Zalma’s Insurance Fraud Letter August 1, 2021
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
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Quote of the Issue
“Show Me A Man That Gets Rich by Being a Politician, And I'll Show You a Crook.” - Harry Truman ?
Convicted Insurance Fraudster Appeals Finding She Breached Probation
Fraud Perpetrators Have Unmitigated Gall
Kristi Heffington appealed from the revocation of her probation. She argued on appeal that the revocation court’s decision was error even though it was proved that she had sent text messages to herself claiming it came from her past employer dentist who fired her for stealing from his practice and defrauding insurers. In Kristi Heffington v. State of Maryland, No. 1899, Court of Special Appeals of Maryland (July 1, 2021) the appellate court wasted much time dealing with her spurious allegations in an attempt to avoid jail.
FACTS
In 2018, Kristi Heffington pleaded guilty to identity fraud, insurance fraud, and conspiracy for using electronic communications to steal thousands of dollars from her employer, Dr. Ron Moser’s Maryland-based dental practice. In Moser v. Heffington, 465 Md. 381, 388-89 (2019) The circuit court sentenced her to ten years’ incarceration (with all but nine months suspended) and five years’ probation. The conditions of Heffington’s probation included paying restitution and following a “no contact” condition, which required Heffington to “[h]ave no contact with Anne Moser [or Dr.] Ron Moser … including no harassing contact or through third parties.”
Four months later, Heffington filed a motion to terminate her restitution obligation. Her motion alleged that the victims of her crimes, Dr. Ron Moser and his wife, Anne, were harassing her in several ways, most notably by sending an anonymous text message to Heffington’s husband that read “YOUR WIFE WILL DIE IN PRISON.” Attached to Heffington’s motion was a copy of the message, which had been sent through a messaging service called SENDaTEXT. The circuit court denied Heffington’s motion to terminate restitution.
The State thereafter filed a petition to revoke Heffington’s probation. The petition alleged, among other things, that Heffington had violated the conditions of her probation by sending the threatening text message herself and then framing the Mosers for having sent the message. Heffington made it appear that the victims were harassing her and to hide her actions. Heffington also posted numerous items on social media that appeared to come from family members and friends, but were, in fact, generated by Heffington with the intent of threatening and harassing the victims, who remain in fear.
The revocation court held a hearing on the State’s petition. The State presented evidence that Heffington fabricated the threatening text message by remotely logging into the computer of a Colorado dental practice, Relaxation Dental Specialties (“Relaxation”), and using Relaxation’s computer to send the threatening text message through SENDaTEXT. The State established this through the testimony of Relaxation’s business manager, Jessie Brown.
The revocation court admitted the SENDaTEXT email chain into evidence over Heffington’s objection. The revocation court ultimately found that Heffington had fabricated the threatening text message and used it to harass the Mosers in violation of the “no contact” condition of Heffington’s probation.
The revocation court rescinded Heffington’s probation; resentenced her to a term of 10 years’ imprisonment, with all suspended but 18 months and time served credit for 9 months; and imposed a new condition on Heffington’s probation, that she was to make no social media post directed at or involving the victims.
DISCUSSION
The first page of the State’s “Petition to Revoke Probation” alleges that Heffington harassed the Mosers in violation of the conditions of her probation by fabricating a threatening text message and claiming it had been sent by the Mosers. Heffington, by harassing the Mosers in the way she did, engaged in contact with them — contact that violated the “no contact” condition of her probation. It was clear from the petition’s first page that the State was alleging that Heffington violated the “no contact” condition by harassing the Mosers.
Heffington is correct that the State did not explicitly allege that the threatening text message violated the “no contact” condition in the first substantive allegation of the petition to revoke, but the standard for reviewing the petition is not whether Heffington was given perfect notice, but rather whether she was given “focused formal notification” of the allegations against her. A reasonable person reading the petition would have understood that the allegation of harassment in the “Summary” was an allegation of violating the “no contact” condition.
Heffington challenges the sufficiency of the evidence supporting the revocation court’s finding that she violated a condition of her probation.
Hearsay evidence can be admitted under the business record exception. In short, otherwise inadmissible hearsay evidence can be admitted under the business record exception when the document was made by someone at the business with knowledge of the document’s subject, and when the business normally produces such a document as part of its normal business.
In fact, the email chain meets the requirements to be admitted under the standard application of the business record exception. The SENDaTEXT email chain identified Relaxation’s computer’s IP address. Immediately prior to moving to admit the email chain, however, the State had established through witness testimony the same IP address as being the one from which the threatening text message had been sent. Thus, the essential content of the SENDaTEXT email chain—the IP address—was already admitted into evidence and we would not reverse the revocation court even if it had erred in admitting the email chain.
The revocation court had sufficient evidence from which to find that Heffington sent the threatening text message. Competent material evidence existed in support of the revocation court’s factual finding. As a result, it was not clear error for the revocation court to find that Heffington violated her probation.
The State’s petition put Heffington on notice of her alleged violation of probation, and that the revocation court had sufficient evidence to find that Heffington violated her probation.
ZIFL OPINION
I am always amazed at the unmitigated gall, the “chutzpah” of those convicted of insurance fraud, who use the courts to spend more time and money than the fraudster stole. Ms. Heffington pleaded guilty to the crime. She was lucky, she only had to serve 9 months of a ten year sentence and leave the dentist she stole from alone. She couldn’t resist. She harassed the dentist and tried to get the court, with false evidence, to remove her obligation to make restitution. She got caught and was sentenced to spend another 9 months and she appealed that. She should have been sentenced to serve the full 10 years. Punishment needs to be real if it is to deter future wrongful actions.
Wisdom
“Like the turtle, man must stick out his neck if he wishes to get anywhere.”?—?Morris Mandel
"The propriety of a law, in a constitutional light, must always be determined by the nature of the powers upon which it is founded." —Alexander Hamilton
“The cure for anything is salt water: sweat, tears or the sea.” – Isak Dinesen
“Patience is bitter, but its fruit is sweet.” – Jean-Jacques Rousseau
“It's the simple things in life that are the most extraordinary.” – Paulo Coelho
“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” — Marie Curie
“They teach you there's a boundary line to music. But, man, there's no boundary line to art.” – Charlie Parker
“I learned that courage was not the absence of fear, but the triumph over it.” -- Nelson Mandela
“One, remember to look up at the stars and not down at your feet. Two, never give up work. Work gives you meaning and purpose, and life is empty without it. Three, if you are lucky enough to find love, remember it is there and don't throw it away.” — Stephen Hawking
"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." —Thomas Jefferson
"Honesty is the rarest wealth anyone can possess, and yet all the honesty in the world ain't lawful tender for a loaf of bread." — Josh Billings
“An optimist is one who sees opportunity in difficulties; a pessimist sees only difficulties in opportunities.” — Morris Mandel
“Maybe happiness is this: not feeling like you should be elsewhere, doing something else, being someone else.” – Isaac Asimov
Refusal to Testify at Examination Under Oath is a Breach Condition Precedent
Court Of Appeal Requires Third Trial of Breach of Condition Precedent Case
Generally, across the country, testifying at a properly noticed Examination Under Oath (EUO) is a condition precedent to coverage for any claim. In SAFECO Insurance Company of Illinois v. Fleurimond Barthelemy, No. 4D20-1045, Florida Court of Appeals, Fourth District (July 14, 2021), in its second trip to the Florida Court of Appeal, the insurer appealed a verdict in favor of the insured.
FACTS
The insured filed a claim with his insurer, seeking coverage for injuries sustained in an automobile accident. The insurer asked the insured for a statement regarding the accident, but the insured refused to give one. This prompted the insurer to investigate the insured’s prior claim history.
The insurer ran a report revealing multiple bodily injury claims. The extensive loss history caused the insurer to suspect fraud. As a result, the insurer asked the insured to submit to an examination under oath (“EUO”). The insured refused. The insurer scheduled two more EUOs, but once again the insured refused or failed to appear. The insured’s failure to submit to an EUO caused the insurer to deny coverage. It also refused to defend the insured against the other parties’ claims.
