Zalma’s Insurance Fraud Letter
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
Zalma's Insurance Fraud Letter - Volume 26, Issue 3 – February 1, 2022
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?Quote of the Issue
“Whatever you are, try to be a good one.” - William Makepeace Thackeray
Cease And Desist Order by California Department of Insurance Targets Illegal Vehicle Extended Warranty Sales and Denial of Consumers’ Claims
Ideal Group and Owners Face $5,000 Daily Penalties for Failing to Follow California Law
The California Department of Insurance issued Orders to Cease and Desist and to Show Cause effective immediately upon Ideal Group, Inc. doing business as Ideal Auto Protect and its owners Richard and Daniel Beda for allegedly selling illegal Vehicle Service Contracts (VSCs), also known as “extended warranties” to 12 California consumers totaling over $22,000. The company was not properly licensed by the Department, as required by law, and improperly denied claims by failing to prove the claim was not covered.
The Orders also allege Ideal and its owners illegally sold contracts that they did not first file with the Department, sold their contracts directly to consumers online and over the phone instead of through car dealerships as required by California law, and failed to use a backup insurer to safeguard consumers.
“My Department is using all tools available to protect consumers from unlicensed and illegal insurance,” said Insurance Commissioner Ricardo Lara. “Illegally selling vehicle warranties to Californians online or by telephone and then improperly denying their claims leaves consumers without protection when they need it most.”?
The Department ordered Ideal and its owners to immediately stop selling VSCs in any capacity and cease acting as an insurance agent or producer in California since they do not hold a valid license, permit, or Certificate of Authority. The company could face a $5,000-per-day penalty if it fails to comply.
Generally, VSCs, often called “extended warranties,” are offered to consumers by car dealers when they buy a car. Most VSCs typically provide coverage for repairs due to mechanical failure. Others offer coverage for routine services, such as oil changes and tire rotation, or other services such as paintless dent removal, glass or key replacement, or tire and wheel repair.???
Consumers should not be buying these VSCs or “extended warranties” over the phone or internet and should always check to see that the company is licensed in California before buying. They can check license status on the Department’s website?here. If any consumer may have purchased a VSC from Ideal they are urged to contact the Department at 800-927-4357.
VSCs may be sold legally to Californians only when specific criteria are met, which Ideal failed to do, namely:
Read the full Cease and Desist Order and Order to Show Cause here.
Wisdom
“Lose with truth and right rather than gain with falsehood and wrong.”?—?Maimonides
“Many of life’s failures are people who did not realize how close they were to success when they gave up.”– Thomas Edison
“The world is new to us every morning – this is the Holy One’s gift and every person should believe he is reborn each day.” — Baal Shem Tov
“Mix a little foolishness with your prudence; it’s good to be silly at the right moment.” — Horace
“Well done is better than well said.” – Benjamin Franklin
“It’s not so much what we have in this life that matters. It’s what we do with what we have.” – Mr. Rogers
“The one who plants trees, knowing that he will never sit in their shade, has at least started to understand the meaning of life.” – Rabindranath Tagore
“The difficult is what takes a little time; the impossible is what takes a little longer.“ – Fridtjof Nansen
“It is more noble to give yourself completely to one individual than to labor diligently for the salvation of the masses.” —Dag Hammarskjold
“No human being can possibly predict the future, let alone control it.” – Peter Drucker
“In times of universal deceit, telling the truth will be a revolutionary act.” — George Orwell
“He who is merciful when he should be cruel will in the end be cruel when he should be merciful.”?— Midrash Shmuel
“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires.” — Ayn Rand
A True Crime Story of Insurance Fraud
True Crime Videos Explaining Insurance Fraud and Weapons to Defeat or Deter Insurance Fraud
There are now nine true crime stories of insurance fraud video blogs. The videos exist so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud with the names and places changed to protect the guilty are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim now available at https://zalma.com/blog, https://rumble.com/zalma and on https://youtube.com. One of the stories follow.
This true crime stories were adapted from my book “Insurance Fraud Costs Everyone” now available at As a Kindle Book and as a Paperback from Amazon.com.
The Burned-Up Russian
Since arriving in the United States, the Russian had done well financially. He owned a million-dollar piece of real estate and three gas stations. He was in the jewelry business, wholesaling jewelry he would get on consignment from immigrants who arrived in the U.S. after he was settled. He was, however, cash poor. What he needed was quick cash.
