Insurance Fraud Weekly ePort: Week Ending May 16

May 16, 2008

 

Insurance Fraud Weekly ePort
Week Ending May 16, 2008
www.InsuranceFraud.org
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LEGISLATION & REGULATION

  • The Oklahoma legislature has sent the governor a bill permanently barring from insurance anyone convicted of crimes of dishonesty and breach of trust. SB 2122 mirrors federal “1033” restrictions. With this legislation, Oklahoma regulators feel they could go after insider looting of insurers faster on their own than by waiting for the feds to act.
  • The Vermont legislature has passed a workers comp reform that includes provisions requiring insurers to send their fraud plans to the state labor department. Currently, only the insurance department receives the required plans, which outline how the insurer intends to investigate suspected claim and premium frauds. The governor is expected to sign SB 345 into law shortly.
  • Florida is clamping down on shady check-cashing firms, currency exchangers and other money outfits that are havens for laundering stolen workers comp, Medicare and Medicaid money. This shadow banking industry has gone largely unnoticed and unregulated in Florida, says a state grand jury report. A bill (SB 2158) would tighten licensing rules for money firms, allow the state to hire outside examiners, and require money-service businesses to report suspicious transactions just as banks must. The measure awaits the governor’s signature.
  • Four states have passed bills banning stranger-originated life insurance policies (STOLIs). In short, seniors buy life policies for packaging to investors who receive the policy proceeds when the seniors die. The initial purchase is the STOLI, and the ensuing investor packaging is called a life settlement. Bills in Connecticut (HB 5512), Hawaii (HB 94) and Oklahoma (SB 1980) define STOLIs as fraudulent, and prohibit life settlements within two years of issuing the policy. These measures track a model bill written by NCOIL. West Virginia’s version (SB 704) is less explicit about calling STOLIs bogus, but sets a lengthy five-year ban on life settlements.
  • John Crowley has a mission: Require life insurers in Massachusetts to deny claims only if they can prove insureds either lied about their wellbeing or should’ve known they were in bad health. Under the state’s current standards, the burden is on insureds to prove they didn’t know they were ill. Crowley and his wife Jenny bought a life policy and passed their physicals. She died a year later from aggressive breast cancer. But the insurer rejected his claim, saying she must’ve been sick before it agreed to insure her. SB 2640 shifting the burden of proof to insurers now is before the state legislature, and Crowley is pushing hard for passage. Life insurers in the state support the measure.

Note: Texts of anti-fraud bills are available on the coalition’s website here.

PUBLIC OUTREACH

  • “Insurers of all lines have a credible story to tell. Life in America would be harder for nearly everyone without insurance protection. Why aren’t insurers more aggressively telling this story?” the coalition’s Dennis Jay says in his FraudBlog posting this week. “Why aren’t insurers trying harder to convince Americans that fraud is a corrosive crime? Taking action will be expensive. But the cost of inaction is unthinkable.”
  • “There are warning signals of a potential spike in arson by desperate homeowners who are looking for an insurance payout to bail them out of foreclosure,” the coalition’s Jim Quiggle said in an article in today’s issue of the respected UK publication, The Guardian. “A small but growing number of arrests are popping up around the US.”

CRIMINAL CONVICTIONS

  • Bruce Riley charged insurers for more than 400 auto glass repairs and replacements that he never performed. The Chandler, Ariz. man billed several victims’ policies multiple times. Several times he also posed as the policyholder when calling the insurer to make the claim. Riley stole more than $100,000 before the Arizona fraud bureau tracked down his scheme. The AG’s office successfully prosecuted. Riley received 1 1/2 years in prison, and must repay $118,031.
  • Two officials inflated an HMO’s net worth and ability to pay claims in reports sent to the Louisiana insurance department. The Oath for Louisiana was $45 million in the red when the state shut it down in 2002. It had insured more than 80,000 Louisiana residents. Health consultant Barry Scheur and former CFO Robert McMillan had helped keep The Oath afloat by including inflated and non-existent accounts receivable in a report sent to state regulators. Some $1.2 million in personal loans that Scheur obtained from a New Orleans bank also were transferred to The Oath’s parent to pad the insurer’s net worth. Scheur and McMillan were convicted federally Monday. No word on potential sentences.

