Cases Across the Country: Small, Big, and In BetweenJanuary 3, 2014 | |
The legal issues governing insurance fraud that are discussed in this column typically focus on New York law or on federal law and its application to New York cases. The world of insurance fraud is quite extensive, however, as illustrated by recent insurance frauds alleged or uncovered from across the country – including some unusual, if not completely bizarre, examples.
$100 at a Time
Not every insurance fraud is a well-thought out effort by criminals to hit it big all at once. Sometimes, it is the frauds that are perpetrated for small amounts – again and again – that really add up.
Consider recent allegations by the fraud division of the California Department of Insurance (“CDI”) against six individuals whom it charged with running a “glass harvesting ring.”
According to the CDI, the defendants filed more than 1,000 false insurance claims for windshield repair, totaling nearly $100,000. On average, the claims were just $100 each, but, the CDI contended, it nonetheless was quite a windfall for the defendants. The government said that, using actual consumers’ insurance policies, the suspects submitted fraudulent claims for automobile insurance windshield chip repairs to multiple insurance companies between May 9, 2011 and May 24, 2012.
The CDI said that it believed that the individuals involved initially were operating a legitimate auto glass repair business and completed authorized repairs. The CDI said, however, that its investigation revealed that the defendants retained consumers’ policy information and sometime later allegedly filed fraudulent claims on consumers’ policies, without the policyholders’ knowledge or permission. The defendants were charged with multiple felony counts of grand theft, false personation of another, and filing fraudulent insurance claims.
As California Insurance Commissioner Dave Jones pointed out, consumers should “pay close attention to any notifications received from their insurance company” and “should review their policy claim history annually, upon renewal, to ensure the claim information is accurate. If there are errors or questions about the claim history, consumers should contact their agent or broker.”
The $1 Billion Case
Then, there are the big, big dollar insurance frauds and frauds related to insurance policies.
In early December, a federal jury in Miami convicted Ft. Lauderdale attorney Anthony Livoti, Jr., of conspiracy to commit wire and mail fraud, conspiracy to commit money laundering, and mail fraud, in violation of 18 U.S.C. Sections 1349, 1956(h), and 1341, respectively, after nearly a three month trial before U.S. District Judge Robert N. Scola. Federal prosecutors said that the verdict was the result of Livoti’s participation in a scheme to defraud approximately 30,000 victims who invested in the viatical and life settlement company Mutual Benefits Corp. (“MBC”).
According to the evidence presented at trial, from approximately 1994 to May 2004, MBC purchased life insurance policies from the elderly, as well as from persons suffering from AIDS and the chronically ill. Thereafter, the government said, MBC sold fractionalized interests in insurance policy death benefits, known as “viatical settlements,” to approximately 30,000 investors.
As alleged, MBC told investors that its viatical settlements offered a fixed rate of return with low risk, and that investors’ principal and returns were paid by the insurance companies. The government presented evidence at trial, however, to the effect that MBC had misrepresented many important facts relating to its viatical settlements, including, for example, the estimated life expectancies of the insured persons, the methods MBC used to acquire life insurance policies, the risks associated with certain policies, the payment of premiums, and the source of funds used to pay investors.
The government asserted that Livoti was MBC’s premium trustee and, as a result, was entrusted with millions of dollars of investor money placed in bank accounts under his control; he also was the designated “trustee” of thousands of the insurance policies sold by MBC. According to the government, Livoti assisted MBC with the marketing of its fraudulent investment by meeting with investors in his Fort Lauderdale law office and encouraging them to purchase MBC investments. Witnesses testified that new investor money regularly was used to pay premiums on life insurance policies purchased by earlier investors and to pay investors who requested their money back.
In a statement, the U.S. Attorney for the Southern District of Florida, Wifredo A. Ferrer, stated, “For nearly 10 years, Anthony Livoti, Jr., used the prestige of his law license to further this massive, multi-million dollar fraud scheme. It is outrageous that an attorney would prey on investors by promising them their money was safe and secure when in reality he was misappropriating their funds.”
Livoti is scheduled to be sentenced by Judge Scola on February 21, 2014.
The Clergy Case
It is bad enough when attorneys are involved in fraud; as attorneys, we are troubled by that, and it does not help the general public’s view of our profession. Imagine how people would feel if they found out that members of the clergy have engaged in insurance fraud.
That is what Florida Attorney General Pam Bondi alleged when she charged James and Grisselle Davis – owners of Kingdom Builders Ministries – with defrauding Florida’s Medicaid program out of nearly $80,000. The attorney general’s Medicaid Fraud Control Unit said that it found that the couple had billed the Medicaid program for nearly $80,000 for targeted case management services (which are designed to link Medicaid recipients with a documented mental health condition to services in the community) that they had never provided.
According to prosecutors, the Davises directed employees to bill for an entire family when only one member received services and to bill for unauthorized expenses, such as travel time, employee staff meetings, and phone calls. Additionally, prosecutors asserted, Kingdom Builders Ministries received payment for services allegedly provided to young children who did not have any documented mental health condition – and it continued to submit invoices months after terminating services.
The Davises each were charged with one count of participating in an organized scheme to defraud the Medicaid program, a second degree felony. If convicted, they each face up to 15 years in prison and up to $10,000 in fines, in addition to restitution.
Lost and Sold?
