reporting workers’ compensation, or other types of insurance fraud. Reporting workers’ compensation fraud is mandated by the act
whenever an insurer “knows or reasonably believes” it knows the perpetrator of insurance fraud. California Insurance Code § 1877.3, subd.
(b)(1); cf. § 1872.4, subd. (a).
Indeed, not only is reporting under such circumstances a duty affirmatively imposed on insurers, but it must be
done within 30 days after the duty to report arises. California Insurance Code § 1877.3, subd. (d). The context
of the qualified immunity is thus fraud reporting, and the natural inference to be derived from that context is
that the “existing” language refers to whatever privileges or immunities insurers had regarding reporting.
The Court of Appeal found that “[I]t would be utterly anomalous for the Legislature to seek to curtail such
fraud and, in the process, create a major disincentive that did not otherwise exist for insurers to report fraud.”
Under Civil Code section 47, insurers are absolutely privileged to report insurance fraud to either the local
district attorney or the department of insurance.
California Civil Code § 47(1) and (2) states:
Privileged publications. A privileged publication is one made1. In the proper discharge of an official duty.
2. In any (1) legislative or (2) judicial proceeding, or (3) in any other
official proceeding authorized by law; provided, that an allegation or
averment contained in any pleading or affidavit filed in an action for
divorce or an action prosecuted under section 137 of this code made of
or concerning a person by or against whom no affirmative relief is
prayed in such action shall not be a privileged publication as to the
person making said allegation or averment within the meaning of this
section unless such pleading be verified or affidavit sworn to, and be
Zalma's Insurance Fraud Letter -- Page 3 of 16
made without malice, by one having reasonable and probable cause for
believing the truth of such allegation or averment and unless such
allegation or averment be material and relevant to the issues in such
action.
California Civil Code § 47 defines a privileged communication as one made in any “judicial proceeding” or
“in any other official proceeding authorized by law.” This provision operates to bar civil liability for any
tort claim based upon a privileged communication, with the exception of malicious prosecution. When
citizens who contacted law enforcement personnel to report suspected criminal activity and to instigate law
enforcement personnel to respond. The communications are therefore privileged and bar liability for all
state law claims. [Titus v. County of Los Angeles, 308 Fed. Appx. 210, 2009 WL 118973 (2009)]
As interpreted in a number of cases, section 47 of the California Civil Code protects persons who report
potential criminal activity to the police or local prosecutor from lawsuits, even if the report is made with
malice. Cote v. Henderson, 218 Cal. App. 3d 796, 806, 267, Cal. Rptr. 274 (1990) (report of rape);
Williams v. Taylor, 129 Cal. App. 3d 745, 753-754, 181 Cal. Rptr. 423 (1982) (report of employee
wrongdoing); Passman v. Torkan, 34 Cal. App. 4th 607, 616-619, 40 Cal. Rptr. 2d 291 (1995); and
Hunsucker v. Sunnyvale Hilton Inn, 23 Cal. App. 4th 1498, 1502-1504, 28 Cal. Rptr. 2d 722 (1994).
The absolute privilege in Civil Code section 47 represents a value judgment that facilitating the utmost
freedom of communication between citizens and public authorities whose responsibility is to investigate and remedy wrongdoing is more
important than the “occasional harm that might befall a defamed individual.” See Imig v. Ferrar, 70 Cal. App. 3d 48, 55-56, 138 Cal. Rptr.
540 (1977). Section 47 hardly leaves the wrongly defamed individual without safeguards. The malicious prosecution remedy always
remains. Indeed, Dr. Gopinath’s malicious prosecution cause of action survived the writ proceeding. The reason for the section 47
privilege is to simplify the utmost freedom of communications between victims of crime and law enforcement agencies applies, if
anything, all the more so to insurance fraud, where the costs of the crime are indirectly borne by all consumers, employees and businesses,
than it does to more localized crimes. See California Insurance Code section 1875.10, subd. (b) that states insurers and their policyholders
ultimately pay the cost of fraudulent insurance claims.
Insurers are also required, by section 1873, to provide information upon the written request of police officers concerning the policy, the
premium, history of previous claims, information relating to the investigation of the insurance fraud, payment drafts, etc. By section
1873.2 the Legislature provides a similar immunity to section 1872.5 if the compliance with the request is made without malice. With
regard to motor vehicle theft, insurers are also required by the IFPA to provide information to “authorized governmental agencies” of
similar nature concerning auto thefts. By section 1874.4 a greater immunity is provided, as follows:
In the absence of fraud or malice, no insurer shall be subject to any civil liability in a cause of action of
any kind for releasing or receiving any information pursuant to section 1874.1 or 1874.2….
Arson fraud is covered with the sections starting at section 1875. The insurer is required, by section 1875.2 to advise authorized agencies
and authorized agencies are required by section 1875.3 to advise the insurer if the agency learns a fire was not accidentally caused.
Complete immunity is provided to insurers who cooperate with the authorized agency similar to section 1874.4.
By section 1875.5 the Legislature concludes that “the act of furnishing information required pursuant to this article shall not constitute an
act of fraud or malice.” All of the reporting sections keep confidential and not subject to subpoena the information provided unless a
criminal prosecution is instituted. Adjusters should avoid disclosing to police officers privileged communications that they do not want
disclosed to the claimant or insured.
