Insurance Fraud Weekly ePort–Week Ending Oct. 19

Insurance Fraud Weekly ePort
October 19, 2007
www.InsuranceFraud.org

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LEGISLATION & REGULATION

* California Gov. Arnold Schwarzenegger signed into law a bill that nearly quadruples the annual fees insurers pay to fund the state’s anti-fraud efforts. The new $5,000 assessment increases the $1,300 fee that had stood for 34 years. The infusion by AB 1401 will help the insurance department staff up to its full complement of 325 fraud investigators. The legislature unanimously approved the bill late September.
Note: Texts of anti-fraud bills are available on the coalition’s website here.

PUBLIC OUTREACH

* “Most body shops are honest and professional, but some will try to defraud you and your insurance company,” the coalition says in a new online consumer alert on repair-shop scams. Shoddy repairs can make vehicles unsafe to drive. Ask to see all repairs and new parts that were installed; get estimates in writing; make sure you’re contacted before repairs are completed that exceed the estimate; and avoid body shops that say they’ll help you recover your deductible by inflating repair charges, the coalition urges.

CRIMINAL CONVICTIONS

* Prosecutors have nailed the head of a staged-accident ring that stole more than $1 million in insurance money for bogus crashes around Dallas-Fort Worth. Tuan “Andy” Nguyen masterminded the plot and faces up to 40 years in federal prison after pleading guilty. His gang bought junked cars and laundered most titles through Arkansas, then insured them in Texas. Ring members faked crash injuries, and made bogus medical claims through chiros and law firms. One chiro also has pleaded guilty to faking medical records in 11 crashes and stealing more than $127,000 in insurance money. Twenty-one ring members have pleaded guilty so far.

* Facing a costly tax lien, Ann Hanna burned down her house so insurance money could help bail her out. The fire at the Gloversville, N.Y. woman’s home started just before her children arrived. Her son was injured when he tried to put out the fire with a pillow. A petroleum distillate was used to start the blaze in three locations in her home. Hanna claimed more than $98,000 from Safeco, including inflated claims for lost property. The family faced financial problems, including a $27,000 tax lien on the property. Hanna pleaded guilty Monday, and awaits sentencing.

* A Houston doctor helped fleece Medicare out of more than $21 million by lying that more than 1,900 seniors needed expensive motorized wheelchairs. A firm called Durable Medical Equipment (DME) paid Dr. Jayshree Patel to authorize the wheelchairs even though the seniors clearly didn’t need them. He routinely approved chairs for up to 80 patients a day without performing physicals or ordering medical tests. A recruiter brought in seniors from Louisiana, promising them free scooters and $50 kickbacks. A DME-affiliated firm billed Medicare $4,200 per wheelchair but actually provided cheaper scooters costing $1,600 each. Patel received 6 1/2 years in federal prison Monday.

* A former Chicago cop had a business associate murdered for $500,000 in life-insurance money. Edward Leak hired two men to ambush Fred Hamilton, who was shot nine times after stopping to change a flat tire in 2004. Hamilton was a driver for a funeral home run by Leak’s family. Leak made 240 calls to his co-defendant John Brown during the month before the shooting. No word about sentencing.

CRIMINAL CHARGES

* David Michael Pitts torched his bar and restaurant six years apart so insurance cash could bail him out of financial problems, the feds charged in Washington State this week. The Spokane man allegedly burned down Sam’s Bar and Tavern in Hillyard in 2000, settling for $75,300. The insurance money helped pay off the mortgage and satisfy liens the state had filed against his businesses, officials say. The bar’s liquor license also had expired when the fire broke out, and at least one other suspicious blaze had started in the bar several months earlier. Pitts bought the Oasis Restaurant in Davenport in 2005. The building soon burned down in a suspicious fire and he made nearly $770,000 in claims to rebuild the eatery, and replace lost business and property. Pitts faces a possible minimum mandatory five years in federal prison if convicted.

* Romance only worsened Khaleef Ahmad Reed’s legal problems. The Rochester, N.Y. man didn’t want his girlfriend to cover his car payments while he stewed in federal prison on a weapons charge. So he hid the car in a relative’s garage, and told police someone had stolen it off the street. He collected $9,300 in insurance money and paid off his car loan. But Reed’s accommodating relative then bought a car and wanted to park it in the garage. So he called police to have Reed’s car towed. The discovery of Reed’s car alerted police, who arrested Reed as soon as he was released from prison.

* The burglary was real but the insurance claims were inflated, Illinois prosecutors charged this week. Three people burglarized an Antioch clothing store called The Hut, and owner Anthony Dembrowski filed a $14,000 claim for stolen merchandise. Police soon nabbed the burglars but found clothing and jewelry worth only $3,000 in their possession. Dembrowski then reported another burglary several months later, and filed a suspicious $8,000 claim for stolen merchandise. Detectives didn’t believe either claim, and Dembrowki faces a variety of charges.