Detectives from the Yavapai County Sheriff’s Office in Prescott, Arizona, recently charged 28-year-old Wade Dickinson with being involved in an insurance fraud that began this summer, when he reported that his home had been burglarized. According to the sheriff’s office, Dickinson told the deputy who responded that unknown persons had forced entry into his home and that his 2009 Sinister brand sand-rail (a lightweight off-road motor vehicle built specifically for traveling in sandy terrain) had been taken from his garage. New, the vehicle was worth more than $50,000.
Several weeks later, the reporting deputy contacted detectives with concern that Dickinson may have filed a false report as part of an insurance fraud scheme. The sheriff’s office said that a detective from its Criminal Investigations Bureau subsequently obtained a copy of an insurance claim that Dickinson had filed and confirmed that he had received a $53,000 check for the “loss” involving the sand-rail. The detective also allegedly learned that the owner of Sinister Sand Sports, the manufacturer of Sinister custom sand-rails, had been contacted by a man in California regarding a 2009 Sinister sand-rail that he had purchased from Dickinson, and that the company had discovered that the sand-rail was the same one previously reported stolen by Dickinson.
In mid-November, the sheriff’s office said, agents from the National Insurance Crime Bureau went to California, examined the sand-rail, and confirmed that it was the one that had been owned by Dickinson and that he had reported stolen.
Dickinson has been arrested on a number of charges, including fraudulent schemes, trafficking in stolen property, and theft.
20 Year Workers’ Comp Fraud
The case brought by the Ohio Bureau of Workers’ Compensation (“BWC”) against John Monday is a case that began over two decades ago.
The BWC said that it had received information from the Cincinnati Spine Institute that Monday had been working as a janitor at the institute for more than 20 years under the name of John Turner. The BWC said that it opened an investigation and determined that Monday, while receiving Workers’ Compensation, had used an Ohio driver’s license and a state identification card under the Turner name to obtain employment at the institute. The BWC found that Monday, under his alias, had sought treatment for pain from a physician at the institute and had supplied his medical records to that physician. According to the BWC, Monday later realized that the records were under his real name and asked the institute, to no avail, not to let the BWC know about him because he was not supposed to be working.
Monday has pleaded guilty to one felony count of Workers’ Compensation fraud. He has been ordered to pay restitution of $105,169, in addition to court costs and $3,692 for investigative costs. He also has been placed on community control for five years under the conditions that he has no new convictions and that he establish an income within 60 days. If Monday violates the terms of his community control, he will serve 18 months in prison.
The Turnpike Case
Closer to home, we have a case in which a claims manager for the New Jersey Turnpike Authority (“NJTA”) admitted to stealing at least $1.5 million from insurance companies and the NJTA.
Prosecutors said that from May 2009 until this past June, the claims manager, Gerardo A. Blasi, was responsible for negotiating and recovering the costs of repairs from insurance companies of motorists who caused damage to property belonging to the NJTA. They asserted that with the assistance of representatives from two New Jersey-based insurance claims adjusting companies, Blasi had inflated the costs to repair the damage done to NJTA property by insured motorists. The inflated claims were submitted to the motorists’ insurance companies and payment was directed through the mail to one of the New Jersey-based claims adjusting companies instead of to the NJTA, according to the government. Payments for actual costs were passed on to the NJTA, and Blasi and his conspirators shared the difference between the inflated costs and the payments for actual costs sent to the NJTA, the government said.
Moreover, the government alleged, despite an NJTA policy of not attempting to recover for damages caused by motorists who died from accidents on the turnpike, Blasi continued to process those claims. Because the NJTA was unaware that he had processed the claims, he was able to share the entire payment sent by the insurance company between himself and one of his conspirators, prosecutors alleged.
Sentencing for Blasi, who faces a maximum potential penalty of 20 years in prison and a $250,000 fine, is scheduled for March 19, 2014.
 See, Press Release, “Sacramento glass harvesting ring files over one thousand false windshield chip repair claims” (Dec. 5, 2013), available at http://www.insurance.ca.gov/0400-news/0100-press-releases/2013/release105-13.cfm.
 See, Press Release, “Ft. Lauderdale Attorney Convicted Of Conspiracy To Commit Wire Fraud, Mail Fraud, And Money Laundering In Connection With $1 Billion MBC Fraud” (Dec. 4, 2013), available at http://www.justice.gov/usao/fls/PressReleases/131204-03.html.
 See, Press Release, “Attorney General Bondi’s Office Announces Arrest of Lake County Couple for Nearly $80,000 Medicaid Fraud” (Dec. 11, 2013), available at http://www.myfloridalegal.com/newsrel.nsf/newsreleases/7BAB936C94315B3885257C3E006F8895.
 See, Press Release, “Deputy’s Suspicion and Detectives Diligence
Result in Arrest of Major Fraud Suspect” (Dec. 4, 2013), available at http://www.ycsoaz.gov/wp-content/uploads/2013/12/120413-SandRail-Fraud-Scheme.pdf.
 See, Press Release, “Dump truck driver repays more than $19,000 in workers’ comp benefits” (Nov. 8, 2013), available at https://www.bwc.ohio.gov/home/current/releases/2013/110813.asp.
 See, Press Release, “New Jersey Turnpike Authority Employee Admits Stealing at Least $1.5 Million” (Dec. 11, 2013), available athttp://www.fbi.gov/newark/press-releases/2013/new-jersey-turnpike-authority-employee-admits-stealing-at-least-1.5-million?utm_campaign=email-Immediate&utm_medium=email&utm_source=fbi-in-the-news&utm_content=281148.
Reprinted with permission from the January 3, 2014 issue of the New York Law Journal. All rights reserved.