The immunities provided by the IFPA are descriptive, but do not reduce, the overall immunity provided by the Civil Code. The Civil Code
immunity referred to in the Fremont case follows a codification of common law immunity that can be found in almost every state:
A key part of IFPA is the immunity provided to insurers who report suspected fraudulent claims to the
fraud division, the local police, or the local prosecutor. The immunities were placed in IFPA to
encourage fraud reporting.
There is considerable authority for the granting of such protection.
Under California law, the privilege for statements made in legislative or judicial proceedings is
absolute and is not affected by malice or other bad motive of the speaker. Arochem Intern., Inc.
v. Buirkle, 767 F. Supp. 1243, aff’d 968 F. 2d 266 1991. Where publication is absolutely
privileged, there is no liability even if it is made with actual malice. In re Moore, Bkrtcy.
N.D.Cal.1995, 186 B.R. 962.
Under California law, the absolute privilege for publications or broadcasts made in judicial
proceedings, where established, will defeat tort action that, however labeled and whatever its
theory of liability, is predicated upon publication of injurious falsehood. In re Moore, Bkrtcy.
There is an absolute privilege for communications (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants
authorized by law; (3) to achieve objects of the litigation; and (4) that have some connection or logical relation to the action. Obos v.
Scripps Psychological Associates, Inc., 69 Cal. Rptr. 2d 30, 59 Cal. App. 4th 103 (App. 3 Dist. 1997).
The litigation privilege protecting statements made in connection with proposed litigation that is contemplated in good faith and under
serious consideration is not a qualified privilege that can be defeated with a showing of malice, nor does it carry a requirement that
Zalma's Insurance Fraud Letter -- Page 4 of 16
statements be made in the interest of justice; if the statement is made with a good faith belief in a legally viable claim and in serious
contemplation of litigation, then it is sufficiently connected to the litigation and is absolutely privileged. Aronson v. Kinsella, 68 Cal. Rptr.
2d 305, 58 Cal. App. 4th 254 (App. 4 Dist. 1997), rehearing denied, review denied.
Good News From the
Convictions
* Kristy Lynn and Michael Alger may wish they never made this shopping trip. Michael pulled their Chevy Malibu into a Sheetz
store. The Hagerstown, Md. couple got into an altercation with another driver. Michael backed up, hit a dump
truck, then pulled forward and hit the other guy’s car. Michael next hit the driver, who was standing outside his
car. The guy was pinned between his vehicle and the Malibu. The Algers sped off, and the dump truck
followed until police pulled over the couple. The victim suffered a broken leg that needed surgeries. Kristy
filed a claim with their insurer, saying she drove. She hit the truck and a pole, she said, omitting hitting the
guy. The insurer pegged the Malibu’s damage at $3,032. The victim later contacted the Algers’ insurer to file
his own claim. The insurer realized the Algers had filed a false claim. The store’s surveillance video confirmed
the incident as well. Kristy received 3 months of home detention. Michael was handed 8 years for hitting the guy.
* Wanted and on the run, David Abitua stole the identity of Jose L. Vasquez and lifted workers-comp money
under that alias. Abitua lied to his doc and used a false SSN to steal comp money for nearly 3 years. He had a long
list of warrants for drug, booze and traffic offenses. Abitua received 6 months of community control for the comp
charges, the Ohio Bureau of Workers’ Compensation announced.
* Joshua West fought to his final breath. Hovanes Maskovian needed a tire iron, knife, teeth, car and gun to kill his
boyfriend for $2.5 million. West broke up with Maskovian after 7 years together, though the Los Angeles-area pair
kept living together to conserve money and pay bills. They’d bought $2.5 million in life coverage on West when they
were romantically involved, with Maskovian the beneficiary. Maskovian enlisted his brother Hachik and a crony to
help murder West. They lured him to Sun Valley. West was beaten, his throat slashed, bitten, run over by a car and
shot in his heart. West’s body was dumped on a road. Hovanes called a State Farm agent the day before West’s
murder to ask about the insurance policies. A pair of gloves found in a canyon 2 miles from the murder scene tested
positive for DNA linked to Hachik and West. Hovanes and Hachik received life without parole. A crony awaits trial.
* “I live my life to cheat insurance companies — my high every day is to cheat insurance companies.” That was the motto of reputed
mobster and South Philly body-shop owner Ron Galati. He made a tidy living using deer carcasses to stage vehicle crashes that saw auto
insurers falsely charged $5 million. He also hired thugs to murder 2 witnesses during his trial, though the hit never came off. Galati
claimed vehicles were damaged in deer crashes. He stored deer carcasses, hair and blood at his body shop. His cronies poured the blood
over cars, simulated crashes and took “Hollywood photos” for insurers. Geese, dogs and chunks of metal and concrete also were involved,
as were hurtled cartons of fruit. Galati favored single-vehicle crashes because insurers considered them “no-fault” and paid claims without
raising premiums. Galati also gave tow-truck drivers a list of his customers. The drivers vandalized the customers’ cars and towed them to
his shop for bogus insurer-paid repairs. A Philly police officer created fake crash reports. Adjusters and the tow-truck drivers also were on
the take. Galati pleaded no contest this week to bilking 18 insurers, and to the planned hits.
