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Insurance Law Blog
Weekly Fraud Blotter – September 11, 2009
Dancing Hamster Arrested On Insurance Fraud Charges
Former Broker-Agent Charged with Multiple Felonies for Identity Theft and Forgery; More Victims Are Possible
Insurance Agent Issued Bogus Insurance Certificates to Dupe Clients
Sacramento Glass Harvesting Ring Files Over One Thousand False Windshield Chip Repair Claims
commercial general liability
Coverage and Exclusions
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health care reform
Regulatory Issues and Compliance
White and Williams
09-13-2009 | 05:31 PM
Weekly Fraud Blotter – September 11, 2009
Each week, with the assistance of our long-time resident fraud expert Barry Zalma, the Insurance Law Center will be surveying what the media, state agencies, insurance companies, and others report in terms of insurance fraud. Just like a police blotter, our insurance fraud blotter lists recent arrests, charges, and convictions.
Jail for Claims Employees – Only 13 Months
In a case that points out the hazards of operating a large health insurer, federal Judge Joe Anderson gave prison terms to Chanell K. Bates, 26, and Natasha F. Henderson, 37 July 30, 2009. The two former BlueCross BlueShield workers in Columbia, South Carolina pleaded guilty in a scheme to get the government to send medical reimbursement checks to phony authorized recipients.
According to the U.S. Attorney’s office, before the scheme was uncovered, it netted almost $490,000 in government checks illegally given out to people who shouldn’t have gotten them. Anderson gave each 13 months in prison after they pleaded guilty to charges of conspiracy to commit mail fraud.
Each also will have to repay more than $80,000 in restitution - their share of the total fraud committed, officials said.
Bates and Henderson both worked for Companion Property and Casualty Insurance in Columbia, a subsidiary of BlueCross BlueShield of South Carolina. According to the U.S. Attorney’s Office, Bates and Henderson, with a few other employees, changed federal tax identification numbers of legitimate BlueCross BlueShield health care providers to individuals who were not health care providers. These individuals, who did not work for BlueCross BlueShield, then would receive workers’ compensation checks in the mail, cash the checks at banks using bogus accounts, and then distribute the proceeds among various parties.
The co-conspirators obtained some $487,346.98 through this scheme, and 116 fraudulent checks were cashed.
30 Days in Jail for W.C. Fraud
Joseph A. Gambino, 58, a Saugerties, N.Y., man who admitted he illegally accepted workers’ compensation benefits over a three-year span was sentenced to 30 days in jail and five years of probation upon release. Gambino was also sentenced to make $77,800 in restitution after accepting his guilty plea to charges of insurance fraud and workers’ compensation fraud, according to the New York State Insurance Department.
Gambino was arrested in December 2008, following in an investigation by the department’s frauds bureau, the New York State Insurance Fund and the Workers’ Compensation Board Inspector General’s Office. Investigators caught Gambino on videotape engaging in activities such as moving furniture and riding a motorcycle without the cane he appeared to rely on heavily during medical exams, according to the department. Gambino collected workers’ compensation benefits from the Insurance fund for more than three years after claiming he had suffered a job-related back injury in 2003.
Another Medicare Fraud Goes to Jail
Michelle Torres is headed to prison for more than three years for falsifying documents and cashing more than $1 million in a Medicare scheme in Miami. The prison term imposed July 31, 2009 includes ten months for a fugitive offense. Authorities the 31-year-old fled to the Dominican Republic after she was indicted in June 2007.
A conspiracy indictment says that as a bank teller, Torres allowed the owners of S.Y.C. Home Medical Equipment to make large, unreported cash withdrawals from their company’s two bank accounts in 2006. The indictment says Torres would take cash payments from them in exchange for falsifying reporting documents and other bank services. The owners of the company have also been given prison time.
Arson For Profit Sends Two to Prison
Jason Varona, 23 and Sideny Terry, 25 both pleaded guilty August 2, 2009 in District Court to charges related to their involvement in the arson of Weekend Sofa Outlet in 2008. Terry pleaded guilty to one count of conspiring to commit mail fraud, wire fraud, arson and using fire to commit another felony. Varona pleaded guilty to one count of misprision of a felony.
