Recent Insurance Fraud Convictions

In the current issue of Zalma's Insurance Fraud Letter I report on the following convictions for insurance fraud. Rare as they are the punishments for the same crime range wildly. Review these convictions and then do something to convince your legislatures, prosecutors and judges to take the $100 billion a year crime seriously.

No Habeas Relief for Insurance Fraud: In Bagetta v. Berghuis, No. 07-CV-10188 (E.D.Mich. 07/17/2008), the defendant on March 17, 2003 pleaded guilty to insurance fraud and embezzlement of more than $1,000.00 but less than $20,000.00 and was sentenced in Oakland County, Michigan circuit court to two to four years for the insurance fraud conviction and two to five years for the embezzlement offense. Bagetta claimed that he was prosecuted and subsequently incarcerated despite his alleged immunity agreement with the state. The court refused his habeas corpus pleading because he sat on his rights and failed to comply with any of the procedural requirements. His conviction was clear and he is required to serve the sentence imposed.

One Year for Fraud: Donna Joyce Espinoza, a resident of Albuquerque , N.M., took more than $328,000 from New Mexico Mutual Insurance Company over a two-year period while working as a manager for the company.. Espinoza continuously wrote checks from workers’ comp settled claim files, making them payable to about 30 unsuspecting friends and other company associates. Prosecutors claimed that Espinoza used the funds to gamble at casinos throughout the Albuquerque area. The court sentenced Espinoza to nine-years in prison with eight years suspended. She was booked into the Metropolitan Detention Center in Albuquerque to serve one year in confinement. She was also ordered to pay restitution as a term of the suspended portion of her sentence and release. One can only wonder where she will get the funds to pay restitution without a large winning streak at the casinos when she is let out of jail. Hopefully the court will send her back to jail if she does not pay.

$2,048,251.50 Judgment in Favor of Insurer Victim of Fraud is Affirmed: In Liberty Mutual Insurance Co. v. Healthcare Integrated Services, Inc., No. A-5599-04T3 (N.J.Super.App.Div. 07/02/2008) New Jersey affirmed a judgment in favor of Liberty Mutual and other insurers against health care providers for violation of the states Insurance Frauds Prevention Act (IFPA) and sent the case back to the trial court to determine if, and how much, attorneys fees should be awarded to the insurers. The violations of the IFPA at issue involved claims for personal injury protection (PIP) benefits for diagnostic tests paid by Liberty Mutual during a period beginning in 1995 and ending in 2003. New Jersey courts recognized that a violation of the IFPA can be based on a submission of a claim for PIP benefits for medical services rendered by or through an entity that is not in compliance with laws and regulations. The judgment affirmed included: compensatory damages of $594,468 and fees and costs in the amount of $21,578.46, a total of $616,046.46. Because treble damages were available, the final award was $1,848,139.38 in favor of Liberty Mutual. Separate awards were entered against defendants other than HIS and the judgment grew as a result of interest accruing.

10 Years in British Prison: A ‘crash for cash’ gang of 13 people on August 7, 2008 was sentenced to a total of 10 years imprisonment at St Albans Crown Court. The sentence follows a two-year investigation by Hertfordshire police and the Insurance Fraud Bureau, codenamed “Operation Mysterious.” The gang made dishonest claims to insurance companies for compensation totaling more than £250,000 relating to road traffic collisions that had never happened. Hertfordshire Constabulary’s senior investigating officer, Detective Superintendent Jon Chapman, said to the British press: “False details about the accidents were provided to insurance companies and bogus documents were created. Some vehicles were deliberately damaged in order to support the claims, which were made in respect of damage to the vehicles, personal injuries, recovery costs, hire vehicles, legal costs and loss of earnings.” Indicating that our friends across the pond are just learning about the perversity of insurance fraud, Andrew Sarkanay, the Senior Crown Prosecutor, told the British press: “This is one of the first cases of its kind prosecuted in the UK. The commitment from the police, the Insurance Fraud Bureau and the prosecution team has undoubtedly been the cause for securing these convictions. The Crown Prosecution Service worked very closely with these Criminal Justice agencies to achieve justice.” The British, although new to insurance fraud, do not have the qualms that American jurists seem to have about sentencing fraud perpetrators to long jail terms. May they continue in their efforts so that American jurists can learn from their example.

Collecting Benefits for the Dead is a Crime: Dirulislam Bilal Abdullah, 53, pled guilty August 5, 2008 to stealing government property and making a false statement to obtain worker's compensation benefits. Abdullah had forged his father's signature in order to keep receiving his father's workers’ compensation pay after he died, and then forged his mother's information to keep receiving the benefits after she died. Abdullah's father, Abdul-Kabeer Abdullah, began receiving about $2,500 a month in workers’ comp benefits from the Department of Labor under the Federal Employees Compensation Act in 1979. Abdul-Kabeer Abdullah died of lung cancer in November 1999, according to a news release by U.S. Attorney McGregor Scott's office. After his death, his son completed three Department of Labor forms and forged his father's signature in order to keep receiving benefits. The money was deposited into a checking account that Abdullah used to pay his mother's mortgage, life insurance premiums, daily living expenses, credit card bills, health club dues and car repairs, the release states. According to the release Abdullah's mother died in February 2003. About one month later, Abdullah forged and submitted another Department of Labor form. In the document, Abdullah stated that his father was still alive and entitled to workers’ compensation benefits. He continued to use his father's workers comp payments to make mortgage payments on his parents' home. Abdullah had stolen $144,366 in workers’ comp pay from the Department of Labor before it was stopped. Abdullah is scheduled to be sentenced in federal court by U.S. District Judge Lawrence K. Karlton on October 15, 2008. He faces a maximum sentence of 10 years in prison, a $250,000 fine and three years of supervised release for stealing government property.

Agent Pays For Unfair Practices: On August 11, 2008 it was reported that a Columbus, Ohio insurance agent accused of unfair business practices agreed to pay a school district $372,500 as part of a settlement with the Ohio Department of Insurance. The Ohio Department accused agent Fritz Neuhart and his brokerage two years ago of deceptive business acts because he secretly accepted payments from insurance companies while also collecting fees to shop for insurance for school districts. The practice was not illegal at the time, but it is now. The state accepted the settlement, which calls for Neuhart to pay the money to the South-Western School District, which covers southwestern Columbus and some of its suburbs. The deal allows Neuhart to refuse to admit wrongdoing but requires that he must attend courses in professional ethics and other insurance-agent topics.

Texas Blues Pay 4.15 Million: In August, Texas state insurance regulators ordered Blue Cross and Blue Shield of Texas to pay $3.9 million in restitution and a $250,000 fine for underpaying member claims when they received out-of-network health care services. The state also alleged that Blue Cross failed to maintain an accurate listing of its preferred providers. The number of members entitled to restitution isn't known, but it could be thousands from Blue Cross' preferred provider organization plans. Once a carrier makes a payment to an out-of-network facility, it usually doesn't know whether the facility bills the patient, or how much the patient pays. If Blue Cross makes the full restitution, its fine is $250,000 according to the department, but if it makes less restitution, the fine goes up by whatever the difference is between what it paid and $3.9 million.