* Body-shop owner Franklin Thomas Wilson fleeced insurers before he even began work. The Darby Borough, Del. man wrote up
estimates for customers, then took the vehicles to an empty garage — across from the police station. He drove
the vehicles into a pole or beam to inflate the damage. Sometimes he drove a forklift into the vehicle. Wilson
did the damage just before an adjuster inspected the vehicles. He repaired the vehicles for a much-lower price
after the claim was paid, pocketing the balance. He also paid kickbacks for customer referrals. A police
informant allegedly earned $10,000 by referring up to 20 people. A driver said a truck hit his Mercedes CLS
500 while he was driving along a parkway. Surveillance caught the driver delivering the undamaged Mercedes
to Wilson. The car mysteriously left Wilson’s garage with substantial damage to its right side. Progressive paid
more than $13,000 on that claim. Wilson stole $85,000 all told, pleaded guilty and received 23 months of
intermediate punishment.
* Auto insurers peeled back onion layers of fake identities to get at the truth of setup crashes masterminded by Cristopher
Santiago Sanchez-Becerra. The Stockton, Calif. man helped stage dozens of wrecks that bilked insurers out of at least $210,000. He and
cohorts used 2 or 3 vehicles that caused $5,000-$10,000 in damage to each vehicle. They used a similar cover story after each setup. The
ring also used aliases, plus false identities and addresses. And they used fake identities to register the vehicles and buy insurance.
Zalma's Insurance Fraud Letter -- Page 5 of 16
Ringleaders repaired the vehicles at body shops owned by Sanchez-Becerra or a crony. They did shoddy repairs,
charging far less than insurers paid out. Sanchez-Becerra pleaded guilty and could spend up to 20 years in prison
when sentenced Nov. 28. Others still face trial.
* Audits showed more premiums were due, agent Charles Gabel told clients. So they dutifully paid up, more
than $58,000 worth. Jones Produce forked over payments of $26,314 and $21,350 to the Fremont, Ohio agent.
Mauch Farms paid more than $11,000. Except that the clients never owed the money — their premiums were paid
in full. Gabel forged premium invoices and stole the money for personal gain, the Ohio insurance department says.
Medical and family financial problems drove him to steal the premiums. He received 3 years of community control
and surrendered his agent license. He avoided jail in order to find employment and repay his clients.
* Prosecutors called Todd Epps an executioner, and the court agreed. The Buffalo, N.Y.-area man shot his fiancee Angela Moss in the
back of her head for a $100,000 life-insurance payout. She was found dead by a roadside after leaving her nursing shift at a senior home.
Epps left a long trail of evidence. A neighbor overheard Epps threaten Moss during an argument, “Before I let you go, I’ll kill you.” Epps
texted another person, “I’m going to kill that ***” He also planned to burn down his house for an insurance payout. His federal sentencing
was postponed to Oct. 12. Epps will spent at least 35 years behind bars.
$15M Verdict Case Against Insurers
Christine Ramirez, 75, a California grandmother who lost her life savings in a real estate investment scam offered by an insurance agent
was awarded more than $15 million August 31, 2016 in a lawsuit against MetLife and two subsidiaries.
Ramirez was awarded the punitive damages by a Los Angeles Superior Court jury that found the companies and a
former MetLife partner aided in both deceit and securities violations, along with counts of negligence and financial
elder abuse.
In a statement issued by Ms. Ramirez’ lawyers she stated that I am so grateful to the jurors for seeing through
MetLife’s finger-pointing argument that they weren’t responsible for the loss of my retirement savings. Ramirez
was the first of 98 people who have sued after being bilked in a $200 million real estate fund scheme run by
convicted felon Bruce Friedman, who died in a French jail while waiting to be returned to the U.S. to face federal
criminal charges.
Jurors found MetLife allowed Tony Russon, a former managing partner, to promote Friedman’s fund during insurance sales meetings.
Ramirez, a retired mortgage processor, had sunk $280,000 into Friedman’s Diversified Lending Group that guaranteed 12 percent returns.
A guarantee that should have been rejected as too good to be true since the most reliable investments were barely paying 2% on
investments. Regardless, she was deceived, and the jury found Met Life liable.
Federal authorities said DLG was a classic Ponzi scheme, with some early investors being repaid, but most ending up with nothing as
Friedman fueled a lavish lifestyle and then left for Europe when the Securities and Exchange Commission sued him.
Ramirez’ counsel established to the jury that MetLife was aware that the branch office run by Tony Russon was not
following MetLife’s own policies and procedures, and failed to act to correct the dangerous behavior.
A MetLife spokesman said the company was disappointed with the outcome and expected to appeal. The jury
awarded punitive damages of $10 million from MetLife Inc., $2.5 million from New England Securities, $2.5
million from New England Life Insurance Co., and $330,000 from Russon. It also awarded nearly $240,000 in
compensatory damages indicating that the award will be reduced based upon due process grounds since the US
Supreme Court has ruled that a punitive damages award should be no more than 9 times the compensatory damages
and usually no more than one time punitive damages. The award is exciting fro Ms. Ramirez but the chances of her
taking the money to the bank are slim. In addition, the more than $5 million in punitive damages will result, if collected, in a state and
federal income tax of approximately half the punitive damages award.
New E-Books from Barry Zalma
Random Thoughts on Insurance – Vol. IV
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 insurance case law from 2014 to 2016. Some of the cases reviewed were important. Some were of
first impression. Others will be totally unimportant. All were interesting to me and I hope are interesting to the reader.
This e-book is more than 700 pages of my review of interesting cases from 2013 through January 2014.
After you purchase please wait for the e-book to upload from PayPal. If it does not upload please e-mail
[email protected] and I will personally send you a copy of the e-mail in pdf format.
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.
Zalma's Insurance Fraud Letter -- Page 6 of 16
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.
The e-book contains the full text of the most important insurance fraud cases in over 2000 pages of material essential to every insurance
fraud professional.