The insured sued the insurer for declaratory relief, seeking coverage for the policy limits. The insurer moved for summary judgment, arguing that, as a matter of law, the insured’s failure to comply with the EUO constituted a material breach of the policy that caused the insurer substantial prejudice. The trial court denied the motion.
The First Trial
The insurer raised fraud and breach of contract as affirmative defenses.
The jury answered three questions:
Because the insurer proved the insured breached the contract with resulting prejudice, the trial court entered final judgment in its favor.
The insured appealed.?See Barthelemy v. Safeco Ins. Co. of Ill., 257 So.3d 1029, 1031 (Fla. 4th DCA 2018) where the Court of Appeal concluded that the trial court erred in instructing the jury and reversed and remanded the case for a new trial.
The Second Trial
Before the second trial, the insured moved in limine to prevent the insurer from mentioning or implying the insured committed fraud or that the insurer suspected fraud. The insured argued that because the insurer did not cross-appeal the jury’s unfavorable finding on fraud in the first trial, the issue could not be retried. The insurer responded that it needed to address fraud to show that the insured’s material failure to comply with the EUO substantially prejudiced the insurer. The trial court reasoned that any reference to fraud was precluded by the previous verdict in the first trial. The trial court granted the motion in limine and ruled that no party was to mention or imply fraud or any wrongdoing on the part of the insured. At most, the parties and witnesses could use general terms like “concerns.”
This time, the jury once again found the insured materially breached his post-loss obligations but the jury found the insurer did not prove substantial prejudice. The trial court entered a final judgment for the insured. The insurer moved for new trial and for directed verdict. The trial court denied both motions. From these rulings, the insurer now appeals.
THE APPEAL
The insurer argued at the second appeal that the trial court erred in denying its motions for directed verdict and new trial because the trial court incorrectly excluded all evidence of fraud and wrongdoing. This prevented the insurer from proving substantial prejudice resulting from the insured’s material breach of the policy. The insurer argued the question of whether it was prevented from conducting a proper fraud investigation was not settled as the law of the case.
The appropriate standard of review applied to a trial court’s denial of a motion for a new trial is whether the trial court abused its discretion
The doctrine of “law of the case,” a principle of judicial estoppel, requires that questions of law actually decided on appeal must govern the case in the same court and the trial court, through all subsequent stages of the proceedings.
When the case was retried, the trial court excluded all evidence of the insured’s wrongdoing and prevented the insurer from proving the insured’s material breach substantially prejudiced its fraud investigation. The fact that the insurer demanded an EUO to investigate the possibility of fraud was relevant and material to determine substantial prejudice to the insurer. As the insurer argued, without the EUO it had almost no information about the details of the accident that it could have used to assess and defend against the insured’s liability. This information could have avoided all the litigation, including this case. The jury could not have possibly understood the importance of an EUO without knowing the insurer wanted to investigate insurance fraud.
The purpose of an EUO is to enable the insurer to possess itself of all knowledge and all information as to other sources and means of knowledge, in regard to the facts, material to its rights, to enable it to decide upon its obligations and to protect it against false claims. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81 (1884).]
The trial court’s ruling on the motion in limine impacted the witnesses’ testimony, the documentary evidence, and the insurer’s case. The trial court’s exclusion of evidence and limitation on the insurer’s argument directly related to the core issue of the case — whether the insured’s failure to cooperate prevented the insurer from conducting a meaningful fraud investigation.
Indeed, an implication that the insured committed fraud would have been prejudicial. Nevertheless, the probative value of the highly relevant evidence outweighed the danger of unfair prejudice. Therefore, the case was remanded to the trial court so that the parties my try the case again.
ZIFL OPINION
The Florida Court of Appeal, although reaching a correct result that reversed the trial court finding in favor of the insured, should have followed the decision of the U.S. Supreme Court in Claflin, found that the refusal to testify at an EUO was a breach of a material condition precedent and entered judgment in favor of the insurer. Rather, it now requires SAFECO to go through a third trial to again prove the breach of a material condition sufficient to allow it to refuse to pay neither defense nor indemnity.
Good News From the
Crooked body shops bribed a Detroit cop more than $6K to refer stolen and abandoned vehicles to their shops for repairs after being recovered. Deonne Dotson also created false police reports to support the scam. The vehicle owners didn’t know the body shops had bribed Dotson when they agreed to have the shops fix their cars. Dotson was handed 80 months in federal prison. Five other Detroit cops earlier pled guilty and served time in federal prison for bribing body shops for vehicle referrals. Dotson’s sentence was the latest action in a 10-year probe of police corruption in Detroit.
Betsy Faria was stabbed more than 50 times. Her close friend Pamela Hupp killed Betsy for a $150K life-insurance payout, state prosecutors allege in Lincoln County, Mo. They’re seeking the death penalty. Here are the allegations: Hupp convinced Betsy to change the sole beneficiary of her life policy from her husband Russ to Hupp just four days before killing Betsy. Hupp also was the last person to see her alive. Betsy was suffering from breast cancer. Hupp drove her home from chemo treatment in Troy, Mo. Hupp then repeatedly stabbed Betsy as she rested on the sofa, weakened from chemo and unable to resist. Hupp next removed Betsy’s socks, soaked them in her blood, and placed the socks over her own hands and smeared blood around to make the room look like her husband Russ killed her in a domestic assault. The knife was still lodged in Betsy’s throat when police arrived. Hupp tried to deflect suspicion from herself. She lured Louis Royse Gumpenberger to her home, then shot him five times while calling 911 — lying that the disabled man held her at knifepoint. Hupp also fingered Russ for Betsy’s murder. He was wrongfully convicted and spent three years in prison until his airtight alibis and other evidence freed him. Hupp already is serving life for killing Louis. Officials also are investigating whether Russ’ conviction was criminal mishandling by prosecutors and other officials.
Timothy Mark Harron and his wife Latisha falsely billed Medicaid at least $17M mostly for dead people — allowing the couple to live a pasha’s lifestyle off stolen taxpayer money needed for the urgent healthcare needs of lower-income residents in North Carolina. The Raleigh-area duo ran two fake home-healthcare firms. The Harrons obtained their patients’ names from obits, cross-checked them with a Medicaid database, then back-billed for home-health services purportedly given while the patients were alive. Taxpayer money tumbled into the couple’s stolen bank accounts. Timothy’s Facebook page describes him as an “Entrepreneur, author, husband, traveler, jet setter, wine connoisseur and lover of fine food.” The couple went off to Australia, the South Pacific, Malibu, Napa, Italy and other luxury destinations — often traveling in their private $900K jet. Tim routinely posted selfie videos at the resorts and penthouses where they vacationed. They also bought Tiffany jewelry and Brioni clothing; business properties; thousands in gym equipment — plus a Las Vegas penthouse and 2017 Aston Martin DB 11 sports car. The couple pled guilty. Latisha will spend more than 14 years in federal prison and must repay $13.4M to Medicaid. Timothy awaits sentencing.
A convicted heart doc tried to avoid jail by claiming he needed six weeks of bed rest for an allergic reaction to his COVID-19 vaccination. The federal judge nixed Dr. Samirkumar J. Shah’s gambit, so the Pittsburgh-area man simply didn’t show up for his sentencing hearing. Now Shah has a warrant out for his arrest. Shah launched a $13M scam promising patients blood-flow therapy that would give them a virtual fountain of youth. He used specialized beds with pressure cuffs that treat disabling angina — chest pain when the heart has too little blood and oxygen. Shah bought 25 beds and treated patients at more than 18 locations in Western Pennsylvania, Ohio, New York and Florida. He claimed his false treatments could make patients “younger and smarter.” Shah promised to cure a range of ailments, including obesity, migraines, high and low blood pressure, diabetes and erectile dysfunction. He could boost energy and stamina and enhance weight loss, he also lied. Shah double-billed insurers and didn’t supervise patients receiving the treatments. One patient had an adverse reaction and had to be transported to a hospital. Shah never met the patients, nor did he review diagnostic ultrasounds he required. He also forged patient files and ordered employees to say on billing forms that every patient had disabling angina, even when they didn’t. Shah could spend up to nine years in federal prison when sentenced.
