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Insurance Law Blog
Insurance Fraud Blotter 11/1/2009 - Recent Arrests, Charges & Convictions
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
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health care reform
Regulatory Issues and Compliance
White and Williams
11-03-2009 | 12:18 PM
Insurance Fraud Blotter 11/1/2009 - Recent Arrests, Charges & Convictions
Each week we'll 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.
Insurance Fraud Blotter – November 1, 2009
21 ½ Years for Defrauding Katrina Victims
This week’s lead story is about fraud involving Hurricane Katrina. A Georgia man Friday received 21 1/2 years in state prison for ripping off New Orleans families desperate to rebuild their homes lost to Hurricane Katrina and the subsequent levee failures. Terry Ferguson, 43, appeared at Orleans Criminal District Court for sentencing before Judge Keva Landrum-Johnson, who heard from eight victims before handing down a staggering prison term for a non-violent crime.
, a licensed contractor in his home state, made off with about a half million dollars from the collection of families who hired him. He pleaded guilty in July to 16 counts of fraud-related felonies and one misdemeanor. Judge Landrum-Johnson had him jailed until sentencing. District Attorney Leon Cannizzaro said that the contractor case, which his office called the biggest one in the city since Katrina, amounted to an assault on the city's recovery.
“I hope Ferguson’s victims can find closure and some measure of solace in knowing that the defendant will have twenty-one years to think about the pain that he caused,” Cannizzaro said. “Criminals such as Terry Ferguson, who are profiting off of the misfortune of those who want nothing more than to return to New Orleans and rebuild their lives, are committing a violent act against our recovery, and my administration will not stand for it.”
Arrested in 2008 by a federal agent, Ferguson became the state's suspect in a rash of contractor fraud linked to his name. Ferguson struck the hardest in the storm-scarred neighborhoods of eastern New Orleans and Gentilly. Several of his victims were elderly home owners, who said they found him through word-of-mouth only to watch him disappear along with their checks.
Louisiana Mayor Convicted of Katrina Fraud – Probation Only
Former Gulfport Mayor Brent Warr was sentenced to probation in a plea deal on Hurricane Katrina fraud charges. Warr pleaded guilty in U.S. District County in Gulfport to one felony count for receiving disaster money that the Federal Emergency Management Agency said he wasn't entitled to, Warr's attorney, Joe Sam Owen, told The Associated Press.
Prosecutors dropped 19 other charges against Brent Warr and all 20 against his wife, Laura. Brent Warr was sentenced to three years probation and was ordered to pay $9,558 in restitution. The Warrs were accused of seeking a homeowners assistance grant for a house they owned but did not live in. They were also accused of making false claims to their insurance company. Warr, who was the highest ranking public official accused of defrauding the government after the 2005 storm, didn't seek re-election this year after his first term.
The Warrs faced up to 210 years in prison and $4 million in fines had they been convicted on all counts, though maximum sentences are rarely imposed in such cases. The charges included conspiracy to defraud the federal government, making false statements to the FEMA and insurance fraud.
General Re Exec Sentenced to two years probation
Richard Napier, 58 years old, of Wilton, Conn., also was ordered to pay a $10,000 fine and perform 400 hours of community service, according to federal prosecutors. He pleaded guilty in June 2005 to one count of conspiring to commit securities fraud. Mr. Napier, one of two cooperating witnesses who assisted prosecutors in the case, gave testimony that helped convict four former General Re executives and one former AIG executive during a 2008 trial in Connecticut federal court. The five defendants were sentenced to prison terms but remain free on bail pending an appeal of their convictions.
According to evidence presented in the trial, Mr. Napier, then a senior vice president of General Re, participated in a conspiracy that allowed the company's most significant client, AIG, to manipulate its financial statements, prosecutors said. Prosecutors in 2006 had accused the former insurance executives of helping AIG inflate its reserves by $500 million in 2000 and 2001 through reinsurance deals that improperly burnished the financials of AIG by making it look like the company had a bigger cushion against losses, thereby boosting its stock price.
Two Years In Prison for Falsely Claiming to Represent Lloyd’s, London
David C. Thomas, of Greenville, S.C., a financial service worker in South Carolina was sentenced September 23, 2009 to two years in prison for using a scheme to dupe mortgage companies and homeowners in Eastern Kentucky. Thomas admitted he falsely portrayed himself to mortgage company offices in Pikeville, Hazard, Paintsville, Corbin, and Richmond as an agent of Lloyd's of London, the insurance provider.
According to the plea agreement filed in January of this year, mortgage companies Citifinancial and American General required homeowners to obtain homeowner's insurance. As a benefit of doing business with these mortgage companies, Citifinancial and American General would pay the homeowner's first year insurance premium. The companies mailed the check to cover the insurance premium to the insurance provider.
Officials said that Thomas, falsely acting on behalf of Lloyd's of London, admitted that he pocketed these checks issued by mortgage companies. Also, as part of the scheme, Thomas issued bogus certificates which were used to show the mortgage company and the homeowner that the homeowner's insurance had been secured by Lloyd's. Thomas worked at North American Financial Services Inc. located in South Carolina but never served as an authorized representative of Lloyd's of London. He was indicted in February of 2008.
The United States Attorney's Office for the Eastern District of Kentucky and the Kentucky Public Protection Cabinet made the announcement after sentencing.
Agent Gives Up License for Fraud
Edward L. Schainker gave up his license to sell insurance and was fined $100,000 because recommended and sold insurance policies to the Illinois Funeral Directors Association Trust, from which he personally received income. The program sold by Schainker was allegedly designed to provide revenue to IFDA members in connection with the burial expenses of consumers who purchased preneed contracts from the IFDA.