Available at http://www.zalma.com/zalmabooks.htm
“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,
reporter, interviewer, investigator or lawyer.
The book will be delivered to you by e-mail shortly after purchase.
Wisdom
“Failure is only the opportunity more intelligently to begin again.” - Henry Ford
“During times of universal deceit, telling the truth becomes a revolutionary act.” – George Orwell
“Those who expect to reap the blessings of freedom, must, like men, undergo the fatigues of supporting it.” — Thomas Paine
“After you’ve done a thing the same way for two years, look it over carefully. After five years, look at it with
suspicion. And after ten years, throw it away and start all over. - Alfred Perlman
“Progress everywhere today does seem to come so very heavily disguised as chaos.” - Joyce Grenfell
“The attempt to silence a man is the greatest honor you can bestow on him. It means that you recognize his
superiority to yourself.” — Joseph Sobran
“If we can prevent the government from wasting the labors of the people, under the pretense of taking care of them,
they must become happy.” — Thomas Jefferson
“Doublethink means the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting
both of them.” — George Orwell
“If the people are capable of understanding, seeing and feeling the differences between true and false, right and
wrong, virtue and vice, to what better principle can the friends of mankind apply than to the sense of this
difference?” — John Adams
“The right to be let alone is indeed the beginning of all freedom.” — Justice William O. Douglas
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Zalma's Insurance Fraud Letter -- Page 7 of 16
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Bad faith
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Duties of insured and insurer
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Investigating Fires
Why Would Somebody Start a Fire?
Regardless of the opinions of insurance professionals who are charged with investigation of arson-for-profit the most
common reason for arson is revenge. The person setting the fire might be mad at another person, mad at an institution,
like a school or the government, or just mad at their circumstances in life. How an arson investigator goes about
looking across this vast acreage of a wild fire that looks like the a charred landscape with no similarity to an actual
forest, and then be able to determine where the fire started and how it started is hard for a lay person to understand.
Wild Fires
Wild fires are extraordinarily difficult to investigate where and how they started. There’s a lot of science and weather
involved. If the investigator knows the area where the fire started, what the direction of the wind was and how strong
the wind was the char will point the investigator to the starting point. Fires, even wildfires, spreads at an angle out
from the point of origin. Depending on the speed of the wind, and the hills, the investigator can work backwards along
that line and get to a workable, manageable scene where the fire probably started.
When the investigator gets to where he or she thinks the fire started, the investigator works on hands and knees,
with small hand shovels, screens, brushes, metal detectors, with binoculars staring at something three feet away
from you, and if there is an incendiary device, its parts will survive the fire because wind will take the heat and
fire away from the device.
Most wildfires are caused by humans. Some are started on purpose. Most are not, they arise from negligence, or
stupidity.
Consider the Sand fire, which went on in July and August 2016, a massive fire in the Santa Clarita Valley of Southern California. That fire
started along a roadside on a holiday weekend, a getaway weekend, and on a slight uphill. That type of fire can be attributable to hot
vehicle parts coming off into dry vegetation. Vehicles, ubiquitous in California, are claimed to cause the majority of fires in California.
Most people believe that roadside fires are started by cigarettes, but in most of the days of the years that’s just not physically, scientifically
possible. A truck laboring up a mountain can start eight, 10 fires, or if a semi-truck has a flat tire, and it starts on fire – again a common
thing in the summer – it will start fires for 30 miles up a road. It will look like a serial arsonist that’s working, but in reality it’s a vehicle
that’s having problems.
What’s the Profile of an Arsonist?
People always ask me, what’s the profile? In serial arson alone I’ve identified over 12 subtypes, so there is no
one subtype, one profile. Each case is quite specific.
The fire cause investigator studies the actual event, the time of day, what was used specifically to light the fire,
the sophistication level of the fire starter, or whether there exists an accidental source. When the investigator
gets to the specifics of a case, the investigator begins the work of eliminating the people who might have
caused the fire.
The investigator’s goal is to get the potential 35 million people down to a manageable level. If the fire starter is
using a device of any sort that has some sophistication, the investigator’s potential fire starters is reduced to
Zalma's Insurance Fraud Letter -- Page 8 of 16
just about two hundred people in the state who could do something like that.
Arson for Profit
The arson-for-profit scheme is the hardest one to prove for investigators because it’s something that somebody
thought about for days, weeks or months ahead of time.
On the other hand the spite/revenge arson is the easiest one to prove: People thought about it for three seconds
ahead of time and they didn’t plan it well. But a business owner that’s going to torch his business – he knows
that the police and fire department will look at him.
And so this is planned, there’s alibis made up – it’s almost comical after a while. An experienced fire cause and origin investigator will
recognize that if a business owner happens to be in Las Vegas or Disneyland when his business catches fire, he probably set the fire or
caused someone to set the fire.
One of the most notorious and probably disturbing, from law enforcement point of view, of the arsonists in Southern California was John
Orr, who was an arson investigator himself, who turned out to be the man setting the fires – a fatal fire in one case. Yes, John Orr is a
respected investigator in the arson investigation world and taught arson investigation at all the meetings of the California Arson
Investigators Association and many International Association of Arson Investigators Associat. John Orr is the most famous because he
was an arson investigator. He was a lecturer on serial arsonists. He was with the arson investigator at the Glendale California Fire
Department. John was friendly and helpful to insurance investigators and their lawyers. I personally worked with him on one of the few
arson fires in Glendale he did not set and his investigation was aggressive and eventually resulted in a conviction.