Disgorging his assets is the final stage of justice for Wade Ashley Walters, whose ring made $510M of claims for false scripts involving worthless compound creams that cost up to $14K for a single tube. The Hattiesburg, Miss. man earlier was handed 18 years in federal prison as the kingpin of the large Tricare fraud ring. He pulled together Marines, patient recruiters, docs, pharmacies and others. The ring lodged false compound claims, often for patients who weren’t examined. Walters rigged the scheme to ensure the maximum insurance payout for the tubes, regardless of patients’ medical needs. So now the court is forcing Walters to repay nearly $287.7M by giving up dozens of ill-gotten assets. He has to fork over millions in properties, plus a speedboat, luxury cars, Cirrus-brand aircraft — and nearly $56.6M in cash. Walters ran the largest health scheme in Mississippi history.
More than 250 pregnant women from Mexico were duped into paying premiums that illegally enrolled them in California’s state-run health system. Melissa Alvarez Torres and Jose Luis Olmos Hernandez advertised pregnancy insurance services on Facebook. The San Diego-area couple told victims the duo would provide private medical insurance for their maternity needs at a low cost so they could give birth in the U.S. Instead, they shuttled the women into a Medi-Cal program for pregnant middle-income Californians without enough health insurance for maternity costs. The Mexican women didn’t live in California and weren’t eligible. Nor did they know Torres and Hernandez were trying to fraudulently enroll them in Medi-Cal. The duo filled out insurance applications for the women, but the applications were filled with falsehoods. The supporting documents, such as letters from fake employers, were also bogus. And Torres and Hernandez told the women to pay an insurance premium of $1.2K-$3K, much of which the pair pocketed. Torres and Hernandez pled guilty. Each faces up to 20 years in federal prison when sentenced in October.
Law enforcement responded to a two-vehicle collision in Sumter County, S.C. Six people reported injuries and filed claims that included altered medical bills. DeMarkus Marquel Daijhon Lane assisted with the filing of three claims for occupants of one of the cars. Over $85K in claims were made, almost all of which insurers paid out. Eight defendants were arrested. The second collision was a two-vehicle incident. Five people reported injuries and filed claims using altered medical bills. Lane provided the medical bills for two claimants. Insurers paid more than $95K, and six people were arrested and Lane was a ringleader. He received five years in prison — suspended to five years of probation if he repays $234.7K. The case is part of a larger Sumter County fraud ring involving multiple staged accidents, hundreds of thousands of dollars’ worth of forged or altered medical bills, and the use of false IDs. The South Carolina Law Enforcement Division has been investigating, with the state AG prosecuting.
A pharma sales rep recruited employees of Bergen County (N.J.) to help loot the county’s prescription drug plan out of $3.4M with forged scripts for expensive and unneeded compound meds. Paul Comarda ran a business called Dynasty Medical to sell compound meds for several specialty pharmacies. The Bergen County health plan reimbursed the pharmacy thousands per employee for a month’s supply of compound creams — such as vitamins, pain, anti-fungal, migraine and libido ointments. Comarda gave county employees blank prescription pads and steered them to a corrupt Newark doc to authorize the meds. Colluding compound pharmacies mixed the creams, and paid Comarda a percentage of the insurance money. He pleaded guilty. Comarda will receive up to 10 years in federal prison for insurance fraud when sentenced, and five years for obstruction of justice and money laundering.
Cookie-cutter diagnoses earned a Boca Raton allergy doc a date with jail bars. Max Louis Citrin came under scrutiny when witnesses told investigators that he wrote narcotic scripts for their boyfriends in exchange for illegally recruiting drug-recovery patients to his allergy practice. Undercover officers posing as patients then went to his office. Citrin gave one officer an allergy test and Xanax script. Yet the officer never complained of allergy problems, nor did Citrin tell her the test results. He billed her insurer nearly $20K for the “allergies” visit and “preparation of allergy shots.” Investigators dug deeper. Citrin cut and pasted virtually identical diagnoses, symptoms, medical backgrounds and vital signs on the insurance forms for seven patients — including the same grammar errors and typos. The claims were worth nearly $450K. All told, Citrin stole more than $2.4M through varied health-insurance crimes. He pled guilty and received 30 months in state prison.
Health Insurance Fraud Convictions
Owner Of Sacramento Area Home Health Care and Hospice Agencies Pleads Guilty to Medicare Fraud
Akop Atoyan, 48, of Glendale, pleaded guilty today to one count of conspiracy to commit health care fraud and one count of conspiracy to pay and receive health care kickbacks, Acting U.S. Attorney Phillip A. Talbert announced.
According to court documents, Atoyan and his wife, Liana Karapetyan, owned and controlled home health care and hospice agencies in the greater Sacramento area: ANG Health Care Inc., Excel Home Healthcare Inc., and Excel Hospice Inc. On behalf of the agencies, Atoyan and Karapetyan certified to Medicare that they would not pay kickbacks in exchange for Medicare beneficiary referrals to the agencies.
Despite their certifications, from at least July 2015 through April 2019, Atoyan and Karapetyan paid and directed others to pay kickbacks to multiple individuals for beneficiary referrals, including employees of health care facilities, as well as employees’ spouses. The kickback recipients included John Eby, a registered nurse who worked for a hospital in Sacramento; Anita Vijay, the director of social services at a skilled nursing and assisted living facility in Sacramento; Jai Vijay, Anita Vijay’s husband; and Mariela Panganiban, the director of social services at a skilled nursing facility in Roseville.
In total, Atoyan, Karapetyan, and others caused the agencies to submit over 8,000 claims to Medicare for the cost of home health care and hospice services. Based on those claims, Medicare paid the agencies approximately $31?million. Of that amount, Medicare paid the agencies over $2?million for services purportedly provided to beneficiaries, but these beneficiaries were referred in exchange for kickbacks paid to, among others, Eby, Anita Vijay, Jai Vijay, and Panganiban. Because the agencies obtained the beneficiary referrals by paying kickbacks, the agencies should not have received any Medicare reimbursement.
This case is a product of an investigation by the Federal Bureau of Investigation and the U.S.?Department of Health and Human Services’ Office of Inspector General. Assistant U.S. Attorney Matthew Thuesen is prosecuting the case.
As part of his guilty plea, Atoyan agreed to pay $2,525,363 in restitution to the U.S. Department of Health and Human Services. He also agreed to forfeit that same amount to the United States.
Former Pittsburgh-Area Doctor Pleads Guilty to Unlawfully Prescribing Opioids, Health Care Fraud and Money Laundering
Andrzej Kazimierz Zielke, 66, of Allison Park, Pennsylvania 15101 (Hampton) pleaded guilty to four counts of unlawful dispensing and distributing Schedule II controlled substances, one count of health care fraud, and one count of money laundering before Senior United States District Judge Nora Barry Fischer,
A former physician, Zielke, pleaded guilty July 13, 2021 in federal court to drug diversion, health care fraud and money laundering charges associated with his suburban Pittsburgh holistic medical practice.
In connection with the guilty plea, the court was advised Zielke owned and operated Medical Frontiers, LLC, a purported pain management practice, located in Gibsonia, Pennsylvania. On or about October 3, 2017, May 25, 2017, October 3, 2017, and December 17, 2014, Zielke knowingly dispensed and distributed Schedule II drugs, including Oxycodone, Methadone, Hydrocodone and Oxymorphone, to four patients outside the course of professional practice and not for a legitimate medical purpose. Zielke committed health care fraud by causing fraudulent claims to be submitted to Medicaid for payments to cover the costs of the unlawfully prescribed drugs. Finally, Zielke violated federal money laundering statutes when he caused approximately $150,000 in proceeds obtained through his illegal drug distribution to be wired from a bank account to Kitco Metals, Inc., in Canada to purchase silver and collector coins.