“Schainker's business practices did not comply with Illinois legal requirements and did not serve the interests of funeral directors and their client families,” the department said.
An IFDA funeral director who agrees to provide what a client family arranged with a preneed contract will receive a proportionate share in order to substantially offset potential IFDA losses. To the extent that a funeral director opts not to agree to provide the same level of benefits, a share will be paid directly to client families with nonguaranteed contracts. Under its previously agreed-to consent order with the state, MLLA will pay into a special fund to finance prepaid arrangements made by more than 47,000 families and managed by the IFDA. Under the terms of the consent order between state authorities and MLLA, it will pay $18 million plus costs that will be held in escrow and subject to distribution guidelines controlled by Insurance Director Michael McRaith and Comptroller Dan Hynes.
14-Years In State Prison for Fake Ingrown Hairs
California Insurance Commissioner Steve Poizner announced that Larry Butler, 40, of Palmdale, was convicted of insurance fraud, grand theft and perjury. He was sentenced on September 15 to serve 14 years and 4 months in state prison.
The Department of Insurance launched an investigation after receiving a complaint that Larry Butler allegedly filed multiple small claims court claims against several razor manufacturers for the same injury. Butler claimed that razors, manufactured by Phillips, Proctor & Gamble, Eveready/Energizer and Panasonic, during a five-month period, caused him to have ingrown hairs, which scarred his face. In support of his claims, Butler submitted the identical photographs of the alleged injury and the same receipt and price quote for dermatological treatment to all companies. Butler collected $9500 from the companies, who are self-insured, as a result of his fraudulent claims. One company suspected that Butler filed the claim fraudulently, and reported this to the Department of Insurance.
Massachusetts Insurance Company Founder Admits to Fraud – Probation Only
Al Perry, the former chairman of the North Andover School Committee, has admitted to insurance fraud and embezzlement stemming from charges that he stole thousands of dollars of clients' insurance premiums, leaving them without coverage while he used the money for personal business. He was placed on two years of probation and ordered to repay his victims in a ruling issued earlier this summer in Lawrence District Court.
Perry, 56, who owned the now-defunct Internet Insurance Agency, admitted to sufficient facts on six charges of insurance agent broker fraud, six charges of larceny over $250, six charges of embezzlement by broker, one count of forgery by check, and one count of uttering a false document, according to records in Lawrence District Court and the Essex County district attorney's office.
He was ordered by Judge Thomas Brennan to pay $22,361 in restitution to the victims, half of which he has already paid, according to court documents.
The charges came from a police investigation of Internet Insurance Agency, based on complaints from six customers who said they were cheated out of their money. The criminal case against Perry developed after customers discovered they weren't covered for workers' compensation and other insurance even though they had paid premiums for that coverage, according to North Andover detectives.
According to court records, Perry used the money to pay personal gas, telephone and credit card bills.
Jail for Ex-Football Player & Coach
Alabama businessman Tommy Lunceford Jr., a former Auburn football player, entered a “best interests'' guilty plea to arson involving a fire that destroyed his Gulf Shores building, forcing a couple living there to flee. The plea allows the 63-year-old Lunceford to acknowledge that prosecutors could have proven their case without admitting that he set the fire.
Prosecutors agreed to recommend a five-year prison sentence – the minimum under the law – and will allow Lunceford to withdraw his plea if U.S. District Judge William Steele does not accept the recommendation. “He's 63 and in poor health,'' said assistant federal defender Fred Tiemann, representing Lunceford. “So if he were to go on trial and lose, he would have gotten 14 to 17 years under the guidelines, which would effectively be a life sentence.''
Court documents that accompanied the plea agreement described Lunceford as a “principal or aider and abettor'' to the fire that ripped through Nick's Restaurant on Nov. 8, 2007. Nick and Cathy Cascario, the restaurant's proprietors, were sleeping in the building when the fire started but were not injured. Lunceford had been trying to evict the couple, accusing them of not paying rent. The Press-Register reported that court records show Nick Cascario's real name is Richard Morrell and that his criminal record includes more than $65 million in civil judgments against him.
Under the plea agreement, a possible sentencing enhancement for “creating a substantial risk of death of serious bodily injury'' will not apply.
Jose Jefferson, a former football coach, on the other hand, was sentenced to a year in jail for making racially charged threats at an insurance company. Authorities say 38-year-old Jefferson sent the letters in February to Ameritas Life Insurance of Lincoln, Nebraska, where he worked.
The letters threatened death to all blacks and said one African-American at the company would be killed. Jefferson's attorney says his client sent the letters in response to an anonymous letter left on Jefferson's desk that said he was not qualified for the job. Jefferson had coached at Lincoln High in 2005, had been an assistant at two Nebraska colleges and was head coach of the Lincoln Capitols and Lincoln Lightning indoor pro football teams.
Lawyer/Doctor Sentenced to One Year In Jail for Insurance Fraud in Utah
Joseph MacNeill, a Pleasant Grove, Utah physician and attorney was sentenced to a year in jail and six years of probation for insurance fraud. Under a plea deal, the sentence will run concurrently with a four-year federal prison term that MacNeill is serving for identity theft.
In the 4th District state case, the doctor admitted falsely claiming a $10,000 loss from a burglary at his home. MacNeill, who pleaded guilty to felony charges of false and inconsistent statements, insurance fraud and forgery, was sentenced Monday by Judge Samuel McVey. The 53-year-old – who has served as a physician at Brigham Young University's health clinic and as director of medicine of the Utah State Developmental Center in American Fork – has been in legal trouble for the past few years.
MacNeill, a BYU law school graduate, has been suspended from the practice of law in Utah for non-payment of his State Bar dues.
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