John Orr set too many fires. He was finally caught and was convicted of four different series, and those series
totaled about 80 fires. But really, he was a strong suspect in 1,200 fires. He killed four people with his fires.
John Orr was unique. It’s sort of like a famous homicide detective becoming a serial killer – it’s like right out
of the movies. The guys that know who john Orr is and really studied him believe that he created himself
because he read a lot of crime noir from the ‘40s and ‘50s and wanted to be famous.
There is also a very famous case about 20 years ago now in Mt. Shasta, Calif. The serial arsonist was a
woman in her 60s who lit fires so her son the firefighter wouldn’t get laid off. She was convicted of five fires
on Mt. Shasta in the wildlands. And she was filmed lighting one of them by investigators.
Every claims investigator should have some knowledge about fire investigation and how to find the place of
origin of a fire. If it appears to be an arson for profit the claims person should immediately submit the investigation to the Special
Investigation Unit, a fire cause and origin investigator and an experienced insurance coverage/fraud lawyer.
Insurance Broker Willis Towers Watson PLC To Pay $120 Million
The insurance brokerage Willis Towers Watson PLC has agreed to pay $120 million to settle litigation accusing it of helping
now-imprisoned Texas financier Allen Stanford run a $7.2 billion Ponzi scheme, court papers show.
The papers, in which Willis denied wrongdoing, were filed on Wednesday with the federal court in Dallas.
The accord requires court approval.
In a lawsuit, investors and a court-appointed receiver for Stanford’s companies accused Willis of providing
letters describing the insurance policies and touting the credentials of the swindler’s Antigua-based Stanford
International Bank.
The suit alleged that Willis did this with an expectation that Stanford would use the letters to lure investors
into buying his bogus offshore certificates of deposit and assure them that his business was sound and their
investments were safe.
The settlement is the largest in 7-1/2 years of litigation brought on behalf of roughly 18,000 former Stanford
investors, Edward Snyder, a lawyer for the Official Stanford Investors Committee, reported in an e-mail dated September 8, 2016.
In a regulatory filing, London-based Willis said it has set aside reserves to cover its settlement.
Stanford’s fraud was uncovered in 2009. Now 66, he is serving a 110-year prison term following his March 2012 conviction.
Health Insurance Fraud Convictions
$3.5 Million Paid by Two Docs
Westlake Convalescent Hospital and Dr. Jasvant Modi, who worked at Los Angeles nursing home paid
$3,563,140 to resolve civil allegations that they participated in a scheme to improperly transfer patients recruited
from the “Skid Row” district to a hospital for medically unnecessary services, and then transfer the patients from
the hospital to the nursing home for medically unnecessary stays.
Jasvant Modi’s wife, Dr. Meera Modi, paid the settlement on August 3 to resolve a federal “whistleblower”
lawsuit. The settlement was announced September 9, 2016 after United States District Judge Beverly Reid
O’Connell dismissed the action.
Zalma's Insurance Fraud Letter -- Page 9 of 16
Between 2008 and 2010, AJIT Healthcare, Inc., doing business as Westlake Convalescent Hospital, allegedly paid illegal kickbacks to a
“care consortium” on Skid Row in exchange for patient referrals to Westlake. During that period and after, Jasvant Modi allegedly
readmitted patients from Westlake to the now-closed Temple Community Hospital and then back to Westlake to extend the patients’
Medicare-covered stays at Westlake, knowing the patients did not require further services at either facility. Meera Modi allegedly signed
medical orders for non-payable services for these same patients. Westlake allegedly billed Medicare and Medi-Cal for medically
unnecessary services provided to these patients.
Westlake and the Modis were named in a lawsuit that alleged the nursing home and the Modis knowingly submitted false claims to
Medicare and Medi-Cal for services to patients for medically unnecessary services.
“This round-robin system of moving mostly homeless and vulnerable people from the hospital to a nursing home and back, purely for
profit not patient care is unacceptable. As this case illustrates, we will work diligently to investigate providers who abuse the system and
take advantage of the elderly and disabled,” said Chris Schrank, Special Agent in Charge for the Department of Health and Human
Services, Office of Inspector General (HHS-OIG). “These were medically unnecessary services which placed the ‘patients’ and federal
health care systems at risk and this type of conduct will not be tolerated.”
This case is related to a large-scale scheme to defraud Medicare and Medi-Cal through the illegal recruitment of Skid Row residents for
medically unnecessary medical procedures at area hospitals and medically unnecessary stays at nursing homes. In December 2013, Dr.
Ovid Mercene pleaded guilty to a tax offense related to his admission of patients, most of whom where homeless, to Temple Community
after they had been referred from a purported “care consortium.” After a short hospital stay, Mercene discharged the “patients” to skilled
nursing facilities, even though they did not require such care.
The whistleblower, Ricardo Gonzales, has received $534,471 from the settlement in the lawsuit, United States of America and the State of
California ex rel. Gonzales v. Dr. Jasvant Modi, et al., CV 11-02987-BRO.
Pharmacist to Prison for 43 Months for Medicare & Tax Fraud
Andrew Barrett, a New York pharmacist who operated pharmacies in Bronx, Queens, and Rockland
counties, was sentenced to 43 months’ imprisonment to be followed by three years of supervised release. As
part of the sentence, he was ordered to forfeit $2.7 million in criminal proceeds, pay $2.7 million in restitution
to Medicare and Medicaid, and pay $736,000 in restitution to the Internal Revenue Service.