* Walter Ford was a poker dealer at Foxwoods Resort and Casino. The Plainfield, Conn. man collected more than $33,000 in workers comp money after filing an injury claim. But he allegedly was caught coaching youth football and baseball teams, lifting heavy objects, raking and picking up trash, and taking part in cleanups of sports facilities.

* Former police officer Robert Desiderio was hurt on the job and collected workers comp money for partial disability. He retired from the New Castle, N.Y. force several years later, and continued collecting comp money. But Desiderio started an electrical contracting business while five times signing documents denying he was working, prosecutors charged this week. He faces up to four years if convicted.

* Dentist Raul Hector Villalobos and his wife falsely billed insurers by using several El Paso, Tex. addresses for work he performed in Mexico, Texas prosecutors charged this week. Villalobos also has no U.S. or Mexican dental license, officials say.

CIVIL SUITS

* A federal judge threw out a whistleblower suit Wednesday by several former State Farm adjusters who had charged that 13 insurers and adjusting firms had engaged in a pattern of overbilling the federal flood insurance program for hurricane claims. The action in Louisiana by Branch Consulting LLC failed because two former State Farm claims managers in Mississippi already had filed a similar whistleblower suit. Under the federal False Claims Act, a whistleblower suit can’t go forward if another suit on the same subject already was filed.

* Robert Pendergrass and his wife Wendy lied that someone stole their 1999 Big Dog Pitbull cycle from outside a bar in O’Fallon, Mo. The couple told Dairyland Insurance they’d bought the chopper for $18,000 and presented a bill of sale. But the actual price was about $14,000 and the couple had paid only about $10,000, a friend of the deceased former owner told Dairyland. The signature also didn’t appear to be that of the former owner, and his name was misspelled, the friend said. Robert and Wendy also claimed they’d had an award-winning paint job done on the chopper just before the claimed theft. True, a paint job was done—but on a Harley-Davidson they owned. The jury agreed, and the couple must fork over $46,000.

* A federal court has reversed a jury verdict for Allstate Insurance and other insurers against chiros that it claimed had bilked them with false injury claims. The insurers sued Accident & Injury Pain Centers, a Texas group of clinics specializing in treating auto and workplace injuries. The chiros billed for phantom and inflated treatment, the insurers said. The jury agreed, but the Fifth Circuit reversed. The insurers didn’t have enough evidence of actual “reliance” on “representations” by the chiros, the court said. Even if the insurers could’ve proven a fraud conspiracy, the damage award was based on conjecture and speculation about how much money the chiros actually stole, the court ruled. [Allstate Ins. Co. v. Receivable Fin. Co. L.L.C., No. 05- 10265 (5th Cir. Sept. 20, 2007)]

ETC.

* Three Colorado potato producers may have bilked the federal crop insurance program out of $1.3 million by filing claims for phantom crop losses, investigators say. JB Farms received $222,000, Bigelow Associated Farms took in $355,000 and Ken Burback received $117,000 in federal crop money for potatoes they said were damaged by hot winds and/or freeze. The farmers, who are still being investigated, must explain why their potatoes were good enough to sell after accepting insurance money and claiming the crops were ruined, investigators say.

* Ten percent of Brits fraudulently reduce their kids’ auto premiums by buying coverage in their own names and declaring the kids merely as named drivers, says a survey by Zurich Insurance. Even so, 60 percent of these parents claim they didn’t realize “fronting” is illegal, the survey says. “They also don’t realize it is a false economy. In an accident, an insurer could decline a claim or recover any third-party costs from the child or parents,” Zurich’s Scott Clayton told the London Mail.

* One of six patients hospitalized for car crashes in Korea is likely to be an insurance swindler, a report by the General Insurance Association of Korea says. Nearly 670 supposed crash victims in the study had registered at hospitals, and then bolted without undergoing treatment. It was unclear how they were structuring the insurance portion of the suspected scams. The rate of suspicious hospital visits in Korea is seven times higher than in Japan, the report says.

QUOTE OF THE WEEK

“He’s not charged with larceny, he’s not charged with taking one dime that he wasn’t entitled to earn. Under workers compensation and disability law, he’s not only entitled to work. He’s encouraged to work. What he’s charged with is not informing the authorities that he was working.”
— James Timko, New Castle, N.Y. lawyer, commenting on his client Robert Desiderio, a police officer charged with workers compensation fraud for allegedly lying about his new job after retiring from the force.

OTHER HEADLINES THIS WEEK

* New Jersey pharmacist convicted of prescription fraud
* Okla. county official charged with arson and fraud
* Iowa searching for victims of rogue insurance agent
* Georgia agent accused of stealing customer premiums
Details at http://www.insurancefraud.org/news.lasso

MEETINGS & CONFERENCES

* October 25, 2007 — 3rd Annual California Insurance Fraud Symposium
Torrance, CA (The National Underwriter Company)
* November 8, 2007 — Worker’s Compensation Claimant Fraud Seminar
Randolph, MA (Lombardo’s)
* December 11, 2007 — Annual Membership & Board Meeting
Washington, DC (Hyatt Crystal City)

For more info, visit online events.