He decided to burn his house down.
To profit from his action he increased his homeowners insurance coverage three fold. He found unscrupulous “art appraisers” who would sign appraisals in blank or which he prepared for them. He, without the knowledge of his insurers, personally appraised all of his household goods as if they were great works of art. He intended to, and did, claim they all came from the then Soviet Union as “household goods.”
Since U.S. Customs requires no declaration of the contents of household goods. He knew the ownership could not be traced. The insurer would be unable to verify the values of the items he expected to destroy in the fire.
He had no qualms about appraising a $1.00 art print at $1,000.00 or a fake oil painting as a $50,000.00 Russian grand master. The appraisals submitted to his insurer described Taiwan pottery as Lemoge or Meissen and glass as Waterford crystal. The appraisals showed him to have as much Faberge as did the Tsar of all the Russians before the revolution.
It took time, but he finally got insurance on the art work. The insurer issued a policy relying on the good faith of the Russian and the accuracy of the appraisals he provided.
A few weeks after the policy was issued, while the Russian, his wife and fourteen-year-old son were at Russian Businessman’s Dinner Dance; his eighteen-year-old son, a girl friend and Doberman Pinscher were at a drive-in movie in a Bronco; and his second Doberman was boarded away, a massive explosion occurred blowing the sliding glass door one hundred feet from the house.
Someone had spread gasoline throughout the house and ignited the fumes. Witnesses saw a car, without lights, speed down the hill from the house minutes after the explosion. His oldest son, who claimed to be at a Night Club at the time, was seen with burns on his hands, face and missing eyebrows.
Coincidentally, when the explosion occurred, there was a fire department helicopter overhead with a full load of water. It saw the explosion and sped to the scene and dropped water on the house almost immediately after the initial explosion. The fire was put out and the damage was not complete.
When the Russian returned home, he was angry. The arson investigators would not let him in the house. He claimed there was $2,000,000 in diamonds in a floor safe in the master bedroom closet. He begged the firefighters to look for it.
They found that the safe door was open and the floor safe was empty. He screamed. He ranted. He accused the arson investigator of theft. He demanded access to his house.
When he finally gained access, he found that destruction was minimal. There were still remnants of the items that would be part of his claim. Evidence would exist that they were not as valuable as his appraisals claimed. Therefore, being a thorough and experienced criminal he made sure that the next day, a second fire occurred at the house to complete the destruction. Only after the second fire had destroyed the evidence did he advise the insurance company of the fire and his loss.
The claim the Russian presented included over $2,000,000.00 in diamonds allegedly stolen by whoever set the fire, which from the overwhelming smell of gasoline was obvious.
T he claim for the house and its scheduled and unscheduled contents included an additional $2,000,000 not knowing that his policy had a $500 limit for theft of jewelery or gems. He demanded, and received, the use of a rental dwelling of equivalent construction.
The insurer, as a result of its thorough investigation learned that the Insured had lied when he presented his application. He stated that he had never been canceled by a prior insurer nor had he ever incurred a loss or presented a claim to a previous insurer.
The insurer established that two different appraisals, stated to be written by two different appraisers in two different cities were typed on the same typewriter. Both appraisers also appeared to write English with East European syntax. Their spelling was appalling. The even misspelled the word “porcelain.”
The insurer, although it could not prove the insured committed arson for profit could, and did, rescind the policy and refuse to pay the claim. Litigation, of course, commenced almost immediately after the claim was denied.
It took three years, and $300,000.00 in investigation and attorney’s fees, to convince the Court that the Russian misrepresented and concealed material facts when he bought the policy. The insurer obtained a judgment rescinding the policy because of fraud and a judgment against the insured for the monies advanced and its attorneys’ fees and investigation expense. The Russian appealed.
Since the Russian’s lawyer was working on a contingency, there was no downside for the Russian dragging the lawsuit on interminably. The Russian, and his counsel knew about, in this type of case, the economics of defense.
They assumed the insurer would eventually offer to settle for a sum less than the amount it would cost to defend through trial and all appeals. In most cases corporate insurers in the U.S. would be willing to settle to avoid paying more defense costs.