The two men, along with Michael Antwan Lee, 44 and Jay Aneja, 47, were indicted on February 19, 2009 and charged with a variety of crimes related to an arson at the Weekend Sofa Outlet. In March, Lee pled guilty to one count of using fire to damage a building. Lee is scheduled to be sentenced on September 1 at 1:00 PM. Aneja has been a fugitive since the time of his indictment.
Jay Aneja, the owner of the Weekend Sofa Outlet, who remains a fugitive, was alleged to have recruited Lee to set fire to the Weekend Sofa Outlet in order to collect insurance through the business’s carrier, Auto Owners Insurance Company. Aneja offered Lee money to set the fire. On August 2, 2008, Lee recruited Terry and Varona to help him set the fire, telling them they too would be paid for the arson. Later that day, Lee, Terry and Varona went to the Weekend Sofa Outlet. The three gained entry to the business by using the key and security code provided to Lee by Aneja.
The defendants loaded furniture for themselves, along with furniture they planned to sell on the street in Richmond, into the box truck registered to Weekend Sofa Outlet provided keys to the truck. In addition to the furniture, the indictment claims that at the instruction of Aneja, Lee, Terry and Varona loaded specific business-related documents from the office into the box truck. While traveling on Interstate 64 on the way to Richmond, the box truck experienced engine problems and broke down. Lee called Aneja who picked up the three men on the highway and drove them back to Roanoke, leaving the loaded box truck on the side of the road.
As a result of the fire, The U.S. Attorney’s office says, the owner of the building leased by Weekend Sofa Outlet and its insurer incurred losses of approximately $407,000. Neighboring businesses and their insurers suffered loses in excess of $300,000. Weekend Sofa Outlet, Inc., has filed claims of loss of over $137,000.
30 Days In Jail After Ten Year Investigation
Proving that it is best to complete fraud investigations promptly and quickly, an insurance agent will only be required to serve 30 days at home for insurance fraud because the case took too long to put together and prosecute.
Jerrold Young, 55, president and co-owner of Young and Company Insurance Brokers, was convicted after a nearly decade-long fraud investigation that included local law enforcement agencies and the California Department of Insurance ended with a weak and minimal 30-day jail sentence on Young, a Crescent City business owner. Young will serve the time on behalf of his business for being an accessory after the fact — a misdemeanor — to a scandal that involved issuing fake insurance documents to customers and pocketing their premiums.
Young initially faced 29 felony counts of insurance fraud before accepting a plea deal from the Del Norte County District Attorney’s Office in September that effectively pinned the accessory-after-the-fact misdemeanor charge on the corporation. While the Del Norte County Probation Department suggested in its sentencing report that Young get 90 days in jail, his attorney, Bill Bragg, argued that his client and his wife, who is also a co-owner of the insurance company, were simply victims of a former employee who was perpetrating the crimes.
It was alleged at that time that the Youngs, both of whom were correctional officers at Pelican Bay State Priso and another were involved in a scheme in which they issued fake insurance policies to customers and used the premiums for personal use. Authorities said then that they had complaints about fraud stretching back as far as to 2000. Though Margaret Young was never charged with any crime, Castro and her husband were named as co-defendants in a criminal complaint filed in February 2008 that included more than a dozen victims and resulted in about 80 felony counts related to insurance fraud.
Judge John Morrison, who presided over the case in Del Norte Superior Court on Tuesday, disagreed with Young’s contention that he had no responsibility for what occurred. He said: “As the head of that agency, it’s your responsibility,” after sentencing Young to a 30-day sentence, that he will be eligible to serve under house arrest. He added that his decision to give Young 30 days versus 90 days, was due to the fact that the company had already paid victims more than $14,000 in restitution. Another contributing factor was that the Department of Insurance had issued his company a restrictive license for three years, meaning any sort of slip-up could result in a revocation.
The state agency also fined Young and Company Insurance Brokers more than $17,000.
The prosecutor claimed that although he could have taken the case to trial he was concerned that a more than eight-year-long Department of Insurance investigation into the allegations was one of the major hindrances because he believed that there would be difficulties in getting a jury to follow and understand a case that relied on a lengthy paper trail. This, of course, is a rash assumption many prosecutors make about the wisdom of the jury system and is often an indication that it would take time and hard work to prove the case. The actual trial, the prosecutor estimated, would have lasted several months, and included more than a hundred witnesses from companies located in multiple states who would have to be relied upon to remember details from something that occurred long ago. Even with a conviction, he questioned whether that amount of time and resources would have resulted in a different outcome.