Judge Fisher scheduled sentencing for November 1, 2021. The law provides for a maximum per count sentence of 10 years in prison, a fine of $500,000.00, or both, for the controlled substances offenses. Zielke faces an additional maximum per count sentence of 10 years and fine of $250,000.00?for the health care fraud charges; and a maximum per count sentence of 10 years and a fine of?$250,000.00 for the money laundering offenses. Under the Federal Sentencing Guidelines, the?actual sentence imposed would be based upon the seriousness of the offenses and the prior criminal?history, if any, of the defendant. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the offense and the prior criminal history, if any, of the defendant. Pending sentencing, the Court continued Zielke on bond.
Medicaid Provider Business Owner Sentenced for Fraud
Larry Lance Crawford, 49, of Las Vegas, was sentenced in a Medicaid fraud case involving the failure to maintain adequate records to substantiate claims submitted to Nevada Medicaid. The fraud occurred between January 2017 and September 2018.
District Court Judge Ronald J. Israel sentenced Crawford to 364 days in jail, suspended, and payment of $50,000.00 in restitution. Individuals or businesses convicted of Medicaid fraud may also be administratively excluded from future Medicaid and Medicare participation.
The investigation of this case began after the Medicaid Fraud Control Unit (MFCU) received information that Crawford, the owner of Dynamic Future LLC, was using his business to submit false claims for services that were never actually provided to Medicaid recipients. The investigation revealed that Crawford failed to maintain records to support the services allegedly provided.
The MFCU investigates and prosecutes financial fraud by those providing healthcare services or goods to Medicaid patients. The MFCU also investigates and prosecutes instances of elder abuse or neglect. The Nevada MFCU receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award. The remaining 25 percent is funded by the State of Nevada.
Home Care Company Owner Pleads Guilty to Medicaid Fraud, Agrees to Pay $1,000,000 Restitution
Richard Wennerberg, age 72, of Grantham, pleaded guilty and was sentenced on Tuesday, July 13, 2021 in the Merrimack County Superior Court to two counts of class B felony Medicaid fraud.
Wennerberg is the owner of Alternative Care @ Home, LLC, a company licensed to provide in-home personal care services to Medicaid beneficiaries. Between January 2015 and December 2018, Wennerberg submitted claims for reimbursement for in-home, personal care services that were never actually provided, and which included periods when Alternative Care's clients were not at home, but instead were in hospitals or nursing homes. Additionally, from as early as December 2015, Wennerberg billed Medicaid up to the maximum hours allowed under certain clients' service authorizations, knowing that his employees did not actually provide care for all of those hours, and would use the difference to reimburse some caregivers for mileage.
The Merrimack County Superior Court sentenced Wennerberg to serve twelve months in the House of Corrections with a recommendation for administrative home confinement and ordered Wennerberg to pay $1,000,000 in restitution. Wennerberg also entered a plea of guilty to a third charge of Medicaid fraud against his company, which excludes Alternative Care @ Home, LLC from future participation in federal health care programs.
If Wennerberg volunteered to pay $1,000,000 in restitution he stole much more and had at least a million to pay or go directly to jail.
California Healthcare Provider Paying $37M To Settle Whistleblower Lawsuits
Prime Healthcare Services, a Southern California-based company and two of its doctors will pay $37.5 million to settle whistleblower lawsuits that claimed the hospital system paid kickbacks to one of the physicians and bought his practice for more than it was worth, prosecutors said Monday.
Prime Healthcare entered into the settlement with federal and state prosecutors to resolve alleged violations of the False Claims Act, the U.S. Attorney’s Office said in a statement.
The agreement resolves allegations that Prime and its founder Dr. Prem Reddy overpaid to purchase Dr. Siva Arunasalam’s physician practice and surgery center because the company wanted the cardiologist to refer patients to its Desert Valley Hospital in Victorville, prosecutors said.
Under the settlement agreement, Arunasalam will pay $2 million. Reddy has already paid $1,775,000, and Ontario-based Prime has paid $33,725,000, prosecutors said.
EEG Testing and Private Investment Companies Pay $15.3 Million and Whistleblowers take Almost $3 million as their Share
Alliance Family of Companies LLC (Alliance), a national electroencephalography (EEG) testing company based in Texas, will pay $13.5 million to resolve allegations that it submitted or caused to be submitted false claims to federal health care programs that resulted from kickbacks to referring physicians or that sought payment for work not performed or for which only a lower level of reimbursement was justified. The settlement also resolves allegations against Texas-based private investment company Ancor Holdings LP (Ancor), which will pay over $1.8 million for causing false billings resulting from the kickback scheme through its management agreement with Alliance.
The two Texas companies have agreed to pay a combined $15.3 million to resolve allegations of kickbacks and other misconduct resulting in the submission of false claims to federal health care programs.
Alliance provides ambulatory EEG testing services for patients referred by physicians and other health care providers to diagnose certain neurological conditions. The United States alleged that Alliance induced physicians to order the company’s EEG testing by providing kickbacks in the form of free EEG test-interpretation reports, thereby enabling primary care physicians who were not neurologists to bill the government as if they had interpreted the tests. The government also alleged that Alliance used an inaccurate billing code for certain EEG testing to generate higher reimbursements and billed for a specialized digital analysis that it did not actually perform. The United States alleged that Ancor learned of the kickbacks based on due diligence it performed prior to investing in Alliance and then caused false claims by allowing that conduct to continue once it entered into an agreement to manage Alliance.
Under the terms of the settlement, Alliance will pay $13,022,356 and Ancor will pay $1,780,349 to the federal government to resolve their liability under the False Claims Act. In addition, Alliance will pay $477,643 and Ancor will pay $64,369 to state Medicaid programs. Alliance is obligated to pay additional amounts if certain financial contingencies occur within the next five years and forego any claim to over $390,000 in suspended payments that it would otherwise be owed by Medicare.?
In connection with the settlement, Alliance entered into a five-year Corporate Integrity Agreement with HHS-OIG, setting forth requirements for future compliance.
The settlement resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act in six actions. Under the Act’s qui tam provisions, a private party can file an action on behalf of the United States and receive a portion of the settlement if the government reaches a monetary agreement with the defendant. The qui tam actions subject to the settlement are all pending in the Southern District of Texas and are captioned United States ex rel. Mandalapu, et al. v. Alliance Family of Companies, Inc., et al., No. 4:17-cv-00740; United States ex rel. Fuller v. Respiratory Sleep Solutions, et al., No. 4:17-cv-01197; United States ex rel. Calcanis v. Alliance Family of Companies, Inc., et al., No. 4:19-cv-1497; United States, et al. ex rel. Jane Doe v. Alliance Family of Companies, LLC, et al., No. 4:19-cv-1213; United States, et al. ex rel. McKay v. Alliance Family of Companies, LLC, et al., No. 4:18-cv-1949; and United States, et al. ex rel. Krasnov v. Alliance Family of Companies, LLC, et al., No. 4:19-cv-4886. Relators Mandalapu and Chava will receive $2,962,850 of the federal settlement proceeds as their share of the government’s recovery, plus a share of any additional recoveries should the financial contingencies occur.?
Former Billings Rheumatologist Settles Alleged Health Care Fraud Claims for $2 Million
Dr. Enrico Arguelles, a former rheumatologist, and his business, Arthritis and Osteoporosis Center (AOC), which closed in September 2018, entered into a civil settlement agreement with the U.S. Attorney’s Office for the District of Montana on July 14, 2021. The terms of the settlement require Arguelles and AOC to pay a settlement amount of $1,268,646 and to relinquish any claim to $802,018 in Medicare payment suspensions that have been held in escrow for AOC since Oct. 11, 2017 by the Centers for Medicare and Medicaid.
