Insurance Fraud -- Recent Conviction

In the most recent issue of Zalma's Insurance Fraud Letter I report on the following insurance fraud convictions with various, strange, punishments:

Guilty Employer – Five Years, Deferred
According to the Kentucky Department of Insurance a West Liberty, Kentucky man, Sidney L. Allen, 45, pleaded guilty in Morgan Circuit Court to one felony count of insurance fraud after giving false information to his workers' compensation insurance carrier. Allen paid $109,985 in court-ordered restitution to Kentucky Employers' Mutual Insurance and a fine of the same amount to the Kentucky Department of Insurance Fraud Investigation Division for investigative costs. Allen originally was fined $219,970 (twice his gain) but half was diverted and payment will not be required if Allen complies with the agreement. He was sentenced to five years in prison, which also was diverted for five years. Allen cannot own nor have access to a handgun or firearm and must file an anti-fraud plan for any business entity for which he has ownership or management interest. According to court records, Allen insured his construction company with KEMI but did not have workers' comp coverage for a logging business he also owned. The fraud was discovered when an employee was injured in a logging accident and filed a workers' comp claim with KEMI. Allen falsified documents claiming the employee worked for the construction business and was injured when he fell off a ladder.

Straw Man Guilty
Sixty-seven-year-old James Zoucha of Oceanside, California, a man described by prosecutors as a "straw man'''' who helped conceal an unlicensed bond broker's illegal insurance business pleaded guilty to a conspiracy charge. Zoucha faces up to five years in prison and a $250,000 fine following his guilty plea to one count of conspiracy to commit mail fraud. Louisiana State Senator Derrick Shepherd also faces charges in the case against unlicensed bond broker Gwendolyn Joseph Moyo. Prosecutors say Shepherd helped Moyo launder money to conceal her illegal operation of an insurance business. Shepherd and Moyo are awaiting a trial in October. U.S. District Judge Carl Barbier is scheduled to sentence Zoucha on January 7, 2008.

Workers’ Comp Fraud – Belatedly Discovered
In what is probably the worst example of the failure of a workers’ compensation system to investigate or detect fraud, two South Carolinians effectively defrauded the system for more than 15 years. Kevin R. Sexton, 42, and Harriett Miller, 60, both of Georgetown, S.C., pleaded guilty to illegally collecting nearly $116,000 from the state Workers' Compensation Commission by pocketing checks meant for the widow of a dead West Virginia miner. Assistant Prosecutor Rob Schulenberg reportedly told the judge that Miller was a neighbor of Hazel Allen in South Carolina. Allen and her husband, Clyde, previously lived in West Virginia where, in 1941, Clyde was killed in a mine roof fall. Allen was awarded lifetime Workers' Compensation payments and received them when she lived in Kanawha County and later when she moved to South Carolina. After the widow died there in 1987, Miller continued to take the checks, which were delivered to a communal mailbox for the building where the two women lived. She forged Allen's name on the checks and on forms sent by Worker's Compensation. Miller, and later along with Sexton, cashed the checks for 15 ½ years, moving numerous times to different states. They sent change of address forms to Worker's Compensation as well as questionnaires sent by the agency, forging Allen's name. Sexton also pleaded guilty to participating with Miller to steal $9,000 worth of checks from Worker's Compensation. He claimed he is unable to hold a job because of mental and physical disabilities and collects Social Security Disability benefits. Miller also said she collects the same benefits because she had breathing problems and anxiety attacks. Miller has been incarcerated at South Central Regional Jail since she was arrested August 5, 2008 in lieu of $5,000 bond. Sexton is free on bond. Both will be sentenced October 16, 2008. They face a possible penalty of one to 10 years in prison.

Health Care Fraud Conviction
In US v. Boesen, No. 06-3291, 07-2217, a prosecution for conspiracy to commit health care fraud, convictions, sentence enhancements, and an order of restitution were affirmed over claims by the defendant, Dr. Boeson that: 1) his Sixth Amendment Confrontation Clause rights were violated; 2) prosecutorial misconduct deprived him of a fair trial; 3) prejudicial statements by the district court deprived him of a fair trial; 4) the district court erred by failing to grant his motion for a judgment of acquittal on fifty-one counts; 5) the court erred in determining the loss amount; and 6) the court erred by applying a two-level sentence enhancement under U.S.S.G. section 3C1.1. The prosecutor also succeeded in obtaining a reversal, in part, because a judgment of acquittal on a conspiracy count was improperly granted.

The government alleged that between December 2000 and December 2002 the Boesen clinic billed for 82 procedures and tests that were not actually performed or that were medically unnecessary. The government charged Dr. Boesen and his brother James with conspiracy to commit health care fraud, 51 counts of fraudulent billing for CPT 31237 procedures, 24 counts of fraudulent billing for CPT 69150 procedures, and seven counts of fraudulent billing for CPT 92588 tests. The government also sought forfeiture of $493,954.00. A jury found both defendants guilty on all counts.

The jury’s conviction of Dr. Boesen for conspiracy was rationally supported by the government’s evidence. The jury could infer that Dr. Boesen and his brother James entered into an implicit agreement to defraud insurers when billing for otolaryngological procedures and tests. Evidence showed that Dr. Boesen submitted fraudulent bills in furtherance of this conspiracy, enabling the jury to find that he had knowledge of and participated in these illegal acts. Viewing the evidence in the light most favorable to the jury’s verdict, the district court erred when it granted Dr. Boesen’s Rule 29(a) motion. It is good to see that, at least in Federal Court, criminal doctors will spend time in jail when caught.

Readers may access the most recent issue of Zalma’s Insurance Fraud Letter here.