CRIMINAL CHARGES

  • Alexander Igor Gutman led a crime ring that staged at least 2,600 accidents over the last two years, Los Angeles prosecutors charged yesterday. Gutman allegedly helped set up crashes that happened mostly on paper and inside body shops. His suspected schemes raked in tens of millions of dollars in bogus injury and collision-damage claims. He recruited hundreds of cronies and scripted their bogus crashes with legal, medical and body shop professionals to make fraudulent claims against insurers, prosecutors say. Body shops banged up the vehicles, and insurers paid out as much as $60,000 per claim. Gutman faces up to 40 years if convicted, and his crony Lazlo Aldar Bango could serve 16 years. More arrests are expected from Operation Big Fish, officials say.
  • Talk about being on the wrong side of the tracks. Christina Soliz claimed someone stole her vehicle and abandoned it on railroad tracks in San Bernardino County. She couldn’t move the car off the tracks after discovering it sitting there, and an oncoming train then demolished it, she told Travelers Insurance. But her claim was way off track, prosecutors said Monday. Soliz was involved in a solo crash that bumped her car onto the tracks and into the train’s path, officials allege. She allegedly concocted a bogus theft story because she was worried Travelers wouldn’t cover the train collision.
  • Lazarus had nothing on this guy. A New Hyde Park, N.Y. man allegedly faked a crippling disease to milk almost $300,000 in disability benefits from the system. Chathapuram Kumar claimed he was confined to a wheelchair due to post-polio syndrome back in January 2004. He filed disability claims with his health insurer and Social Security. But investigators allegedly caught Kumar driving to his $168,000-a-year job without using a wheelchair or crutches. He could be wheeled into prison for 15 years if convicted. Kumar already is working to repay the stolen money, his attorney says.
  • An agent’s attempted insurance scheme went up in flames. Tim Allison backdated a premium check to help an uninsured client collect on a policy after the client’s Fort Scott, Kans. building sustained fire damage. Chris Parson’s policy had lapsed for non-payment and was canceled on February 15, 2005. Since neither man owned a time machine, Allison had Parsons write him a check for the past-due premium amount. Allison then backdated the check to March 10 and submitted a claim to Farmers Alliance Mutual for the March 15 fire damage. A judge cleared Parsons, but Allison is waiting to see if he’ll get probation or prison time.
  • James Bombinski tried to clean out a customer at car washes. Bombinski repaired windshields at car washes in Phoenix, Peoria and Glendale, Ariz. But he allegedly stole an insurance ID card from a vehicle at one of the car washes and submitted phony claims for glass repairs he never made, the Arizona insurance department charges. Bombinski posed as the insured and forged the policyholder’s signature to claim forms, officials say.
  • A Washington state woman stole another woman’s identity and Medicaid information to obtain more than $180,000 in insurer-paid prescription narcotics and medical treatment, officials charged Tuesday. Barbara Reuter, of Everett, shared a room with the unnamed victim in a homeless shelter in 2006, and received Medicaid services from the state-run public health agency. A health plan that contracts with the agency noticed bills for duplicate appointments under the same name and notified the agency. The investigation also allegedly uncovered doctor shopping, identifying Reuter as the alleged imposter. Reuter faces charges of medical identity theft.
  • Lauren Ashley Morrow’s mother still loves her daughter, even though Morrow allegedly wanted her killed for $2 million life-insurance money. Morrow and her 19-year-old boyfriend tried to hire a high school senior to shoot Karen Colleen Stribel. But officials uncovered the alleged plot and audio-recorded the trio planning the suspected hit to seem like a fatal robbery, officials say. Morrow’s main concern was that the young hitman not shoot Stribel in the face so she could have an open-casket funeral. But Stribel says she doesn’t believe her daughter could’ve plotted a murder for real, and still supports Morrow.

ETC.

  • A $1-million study attempting to measure fraud in California’s workers comp system will be released June 17. The study was funded by a fraud assessment on employers, and was conducted by the state Fraud Assessment Commission with the cooperation of the two state comp-related agencies.
  • Two companies working on Iraq reconstruction charged U.S. taxpayers for employee medical and disability coverage they inflated or never bought, a federal investigation allegedly revealed this week. Contractors in Iraq must provide coverage for employees because they work in a dangerous setting. The feds reimburse the companies as part of the consulting contract. The local companies Sakar al-Fahal and al-Jubori were building a security network for an oil pipeline between Baghdad and Bayji. Both companies submitted letters confirming they had coverage from Continental Insurance. But the letters appeared to be cut and pasted together. Neither company had bought coverage from the insurer, Continental says. The contractors say they were duped by an unauthorized broker in Baghdad who sold them fake coverage. The investigation continues.
  • Jerry Zappola, former SIU manager of Bristol West Insurance, died last Friday. He served on the board of the International Association of SIUs and was a leader in establishing education programs for investigators in Florida. More info here.
  • From our “Sounds Familiar?” file: Insurance fraud costs New Zealanders more than NZ $300 million a year, up from $50 million in 1999, says a new survey of insurers there. Fraud costs each Kiwi household an extra $73 in premiums a year. And surprise, surprise average policyholders are the main culprits, officials say. One woman made eight claims for repairing a car that didn’t exist.

QUOTE OF THE WEEK

“Los Angeles didn’t invent medical provider fraud, but they perfected it.”

—Don Marshall, vice president of Zenith Insurance Co.’s national anti-fraud efforts.

OTHER HEADLINES THIS WEEK

  • Two in N.Y. charged with filing false claim over fire loss
  • Texas business guilty of workcomp premium fraud
  • Traffic stop in Indiana leads to arrest of arson suspect
  • Florida man gets prison time for fraud involving drugs

Details at www.InsuranceFraud.org/

 

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