The United States contended that it had certain claims against Arguelles and AOC arising from the diagnosis and treatment of rheumatoid arthritis, including the improper billing for MRI scans, improper billing for patient visits, and the use of biologic infusions such as Remicade for certain patients who did not have seronegative rheumatoid arthritis, from Jan. 1, 2015 through AOC’s closure in September 2018.
Owner Of Mental Health Services Agency Sentenced to 2 Years in Federal Prison
WALI MUHAMMAD, 46, of Branford, Connecticut, was sentenced July 19, 2021 by U.S. District Judge Vanessa L. Bryant in Hartford to 24 months of imprisonment, followed by three years of supervised release, for defrauding Connecticut’s Medicaid Program.
According to court documents and statements made in court, from 2010 to 2019 Muhammad owned and operated Happy Family Clinical Services LLC (“Happy Family”), a mental health and social services agency. At various times, Happy Family’s office was located in East Haven and Branford, before moving to New Haven in 2014.?
From 2013 through 2019, Muhammad engaged in a scheme to defraud the Connecticut Medicaid Program by submitting fraudulent claims for psychotherapy services that were purportedly provided to Medicaid clients. The claims were for occasions and dates of service when no psychotherapy services of any kind had been provided to the Medicaid clients identified in the claims. The claims also were submitted using the names and identities of licensed clinical social workers and other licensed health care providers who purportedly worked for Happy Family, and represented that the psychotherapy services were personally rendered by the licensed providers, when, in fact, the licensed providers had not personally rendered the services, had not supervised the services that were billed, and were unaware that Muhammad was billing or causing the services to be billed as if the providers had personally rendered the services. When services were provided, they were usually rendered by unlicensed individuals and billed as licensed psychotherapy.
Judge Bryant ordered Muhammad to pay $527,034 in restitution to Medicaid.
On March 11, 2021, Muhammad pleaded guilty today to one count of health care fraud.
Muhammad, who is released on bond, is required to report to prison on September 27, 2021.
Prime Healthcare Services and Two Doctors Agree to Pay $37.5 Million To Settle Allegations of Kickbacks, Billing for A Suspended Doctor, And False Claims for Implantable Medical Hardware
Prime Healthcare Services system (Prime), Prime’s Founder and Chief Executive Officer Dr. Prem Reddy, and California interventional cardiologist Dr. Siva Arunasalam, representing one of the largest hospital systems in the nation and two of its doctors will pay $37.5 million to resolve violations of the False Claims Act and the California False Claims Act. The settlement is a joint resolution with the U.S. Department of Justice and the California Department of Justice.
The United States and California entered into a settlement agreement with the three to resolve alleged violations of the False Claims Act and the California False Claims Act based on kickbacks paid by Prime to Dr. Arunasalam for patient referrals.
Prime includes Prime Healthcare Services Inc., based in Ontario, California; Prime Healthcare Foundation Inc.; Prime Healthcare Management Inc.; High Desert Heart Vascular Institute (HDHVI); and Desert Valley Hospital Inc. Under the settlement agreement, Dr. Arunasalam will pay $2,000,000; Dr. Reddy paid $1,775,000; and Prime paid $33,725,000. The United States will receive $35,463,057 of the settlement proceeds, and California will receive $2,036,943. Prime and Dr. Reddy paid $65 million to settle previous unrelated allegations of false claims and overbilling in 2018.
The settlement resolves allegations that:
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The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by a federal health care program, such as Medicare, Medicaid or TRICARE. Claims submitted in violation of the Anti-Kickback Statute may give rise to liability under the False Claims Act.
In connection with the settlement, Prime and Dr. Reddy entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The CIA requires, among other things, that Prime maintain a compliance program and hire an Independent Review Organization to review arrangements entered into by or on behalf of its subsidiaries and affiliates.
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act in two lawsuits filed in federal court in Los Angeles. One suit was filed by Martin Mansukhani, a former Prime executive. The second suit was filed by Marsha Arnold and Joseph Hill, who were formerly employed in the billing office at Shasta Regional Medical Center, a Prime hospital in Redding, California. Under the qui tam provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of any recovery. Although the United States did not intervene in these cases, it continued to investigate the whistleblowers’ allegations and helped to negotiate the settlement announced today. Mr. Mansukhani will receive $9,929,656 as his share of the federal government’s recovery. The cases are United States and the State of California ex rel. Martin Mansukhani v. Prime Healthcare Services, Inc., et al., 5:18-cv-00371-RGK (C.D. Cal.); and United States and the State of California ex rel. Marsha Arnold and Joseph Hill v. Prime Healthcare Services, Inc., et al., 5:18-cv-02124-FLA (C.D. Cal.).
Lewiston Men Sentenced for Million-Dollar Health Care Fraud
Abdirashid Ahmed, 41, was sentenced to serve two years in prison and three years of supervised release. Garat Osman, 35, was sentenced to serve three years of probation in U.S District Court in Portland, Maine for health care fraud by U.S. District Judge Jon D. Levy.
Judge Levy also ordered Ahmed to pay $1,863,264.83 and Osman to pay $544,097.78 in restitution to MaineCare. Both men pleaded guilty in May 2019.
According to court records, Ahmed and Osman were interpreters who conspired with several Lewiston/Auburn mental health counseling services to defraud MaineCare. One of the counselors was Nancy Ludwig, who was the owner of Facing Change, a mental health and substance abuse counseling agency in Lewiston. From about November 2015 until May 2018, Ludwig and Ahmed led a conspiracy to commit health care fraud by submitting claims to MaineCare for services that were not rendered as billed.
Beginning in February 2015, Ludwig agreed to pay Ahmed a kickback in return for Ahmed bringing MaineCare beneficiaries to Facing Change. Ludwig, Ahmed and other employees at Facing Change then caused false and fraudulent claims to be submitted to MaineCare for both counseling and interpreter services. The false claims included claims for visits that never occurred and claims that inflated the level of service provided. In 2016, in response to a MaineCare regulatory change, Ludwig and Ahmed conspired to change the diagnosis of many of Ahmed’s clients to schizophrenia so they could remain eligible to receive MaineCare reimbursement for the services at Facing Change.
In the fall of 2016, auditors with the MaineCare Program Integrity Unit audited Facing Change. Ludwig and many of her employees conspired to manufacture false and fraudulent records in an attempt to deceive the auditor. Osman joined the fraud scheme in December 2016 and established an interpreter company that received all the fraudulent payments from that time until early May 2019. In May 2019, agents with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), the FBI and the Maine Attorney General’s Office executed search warrants at Facing Change and Ahmed’s business. Investigators eventually determined that MaineCare was defrauded of $1,863,264.83 in this fraud scheme.
EEG Testing and Private Investment Companies Pay $15.3 Million To Resolve Fraud Allegations
Alliance Family of Companies LLC (Alliance), a national electroencephalography (EEG) testing company based in Texas, will pay $13.5 million to resolve allegations that it submitted or caused to be submitted false claims to federal health care programs that resulted from kickbacks to referring physicians or that sought payment for work not performed or for which only a lower level of reimbursement was justified. The settlement also resolves allegations against Texas-based private investment company Ancor Holdings LP (Ancor), which will pay over $1.8 million for causing false billings resulting from the kickback scheme through its management agreement with Alliance.
The two Texas companies have agreed to pay a combined $15.3 million to resolve allegations of kickbacks and other misconduct resulting in the submission of false claims to federal health care programs.
Kickbacks and inflated billings result in the misuse of critical federal health care program funds. The Department of Justice collaborated with agency partners to protect federal health care programs by pursuing those who knowingly claim public funds to which they are not entitled.