One Year in Jail for Working in a Staged Accident Ring
Ralph Campbell, 28, of Newark , New Jersey was sentenced August 5, 2009 for participating in a staged accident ring, state Attorney General Anne Milgram announced. Campbell had been on trial with his two brothers, but all three pleaded guilty on April 14, 2009 as the lengthy trial neared its end. His brothers were sentenced to prison last week.
According to Acting Insurance Fraud Prosecutor Riz Dagli, Campbell was sentenced to a year in the Essex County Jail and five years of probation by state Superior Court Judge Joseph C. Cassini in Newark. Campbell pleaded guilty to conspiracy to commit racketeering. The state has 10 days to decide whether to appeal, on the basis that probation is not a proper sentence for a person convicted of a second-degree crime.
On July 27, Cassini ordered Edward Campbell Jr., who is also known as Tariq Campbell, 39, of Elizabeth, to serve six years in state prison, and ordered Bobbie Campbell, 41, of Newark, to serve three years. Edward Campbell Jr. had pleaded guilty to all charges against him, including conspiracy to commit racketeering, conspiracy to commit health care claims fraud, criminal use of runners, theft by deception, and tax fraud, as well as three counts of conspiracy to commit health care claims fraud, six counts of health care claims fraud and one count each of racketeering and theft by deception.
Edward Campbell Jr. also admitted that he acted as a runner for Irwin B. Seligsohn, who was a West Orange attorney sentenced last year to three years in prison, becoming the first New Jersey lawyer to be imprisoned under New Jersey’s criminal runners’ statute.
The law makes it a crime for attorneys or health care professionals to pay persons to procure clients or patients to file insurance claims and lawsuits. Racketeering and conspiracy charges were filed by the state Office of Insurance Fraud Prosecutor against Seligsohn, his law partner, their firm, and 47 other individuals in connection with the firm’s use of runners to recruit individuals, many of whom feigned auto accident injuries so phony insurance claims could be submitted. To date, more than 35 defendants have pleaded guilty, including Seligsohn and the firm, Seligsohn, Goldberger & Shinrod in West Orange.
Edward Campbell Jr. admitted that he recruited persons to be in staged accidents and assisted in setting up the accidents so that phony insurance claims could be submitted by Seligsohn and other attorneys. Ralph Campbell and Bobbie Campbell both pleaded guilty to conspiracy to commit racketeering. Each admitted he was involved in several fake accidents and the submission of fraudulent claims.
Insurer Does Wrong – $500,000 Settlement
California Insurance Commissioner Steve Poizner announced on August 6, 2009 a $500,000 a settlement agreement with Conseco Senior Health Insurance Company over its unfair claims handling practices on long term care insurance policies.
“As a society, we should be celebrating and protecting our seniors, not scamming them,” said Commissioner Poizner. “Conseco’s practices showed a callousness or carelessness toward vulnerable policyholders from whom it was more than happy to accept premiums month after month. Conseco Senior appeared to violate its contracts and California law without much concern for the results of its actions.”Conseco Senior Health Insurance Company, which is under new management and is now called the Senior Health Insurance Company of Pennsylvania, had been the subject of numerous consumer complaints to the Department which discovered that Conseco was improperly denying claims on long term care policies and that its claims handling practices were confusing and onerous. The average age of Conseco Senior’s policyholders is 80.
In response to numerous complaints, the Commissioner conducted an on-site market conduct examination that uncovered additional poor claims handling practices that violated California law, and uncovered coverage denials that were based on a misreading of federal law.
The Commissioner also determined that Conseco Senior was misapplying the terms of its policies and was denying benefits.
Under the settlement agreement, Conseco Senior will pay a $500,000 penalty and will retroactively readjust certain policyholder claims back to January 1, 2004, which will be paid with interest.
Last year the California Department of Insurance announced a $10 million settlement with Allianz Life Insurance Company for allegedly targeting thousands of seniors in deceptive annuity sales. Allianz, the largest seller of annuities in California, purportedly deceived elderly victims into purchasing confusing annuity products that were financially unsuitable for their needs. In addition to the sizable monetary settlement, Commissioner Poizner announced that Allianz has agreed to implement a groundbreaking suitability review process to further protect seniors.
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