The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New
York. Mr. Capers expressed his grateful appreciation to the agencies that led the government’s investigation:
the Federal Bureau of Investigation, New York Field Office; the Department of Health and Human Services,
Office of the Inspector General, New York Office (HHS-OIG); and the Internal Revenue Service, Criminal
Investigation, New York (IRS-CI). Mr. Capers also thanked the New York Office of the Medicaid Inspector
General (OMIG) for its cooperation and assistance in the case.
On May 25, 2016, Barrett pleaded guilty to committing a health care fraud scheme and filing false tax returns. From January 2011 to
December 2012, he fraudulently billed Medicare and Medicaid approximately $2.7 million for prescription medications that he never
dispensed to patients. Barrett used some of these proceeds to buy pharmaceutical products for his pharmacies. He also falsely claimed over
$2 million in personal expenses as business expenses on his tax returns. Through this scheme, he caused a tax loss of $736,192.80.
The sentencing proceeding was held before United States District Judge Kiyo A. Matsumoto.
Doc Sentenced to Eight Years in Prison
Michael Minas, 50, of Boise, Idaho, was sentenced today to eight years in federal prison on 80 counts of unlawfully distributing controlled
substances outside the usual course of professional practice and not for a legitimate medical
purpose, U.S. Attorney Wendy J. Olson announced. Senior U.S. District Judge Edward J. Lodge
also ordered Minas to pay an $80,000 fine and to forfeit proceeds of $8,000. During the
sentencing hearing, Judge Lodge stated that “doctors must be part of the solution, not the source
of the problem.” Minas was convicted in May at the end of a 14-day federal jury trial in Boise.
In April 2015, a federal grand jury charged Minas with 146 counts of distributing a controlled
substance. On May 6, 2016, the jury returned a verdict of 80 counts guilty and 59 counts not
guilty. The United States dismissed seven counts during trial.
Evidence at trial showed that Minas knowingly and intentionally prescribed controlled
substances outside the usual course of professional practice and not for a legitimate medical
purpose. The controlled substance Minas illegally distributed was primarily oxycodone 30 mg,
but the jury also found Minas guilty of distributing fentanyl and hydromorphone. The jury heard evidence that Minas wrote prescriptions
for extraordinary dosages, such as 240, 300, and even 420 oxycodone 30 mg. It also heard evidence that he often wrote prescriptions at
intervals of two or three weeks, but wrote dosage instructions on the prescriptions indicating that it was a month’s supply. The jury also
heard evidence that Minas wrote prescriptions for drugs that present a risk of negative interaction with oxycodone, such as
benzodiazepines, sedatives, and muscle relaxers. Minas generally charged $100 cash for an appointment. Several former employees
testified that Minas’s practice transitioned over time from a standard family practice to one catering to patients claiming chronic pain and
seeking opioid narcotics. Many of Minas’s patients testified that the prescriptions issued by the defendant fed the patients’ addiction and
resulted in substantial negative effects on their lives.
Zalma's Insurance Fraud Letter -- Page 10 of 16
Minas operated the River Medical Family Practice in Eagle until his arrest in June of 2014. He had been released pending trial.
Guilty of Durable Medical Equipment Fraud
Veronica Vela, 42, of Mission, Texas, the owner of a Rio Grande Valley area durable medical equipment
(DME) company has been convicted of conspiracy to commit health care fraud. Vela, entered her plea
September 8, 2016 before U.S. District Judge Micaela Alvarez.
Vela, the owner of ABC DME, admitted to engaging in a scheme with her co-conspirator and biller,
Cynthia Zapata, 50, also of Mission, to submit fraudulent claims to Texas Medicaid for incontinence
supplies that were not provided as claimed. The defendants also billed for durable equipment that the
recipients’ physicians did not authorize.
Zapata pleaded guilty to conspiracy to commit health care fraud for her role in the scheme. As part of their pleas, the defendants admitted
they billed for the maximum quantity of pull-ups allowed under Texas Medicaid rules when it was not needed or provided. Further, they
also billed for larger sizes of pull-ups than were needed in order to receive higher reimbursements from Texas Medicaid.
Two Psychologists Plead Guilty to Medicare Fraud
Beverly Stubblefield, Ph.D., 62, of Slidell, Louisiana, and John Teal, Ph.D., 46, of Jackson, Mississippi, two clinical psychologists
pleaded guilty September 7, 2016 for their involvement in a fraudulent psychological testing scheme that preyed upon Medicare recipients
living in nursing homes throughout the Southeastern United States.
Stubblefield and Teal each pleaded guilty to one count of conspiracy to commit health care fraud before U.S. District Judge Carl Barbier of
the Eastern District of Louisiana. They were charged in a superseding indictment on Oct. 22, 2015, along with co-defendants Rodney
Hesson, Psy.D., 46, and Gertrude Parker, 62, both of Slidell, who were originally charged in June 2015 in connection with a large-scale
Medicare Fraud takedown.
According to admissions made in connection with their plea agreements, Stubblefield and Teal
practiced as clinical psychologists at Nursing Home Psychological Services, Inc. (NHPS) and
Psychological Care Services, Inc. (PCS). Stubblefield and Teal admitted that NHPS and PCS
were owned and operated by Hesson and Parker, who is Hesson’s mother. NHPS and PCS billed
Medicare claiming that NHPS and PCS psychologists, including Stubblefield and Teal,
administered psychological tests to nursing home residents throughout Mississippi, Louisiana,
Florida and Alabama. In addition, Teal and Stubblefield admitted that a large number of these
tests were not medically necessary and many testing services were not provided. According to
the plea agreements, Teal and Stubblefield repeatedly tested the same nursing home residents
even though some were incapacitated and could not meaningfully participate in testing.