Alliance provides ambulatory EEG testing services for patients referred by physicians and other health care providers to diagnose certain neurological conditions. The United States alleged that Alliance induced physicians to order the company’s EEG testing by providing kickbacks in the form of free EEG test-interpretation reports, thereby enabling primary care physicians who were not neurologists to bill the government as if they had interpreted the tests. The government also alleged that Alliance used an inaccurate billing code for certain EEG testing to generate higher reimbursements and billed for a specialized digital analysis that it did not actually perform. The United States alleged that Ancor learned of the kickbacks based on due diligence it performed prior to investing in Alliance and then caused false claims by allowing that conduct to continue once it entered into an agreement to manage Alliance.
Under the terms of the settlement, Alliance will pay $13,022,356 and Ancor will pay $1,780,349 to the federal government to resolve their liability under the False Claims Act. In addition, Alliance will pay $477,643 and Ancor will pay $64,369 to state Medicaid programs. Alliance is obligated to pay additional amounts if certain financial contingencies occur within the next five years and forego any claim to over $390,000 in suspended payments that it would otherwise be owed by Medicare.?
In connection with the settlement, Alliance entered into a five-year Corporate Integrity Agreement with HHS-OIG, setting forth requirements for future compliance.
The settlement resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act in six actions. Under the Act’s qui tam provisions, a private party can file an action on behalf of the United States and receive a portion of the settlement if the government reaches a monetary agreement with the defendant. The qui tam actions subject to the settlement are all pending in the Southern District of Texas and are captioned United States ex rel. Mandalapu, et al. v. Alliance Family of Companies, Inc., et al., No. 4:17-cv-00740; United States ex rel. Fuller v. Respiratory Sleep Solutions, et al., No. 4:17-cv-01197; United States ex rel. Calcanis v. Alliance Family of Companies, Inc., et al., No. 4:19-cv-1497; United States, et al. ex rel. Jane Doe v. Alliance Family of Companies, LLC, et al., No. 4:19-cv-1213; United States, et al. ex rel. McKay v. Alliance Family of Companies, LLC, et al., No. 4:18-cv-1949; and United States, et al. ex rel. Krasnov v. Alliance Family of Companies, LLC, et al., No. 4:19-cv-4886. Relators Mandalapu and Chava will receive $2,962,850 of the federal settlement proceeds as their share of the government’s recovery, plus a share of any additional recoveries should the financial contingencies occur.
Mississippi Pharmacist Pleads Guilty in $180 Million Insurance Fraud Scheme
David “Jason” Rutland pleaded guilty in the Southern District of Mississippi to paying kickbacks to distributors for the referral of medically unnecessary compounded prescription medications that were ultimately dispensed by his pharmacies.
More than $50 million in fraudulent billings were paid by the federal government, according to a statement from the U.S. Department of Justice.
Rutland, a pharmacist and co-owner of compounding pharmacies, admitted he participated in a scheme to defraud TRICARE and other health care benefit programs by distributing medically unnecessary compounded medications, it said.
Rutland and his associates adjusted prescription formulas to ensure the highest reimbursement without regard to efficacy and solicited recruiters to procure prescriptions for high-margin compounded medications and paying them commissions based on the percentage of reimbursements paid by pharmacy benefit managers and health insurers. In addition, it said they systematically waived or reduced copayments to be paid by beneficiaries and members, including using a “copayment assistance program” to make it appear as if his pharmacy and its affiliate compounding pharmacies had been collecting copayments.
According to the plea agreement, Rutland must make restitution for the counts that prosecutors dropped as well as the count on which he pleaded guilty. He agreed to a total of $182.5 million in restitution to health insurers and pharmacy benefit managers, including $47.3 million to CVS Caremark, $2.1 million to Blue Cross Blue Shield of Mississippi and $1.5 million to Blue Cross Blue Shield of Massachusetts.
A trial for Rutland’s associates in the scheme, Mitchell Chad Barrett and Thomas Tommy Wilburn Shoemaker, is set for Sept. 20.
In a separate case, a Mississippi executive, Wade Walters, was charged in a $510 million fraud scheme that also defrauded Blue Cross and Blue Shield of Mississippi and Tricare. He pleaded guilty in January and was sentenced to 18 years in prison and ordered to pay $287.6 million in restitution.
Other Insurance Fraud Convictions
Adam Haddad, Body Shop Owner, Sentenced for Damaging Cars to Collect More Insurance Money
Adam Haddad, 44, an auto body shop owner from Shrewsbury, Mass. pled guilty and was sentenced to serve two and a half years in prison on January 21, 2021 for damaging cars to get more money out of insurance companies.
Haddad, who owned ADH Collison of Boston Inc. in Everett and Accurate Collision Inc. in Worcester, pled guilty in Middlesex Superior Court to 42 charges, including motor vehicle insurance fraud, attempted larceny and malicious destruction of property.
Massachusetts Attorney General Healey says on a regular basis Haddad took a customer’s car and damaged it further before drawing up his repair quotes. In total, Haddad stole $170,000 from 11 different insurance companies.
In 2017, the Massachusetts Insurance Fraud Bureau started an investigation into Haddad’s businesses. The investigation later revealed that Haddad either enhanced damages or caused new damages to a customer’s vehicles in order to “falsely inflate appraisal repair quotes for labor, paint, and parts reimbursement requests”.
Haddad made additional cash by pocketing the insurance money while also, in several instances, not completing the necessary repairs on his customers’ cars. Investigators discovered surveillance footage from the location of one of Haddad’s businesses that showed him using sledgehammers, mallets and pieces of wood to intentionally create damage to five vehicles.
Bradenton, Florida Insurance Agent Pleads Guilty to Defrauding Elderly Investors
Kenneth Murry Rossman, a certified public accountant and licensed insurance agent, pleaded guilty to conspiracy to commit wire fraud and mail fraud and aiding and assisting in the preparation and filing of a false income tax return.
Rossman, a Bradenton, Florida resident, faces a maximum penalty of eight years in federal prison.
According to the plea agreement, Rossman conspired with Phillip Roy Wasserman, a former lawyer and licensed insurance agent, to defraud elderly victim-investors. The conspirators made false and fraudulent misrepresentations and concealed material information in order to convince elderly victim-investors to put their money into Wasserman’s new insurance venture, “FastLife.”
Some victim-investors were persuaded to liquidate traditional investments, such as annuities, and/or to borrow funds against existing life insurance policies to generate cash to invest in the venture. These victim-investors were not told about surrender fees and other costs associated with the liquidations, and Rossman prepared income tax returns for victim-investors in a manner designed to conceal negative personal tax consequences that resulted from the liquidations from both the victim-investors and the Internal Revenue Service.
Victim-investors’ money was used to perpetuate the fraud and for the conspirators’ personal enrichment. Wasserman paid Rossman a percentage of the victim-investors’ money as compensation for his role in the conspiracy. Wasserman also used victim-investors’ money to make payments to earlier victim-investors in the FastLife venture, as well to as victim-investors in his earlier hedge fund and real estate fund ventures. Wasserman spent a significant amount of the victim-investors’ money to finance a lavish lifestyle that included luxury residences, high-end vehicles, jet skis, jewelry, personal celebrity entertainment, gambling, retail shopping, home improvements, personal insurance, and many other expenses for his personal benefit and the benefit of family members.
The conspiracy resulted in victim-investors losing more than $6.3 million.
In November 2020, Wasserman was charged in a superseding indictment with filing false income tax returns, tax evasion, conspiracy to commit wire fraud and mail fraud, and substantive counts of wire fraud and mail fraud. His case is currently set for trial in December 2021.
Davenport, Iowa Man Gets Five Years in Prison for Insurance Fraud
Dustin Jungvirt, a 31-year-old Davenport, Iowa man pleaded guilty to one count of insurance fraud – presenting false information, a Class D Felony, following an investigation by the Iowa Insurance Division’s Fraud Bureau.
The investigation revealed that Jungvirt lied about the date and time of loss in a renter insurance claim to obtain benefits he would not otherwise be entitled to receive.
Jungvirt will serve five years in prison. He will serve that consecutively with recent convictions on unrelated charges. He’s also ordered to pay court costs and a suspended $750 fine.
On Dec. 20, 2017, Travelers Indemnity Co. submitted a fraud referral to the Iowa Insurance Fraud Bureau. Travelers alleges Jungvirt submitted false information when he made a renter’s insurance claim. Jungvirt’s residence was burglarized on Dec. 11, 2017, but he didn’t have a renter’s insurance policy at the time. On Dec. 13, 2017, Jungvirt applied for and received a renter’s insurance policy through Travelers, with a policy inception date of 12:01 a.m. Dec. 13, 2017.
Shortly after 4 p.m. that same day, Jungvirt submitted a renter’s insurance claim to Travelers and made statements claiming the burglary occurred during the early-morning hours of Dec. 13, 2017, which was after the police inception date and time.
Davenport Police records show that Jungvirt reported that the burglary occurred on Dec. 11, not Dec. 13, as Jungvirt told Travelers, the affidavit says.
Shortly before 1:30 a.m. May 29, officers responded to the 2100 block of Dixwell Street for a disturbance, and that Jungvirt had warrants for his arrest. While officers stood outside the residence Jungvirt jumped out of the rear of the house and climbed a fence.
Officers gave him four commands to stop running, but he kept going toward Pine Street until he fell and then was taken into custody. After officers asked his name several times, he did not answer, gave a name that wasn’t his, then finally gave his real name, police say.
This case establishes that the quality of insurance criminals is dropping like a rock thrown off a cliff.
Former Insurance Agent Sentenced for Embezzling Nearly $200,000 From Clients, Leaving Them Uninsured
Anna Gabriela Garcia, also known as Anna Nuno-Garcia, 48, of Capistrano Beach, was sentenced in Orange County Superior Court in Santa Ana after pleading guilty to two felony counts of embezzlement and grand theft for collecting premium payments from clients and diverting over $195,000 in funds for her personal use. Garcia was sentenced to two years of supervised probation and was ordered to pay the insurance company $190,676 in restitution.
An investigation by the California Department of Insurance found Garcia, a former licensed insurance agent, while working for an independently owned State Farm agency from September 2011 to November 2014, embezzled more than 300 checks totaling $195,626 by altering, endorsing or depositing them into her personal bank accounts. These checks were intended to be payment for her clients’ insurance premiums or were premium refunds for the policyholders.
Garcia failed to place coverage for personal and commercial automobile insurance causing cancellation of DMV registrations and exposing her clients and others on the road to financial risk. Garcia also failed to place a life insurance policy and at least 17 homeowners and renters policies.
To conceal the embezzlement, Garcia made 57 unauthorized ACH debits from one client’s bank account to pay the premiums of other clients. She also made unauthorized charges to multiple clients' credit cards to pay the premiums of other State Farm policies.
Garcia used cash payments from some clients to purchase money orders to pay premiums for other clients and set up policyholders on unauthorized State Farm installment payment plans. Garcia also misdirected customer billings, statements, and refunds to incorrect addresses, some her own or Post Office boxes she had access to. Victims included extended family members and elderly State Farm customers.
Garcia was sentenced on July 21, 2021. Her license expired in April 2018 for failure to renew and on July 2, 2020, the Department revoked her license and licensing rights.
Another Bad Agent Punished & Owes $30,000 & Has License Revoked
Chad Mackland, of Council Bluffs, Iowa, recently entered a plea to the charge of Ongoing Criminal Conduct (Class B Felony) in Pottawattamie County District Court following an investigation by the Iowa Insurance Division’s Fraud Bureau.
As part of the plea, Mackland received a deferred judgment, was placed on probation for three years, was ordered to complete 120 hours of community service, and was ordered to pay $30,000 in victim pecuniary damages.
According to the consent order issued by the Iowa Insurance Division, “Mackland was alleged to have fraudulently converted life policies, increased policy coverage without consent, initiated or directed others to initiate policy loans without the insured’s consent, initiated or directed others to initiate premium draft changes without the insured’s consent, misrepresented the purpose of various insurance forms, and misrepresented to multiple insured’s that money would be deposited into a special holding account when in fact no such account existed and the money was used as premium payments for life policies.”
The consent order issued July 9 permanently revoked Mackland’s Iowa resident insurance producer’s license. He had been licensed since January 2005.
Jury Convicts Suspended Georgia Commissioner Beck on Fraud, Laundering Charges
Jim Beck, the suspended Georgia Insurance Commissioner, was convicted by a jury on 37 counts of mail fraud, wire fraud and money laundering and tax fraud charges.
The jury needed about an hour and 20 minutes to return the guilty verdict, putting an end to a two-week federal trial.
Prosecutors alleged Beck embezzled more than $2 million from his previous employer, Georgia Underwriting Association, by funneling funds through a series of fraudulent companies.
Beck used the money to fund his campaign for commissioner and pay his credit card bills and taxes.
Beck was elected Georgia’s chief insurance regulator in 2018. Only a few months into office, he was charged with wire fraud, mail fraud and money laundering.
Beck voluntarily asked Georgia Gov. Brian Kemp to suspend him but continued to earn an annual salary of $195,000.
Prosecutors argued that Beck concealed his financial interest in two companies receiving money from GUA, Green Technology Services and Paperless Solutions, according to an Associated Pres report.
Beck’s defense said investigators didn’t understand the insurance business and lacked enough evidence to merit a conviction.
Before being elected Georgia insurance commissioner, Mr. Beck had worked as general manager of operations for the Suwanee, Georgia-based Georgia Underwriting Association, which provides high-risk property insurance to Georgia homeowners. He was charged with talking four associates into forming four separate businesses that supposedly supplied necessary services, including property inspections and water damage mitigation, to the association. Then, through an elaborate system of fraudulent invoicing that included producing false documentation and concealing the truth from the associates, Mr. Beck regularly approved substantial GUA payments to the four companies, defrauding the association out of more than $2 million, according to his indictment.
Sentencing is scheduled for Oct. 8. U.S. District Judge Mark Cohen allowed Beck to remain free on bail but under house confinement while awaiting sentencing.
Fraud Conviction Blocks Naturalization Application
Blanca Orellana, a citizen of El Salvador, injured her neck, hands, right foot and back in February 2002 while working for Ocadian Care Centers LLC, based in Belvedere Tiburon, California, according to documents in Orellana v. Mayorkas.
A federal appeals court Wednesday upheld a district court’s ruling that the U.S. Citizenship and Immigration Services did not err in denying a woman’s naturalization application because of a workers’ compensation fraud conviction.
Ms. Orellana said she was unable to work because of her injuries and filed a disability claim. Ocadian accepted the claim, and by Dec. 2, 2002, had paid out nearly $38,000 in temporary disability and medical treatment.
Surveillance of Ms. Orellana found that she continued to work between April and August 2002 and showed no signs of impairment. A criminal complaint was filed against her, and she was convicted of failing to disclose her outside employment and ordered to pay Ocadian $30,000 in restitution.
In 2004, a workers compensation appeals board approved a separate agreement settling Ms. Orellana’s workers compensation claim for $42,700, with the restitution deducted from the settlement.
Years later, when she applied for naturalization, her application was denied because the fraud conviction’s loss to the victim exceeded $10,000. She appealed to a district court which dismissed her complaint.
The 9th U.S. Circuit Court of Appeals in San Francisco upheld the lower court decision. Although Ms. Orellana argued that the actual loss from her conduct was “at most $5,010,” the appellate court disagreed, holding that her outside employment affected her “entitlement to insurance benefits or payments” and that she presented no evidence that the loss did not exceed $10,000.
The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence.
INSURANCE AS A NECESSITY
Neither the courts nor the governmental agencies seem to be aware that in a modern, capitalistic society, insurance is a necessity. No prudent person would take the risk of starting a business, buying a home, or driving a car without insurance.
The risk of losing everything would be too great. By using insurance to spread the risk, taking the risk to start a business, buy a home, or drive a car becomes possible.