From 2010 through 2015, Stubblefield and Teal were responsible for more than $5.6 million in fraudulent claims submitted to Medicare,
according to the lea agreements.
Hesson and Parker are scheduled to begin trial on Oct. 11, 2016.
Dentist Sentenced to One Year in Prison for Medicaid Fraud
Robert Rouzaud, 60, a Cleveland dentist was sentenced to a year in prison and ordered to pay nearly $344,000 in restitution for
fraudulently billing Medicaid for more work that not authorized or never performed. Rouzaud was previously found guilty of healthcare
fraud.
He operated Five Points Dental Centre on East 152nd Street. Rouzaud submitted claims on behalf of Medicaid recipients for services that
were not pre-authorized, as required, and/or not provided. This took place between 2009 and 2015, according to court documents.
For example, Rouzaud billed for an excessive number of fillings on the same teeth, when
he had not done fillings, filed claims for fillings on teeth that had been previously
extracted, and submitted claims for fillings on patients who had dentures, according to
court documents.
Rouzaud submitted false claims totaling $407,982 for services he did not provide
between 2009 and 2015. He was paid nearly $344,000 for these services, according to
court documents.
20 Years in Prison for $57 Million Home Health Agency Fraud
Khaled Elbeblawy, 40, of Miramar, Florida, The owner and manager of three
now-defunct Miami-area home health agencies was sentenced August 30, 2016 to 240
months in prison for his role in a $57 million Medicare fraud scheme.
Elbeblawy was sentenced by U.S. District Judge Beth Bloom of the Southern District of Florida, who also ordered Elbeblawy to pay
approximately $36,400,957 in restitution and to forfeit the same amount. On Jan. 21, 2016, Elbeblawy was convicted after a two-week
trial of one count of conspiracy to commit health care fraud and wire fraud and one count of conspiracy to defraud the United States and
pay health care kickbacks.
Zalma's Insurance Fraud Letter -- Page 11 of 16
According to evidence presented at trial, Elbeblawy managed Willsand Home
Health Agency Inc. (Willsand) and owned JEM Home Health Care LLC
(JEM) and Healthy Choice Home Services Inc. (Healthy Choice). The
evidence showed that through these three entities, from approximately 2006 to
2013, Elbeblawy and his co-conspirators purported to provide home health
services to Medicare beneficiaries in the Miami area, which were not
medically necessary and often were never even provided. Elbeblawy and his
co-conspirators paid kickbacks to doctors, patient recruiters and staffing
groups, which, in exchange, referred beneficiaries to Willsand, JEM and
Healthy Choice, the evidence showed.
Evidence presented at trial showed that the three agencies submitted a total of approximately $57 million in false and fraudulent claims to
Medicare, and received payments totaling approximately $40 million on those claims.
On Oct. 15, 2012, Eulises Escalona, the former owner of Willsand and the former co-owner of JEM, was sentenced to 10 years in prison
after pleading guilty to one count of conspiracy to commit health care fraud. Cynthia Vilches, the former co-owner of Healthy Choice,
was charged by information and pleaded guilty to one count of conspiracy to commit health care fraud. Vilches is scheduled to be
sentenced on Oct. 13, 2016.
Zalma 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
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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
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This edition has been totally rewritten and expanded, providing the most extensive and detailed coverage of the
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Other Insurance Fraud Convictions
Former Ohio Insurance Agent Sentenced for $58K Grand Theft To Three Years Community Control
Charles Gabel, of Fremont, Ohio, an insurance agent and agency owner has been sentenced for grand theft after pleading guilty to
misappropriating more than $58,000 from two clients, the Ohio Department of Insurance announced.
Gabel was sentenced in the Sandusky County Court of Common Pleas to three years of community control supervision and 100 hours of
Zalma's Insurance Fraud Letter -- Page 12 of 16
community service. He also was ordered to pay restitution to his victims.
The Ohio Department of Insurance said Gabel intentionally produced fictitious policy premium invoices to
defraud clients for his financial benefit. Gabel stated an audit revealed additional premium payment funds
were owed. It was later determined the clients’ accounts were already in good financial standing.
Gabel surrendered his Ohio insurance agent license on Aug. 12, 2015.
23 Months for Using Fork Lift to Fake Accident Damage
Franklin Thomas Wilson, the former owner of a Darby Borough, Delaware auto body shop was sentenced
to 23 months of intermediate punishment Thursday after pleading guilty to insurance fraud and receiving
stolen property.
Wilson, who owned Transformer Collision Specialist was among 11 people arrested in March 2015 for an
alleged $85,000 insurance fraud scheme that included damaging vehicles with a fork lift to falsely inflate
claims.
Wilson would meet with customers seeking body work on their vehicles and provide them with an estimate,
according to a 30-page criminal complaint and affidavit of probable cause written by County Detective
Lawrence Patterson.
After the customer departed, Wilson, 45, of the 100 block of Betsy Rawls Drive in Wilmington, Del., would
take the vehicle to an empty garage at 850 Summit Street, across the street from the Darby Borough Police Department, and drive the
vehicle into a pole or beam to cause further damage. He also used a forklift to damage the vehicles, according to the affidavit.