Insurance has existed since a group of Sumerian farmers, more than 5,000 years ago, scratched an agreement on a clay tablet that if one of their number lost his crop to storms, the others would pay part of their earnings to the one damaged. Over the eons, insurance has become more sophisticated, but the deal is essentially the same. An insurer, whether an individual or a corporate entity, takes contributions (premiums) from many and holds the money to pay those few who lose their property from some calamity, like fire. The agreement, a written contract to pay indemnity to another in case a certain problem, calamity, or damage that is fortuitous, that is that occurs by accident, is called insurance.
In a modern industrial society, almost everyone is involved in or with the business of insurance. They insure against the risk of becoming ill, losing a car in an accident, losing business due to fire, becoming disabled, losing their life, losing a home due to flood or earthquake, or being sued for accidentally causing injury to another. The insurers, insureds, or people damaged by those insured are dependent on one another. In a country where human interactions are governed solely by the terms of written contracts, insurance would be a simple means of spreading risk and providing indemnity based on the promises made by the contract of insurance. But, in this the real world, insurance contracts are controlled by statutes enacted to ostensibly protect the consumer of insurance, regulations imposing obligations on the conduct of insurers and the decisions of trial and appellate courts interpreting insurance contracts.
A simple insurance contract between two parties might say: “I insure you against the risk of loss of your engagement ring valued at $15,000 by all risks of direct physical loss except wear and tear for a premium paid by you of $15.00.” Anyone who could read would understand that contract. If something happens to damage, destroy or lose the ring the insurer will pay you $15,000.00. However, insurers cannot write such a simple contract because the state requires many terms and conditions that complicate the policy wording and confuse the common person. The states and courts that did so had nothing but good intentions to protect the consumer against the insurer and control the actions of the insurer.
The tort of bad faith was created because courts felt that insurers treated their insureds badly and defeated the purpose for which insurance is acquired. It has served its purpose. Fair Claims Settlement Practices laws and regulations are now available to control insurers who do not act in good faith. Insurance fraud statutes and Regulations provide assistance to insurers who have been deceived by those they insure or who are victims of attempted insurance fraud.
It is time that all contracts, including insurance contracts, are treated like any other contract, and insureds who believe the insurer breached the contract of insurance can sue to recover the benefits promised by the policy.
Legal Disclaimer
ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationship between you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.
Consider Books to Show Your Appreciation to Your Insurer Clients or Claims Employees
Many insurers refuse to allow their employees to receive gifts from lawyers, independent adjusters or vendors.
If you wish to thank your insurance company clients for allowing you to represent their interest or if you wish to honor your claims personnel it is time to give them something that will be useful to them throughout the coming year and that will not offend insurer’s rules to avoid attempts to extort clients for business from insurer employees.
The Insurance Claims Library
Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it for insurers and their claims staff to become insurance claims professionals.
Consider the Insurance Claims Library where, for a small investment you can provide each claims office – rather than individual adjusters – a group of insurance books that will help them throughout the year.
By providing clients, claims departments, or claims personnel with any one or more of the books offered by the Insurance Claims Library. By so doing you can add to the insurance claims professionalism of your clients, employees and claims personnel. With delivery handled by Amazon.com any one or more of the following books, all available from amazon.com and https://zalma.com/blog/insurance-claims-library/, will gain the respect and gratitude from each recipient and their employers.
New and Now Available from the Zalma Insurance Claims Library
The Insurance Examination Under Oath Second Edition
A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud
The insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by the agreement of the insurer, when he, she or it acquires a policy of insurance, to submit to a condition of the insurance contract that compels the insured to appear and give sworn testimony at the demand of the insurer. Failure to appear and testify is considered a breach of a material condition.
The EUO is conducted before a notary and a certified shorthand reporter who is present to give the oath to the person interviewed. The reporter will record the entire conversation and prepare a transcript to be read, reviewed, corrected and signed by the witness under penalty of perjury or by an oath taken before a notary or judge.
The EUO is a tool only sparingly used by insurers in the United States. A professional insurer will only require an insured to submit to an EUO when a thorough claims investigation raises questions: About the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss.
Although seldom used the EUO is an important tool needed by insurers when there is a question of coverage, destruction of evidence needed to prove a compensable loss or the amount of loss or evidence indicating the potential that a fraud is being attempted. The EUO and Legal Action provisions in an insurance policy are conditions precedent to an insured’s ability to file suit, and that since the insured failed to substantially comply with the terms of those provisions, the appropriate remedy is dismissal without prejudice. The insured’s failure to comply with these conditions does not bar his ability to bring suit to recover, but merely suspends his ability to bring suit until he has fully complied with those conditions.
Barry Zalma, Esq., CFE
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at https://www.zalma.com and [email protected] .
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; [email protected] ; https://www.zalma.com ; https://zalma.com/blog ; Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma ; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma ; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921 ; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg ; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts ;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
The Insurance Claims Library
The Compact Book on Adjusting Liability Claims, Third Edition
A Handbook for the Liability Claims Adjuster
This Compact Book of Adjusting Liability Claims is designed to provide the new adjuster with a basic grounding in what is needed to become a competent and effective insurance adjuster. It is also available as a refresher for the experienced adjuster. The liability claims adjuster quickly learns that there is little difficulty with a claimant (the person alleging bodily injury or property damage against a person insured) if the claim is paid as demanded. The insured may be unhappy if the claimant’s claim is paid as presented since most do not believe they did anything wrong or fear an increase in premiums charged for subsequent policies. The adjuster must be prepared to salve the insured’s emotions, explain why in the law and the policy it was appropriate to pay the claimant and that the settlement is in the best interest of both the insured and the insurer the adjuster represents. The adjuster knows, and must be prepared to explain to an insured, that if a claim is resisted or denied the claimant will be unhappy, will probably file suit. If not promptly settled the claimant’s lawyers will rake the insured over the coals to prove that the insured is liable for the claimant’s injuries. The litigation will take time, effort, and money to establish the extent of the injuries and who is responsible for the injuries. Failure to settle promptly can cost the insured his or her reputation and will certainly cost the insurer much more than the claim could have been resolved for had it been resolved before the claimant retained a lawyer. Available as a Kindle book Available as a paperback.
Ethics for the Insurance Professional – Second Edition
How the Covenant of Good Faith and Fair Dealing Requires Ethical Insurance Representatives
Insurance is, by definition, a business of the utmost good faith. This means that both parties to the contract of insurance must act fairly and in good faith to each other and do nothing that will deprive the other of the benefits the contract of insurance promised. Without the covenant of good faith and fair dealing and ethical people who work in the insurance industry applying and fulfilling the covenant, insurance is impossible. One cannot act fairly and in good faith without being a person with a well-formed ethical compass. In Carter v. Boehm S.C. 1 Bl. Burr 1906, 11th May 1766. 593, 3 Lord Mansfield in the British House of Lords stated: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary.” Insurers, when making a decision to insure or not insure a risk, rely on the information provided to them by the insured. As Lord Mansfield instructed, the insured must provide the information requested honestly and in good faith. The implied covenant explains that no party to a contract of insurance should do anything to deprive the other of the benefits of the contract. The implied covenant of good faith and fair dealing imposes obligations not only as to claims by a third party but also as to those by the insured. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort. For the insurer to fulfill its obligation not to impair the right of the insured to receive the benefits of the agreement, it again must give at least as much consideration to the latter=s interests as it does to its own. Therefore, since, at least 1766, the business of insurance is a business of the utmost good faith, that is, each party to a contract of insurance must deal with each other ethically. The general duty of good faith and fair dealing incorporated by reference into every policy of insurance requires a complete understanding of ethics and ethical behavior. In every insurance contract there is an implied covenant of good faith and fair dealing that neither party will do anything which will injure the right of the other to receive the benefits of the agreement. Available as a Paperback Available as a Kindle Book.
Rabbi, MEOR DC, host of Rabbi E in 3 podcast
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Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
2 年Good luck. Find more fraud.
Owner of Discovery Security and Investigations
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