The additional damage would take place before an insurance adjustor saw the vehicle. Once the insurance claim had been paid, Wilson
would fix the customer’s vehicle for a much lower price and pocket the balance of the claim, the affidavit states.
Wilson also paid kickbacks to third parties that referred customers to his business with a portion of the
insurance payout. One police informant claimed to have made approximately $10,000 by personally
referring 30 to 40 customers to Wilson and said the scam had been running for years.
Wilson will serve the first five months of his sentence at the county prison in Concord, followed by six
months of electronic home monitoring, under the plea agreement worked out by Deputy District Attorney
George Dawson and defense counsel Laura Lazuski.
Judge Richard M. Cappelli also ordered Wilson to pay $68,476.18 in restitution, provide a DNA sample to
state police and serve three years of consecutive probation. Wilson did not comment Thursday, but Lazuski
noted he has already paid $15,000 toward restitution.
Two others charged in the scheme, Ashley Wilson, Franklin Wilson’s daughter, and her mother, Letisha
Johnson, 44, of Philadelphia, entered into the Accelerated Rehabilitative Disposition program Thursday
and received 12 months of probation.
Franklin Thomas Wilson
Ashley, 27, of Darby, reported damage to Progressive on the right side of her 2010 Nissan Maxima in
March 2014, according to the complaint. Analysis of the vehicle indicated it could not have been damaged
in the way reported and Wilson was also seen delivering the undamaged vehicle to Transformers.
While the car was parked inside 850 Summit, the Nissan’s front and rear doors passenger doors suffered substantial damage, according to
the affidavit. Detectives found Progressive had paid Ashley Wilson more than $5,000 in repair and rental fees.
Johnson, represented by defense attorney Kevin O’Neill, was accused of attempting to claim $12,000
worth of damage to her 2003 Nissan Turano from vandalism. She withdrew the claim following an
interview from an adjustor.
Johnson was ordered to perform 40 hours of community service and pay $500 towards ARD Thursday,
with the balance due within 90 days. Ashley Wilson was also ordered to pay $500 toward the program,
perform 32 hours of community service and pay $5,340.55 in restitution. Dennis Coin, representing
Ashley Wilson, said his client has already paid $3,000.
Three other defendants named in the complaint, Tywana Neal, 37, of King of Prussia, Adiaha Bell, 34,
and Jamar Grant 29, of both of Philadelphia, have also entered ARD.
A bench warrant is pending for Vernon White, 34, of the 1500 block of 53rd Street in Philadelphia, who
allegedly reported to Philadelphia police and Progressive Insurance that a truck struck the front of his Mercedes Benz CLS 500 on Oct. 8,
2011, while he was driving on Cobb’s Creek Parkway.
Expert analysis of the Mercedes showed the damage did not match the account given to police, according to the affidavit. Transformers
was also under surveillance by this time and White was allegedly seen delivering the undamaged Mercedes to the business on Oct. 7. By
the afternoon of Oct. 8, while never having left Transformers, the vehicle had gained substantial damage to its right side, the affidavit said.
Progressive paid more than $13,000 on that claim, according to detectives.
White offered statements from three passengers in the vehicle at the time of the alleged accident: Nicole Walton, 42, Conchetta Edwards,
60, and Pamela Fields, 53, all of Philadelphia.
Zalma's Insurance Fraud Letter -- Page 13 of 16
Edwards pleaded guilty in May to one count of theft by deception and was sentenced to two years of probation. She was
also ordered to pay $15,257.70 restitution to Progressive Insurance.
Community Control for Workers’ Compensation Fraud
David Abitua, 51, a Toledo, Ohio man with a long arrest record was convicted of workers’ compensation fraud after
investigators discovered he had lied to his physician and used a fake identity to collect injured workers’ benefits.
Abitua pleaded guilty August 18 in Franklin County Common Pleas Court to one count of workers’ compensation fraud,
a fifth-degree felony. He was arrested July 19, more than a year after a warrant was issued for his arrest.
“If you try to cheat the workers’ compensation system, even while hiding under a false identity, we will find you and
prosecute you to the fullest extent of the law,” said Sarah Morrison, Administrator/CEO for the Ohio Bureau of Workers’ Compensation
(BWC). Acting on a tip, BWC’s Special Investigations Department (SID) discovered in 2014 that Abitua had lied to his physician, used a
false social security number and an alias of Jose L. Vasquez to collect injured workers’ benefits from Nov. 2,
2009 until Oct. 6, 2012. SID found Abitua was using the alias to conceal that he was wanted by police and had
numerous local arrest warrants issued against him under his real name, Abitua.
SID worked with the Northwest Ohio Fugitive Task Force to find Abitua and have him arrested. The arrest
marked Abitua’s ninth in Lucas County since 1988, according to the Lucas County Sheriff’s Office. Most of
those arrests involved drug- and alcohol-related charges and traffic offenses.
On the workers’ compensation fraud charge, the Franklin County judge fined Abitua court costs and sentenced
him to six months community control, plus one year in jail if he violates the terms of his probation. He gave
Abitua credit for 41 days already served.
Abitua
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.
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 -- Page 14 of 16
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.
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
Zalma's Insurance Fraud Letter -- Page 15 of 16
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.
Zalma’s Insurance Fraud Letter
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]. Has this email been forwarded to
you by a colleague? Register with Zalma’s Insurance Fraud
Letter at this link. to receive the latest news directly to your
inbox regularly.
Zalma's Insurance Fraud Letter -- Page 16 of 16