In this case, however, the insurer was based in London, U.K., not the U.S. The insurer decided that it could not reward fraud. It would spend as much as necessary to defeat the claim. The insurer instructed its defense counsel to “take no prisoners!” Its persistence was rewarded. The court of appeal affirmed the judgment of rescission five years after the fire.
In the trial that followed the Court of Appeal’s affirmation of the trial court judgment and the insurer recovered $500,000 from the Russian and his broker.
By fighting to the end, the insurer’s position was not only vindicated but it recovered all of its costs and attorneys’ fees and a return of the payment for rental expenses. The insurer and its counsel were brave. The insurer spent everything needed to defeat the bad faith suit and win its cross claim.
The claims investigator had his life threatened four times and defense counsel received a bomb threat that required him to eliminate the case against the insured. During the final trial to set damages the insured threatened the life of the defense counsel as he approached the stand to testify. Because of the insured’s threats there were three bailiffs in the courtroom and all kept their hands on their weapons at all time. Counsel was escorted by a bailiff to his car after his testimony completed.
The decision to pay a person submitting a fraudulent claim to avoid the costs of defense is short sighted. It is not cost effective. Once the word gets out that the insurer will fight each fraudulent claim through the courts of appeal and will seek affirmative relief from the fraud the number of fraudulent claims presented will be reduced. Those who pay to avoid expense pay often and pay out more than they would if they defended all fraudulent claims without compromise.
This case also is informative because the insurer did not quit when it became clear that proof of the arson by the insured was difficult. The insurer understood that an insured intent on fraud would not limit his fraud to the act itself. The insurer found that the Russian also lied when he applied for the insurance.
Insurers should always investigate thoroughly each claim, and, as part of that investigation work to establish the truth or falsity of the information provided the underwriting department when the policy was first issued.
No person should be allowed to profit from fraud.
Fraud Perpetrator Attempted to Use Court to Enforce Fraud
Body Shop May Not Force Insurer to Pay for Repairs not Performed
Allstate maintains a network of repair shops called Good Hands Repair Network (Allstate’s “network shops”). The network shops repair vehicles at the price set forth in Allstate’s approved estimates of repairs with no out-of-pocket cost to the insured other than the policy deductible. Insureds are not required to use a network shop and have the right to select the repair facility of their choice. A body shop sued because it charged more than the Good Hands Repair Network and Allstate refused to pay their rates and found fraud in their repair estimates. In Exclusive Auto Collision Center v. Allstate Insurance Company A/K/A Allstate New Jersey Insurance Company, Encompass Insurance; et al, Civil Action No. BER-L-1784-20, Superior Court of New Jersey, Law Division, Bergen (January 12, 2022) the New Jersey Court resolved the litigation.
Breach Of Contract Claims
Exclusive is not a network shop. Exclusive performed repairs on the 167 vehicles involved in the litigation. Exclusive had the vehicle owners execute an assignment to Exclusive of their right to receive payment of insurance benefits so that Exclusive could receive direct payment from Allstate. Under Allstate’s policy with its insureds, it is obligated to pay for the cost to repair or replace the vehicle to its condition at the time of loss subject to state laws and regulations.
For each claim, an Allstate adjuster performed an initial inspection of the vehicle and prepared an estimate for the price of the vehicle repair for the damage that was visible during the inspection. Allstate’s estimates and supplements always use the labor rates paid to its network shops. Allstate used the CCC One Database, a repair estimating software approved by the Department of Banking and Insurance (“DOBI”), to provide the appropriate amount of labor time for a particular repair task. As Exclusive repaired the vehicle it prepared its own estimate setting forth the scope of repairs and the time it claimed was necessary to perform the repairs. Exclusive presented its damage analysis to Allstate’s appraiser during the re-inspection process.
In addition to its claims for higher labor rates, which were previously dismissed, Exclusive’s estimates and supplements exceeded the price of Allstate’s estimates and supplements in three primary ways:
None of the charges demanded by Exclusive in this litigation were approved in Allstate’s estimates.
Exclusive’s Tort Claims and Allstate’s Insurance Fraud Investigation
Allstate began investigating Exclusive for insurance fraud in approximately 2011 after an insured was involved in an accident and chose Exclusive for repairs. During the repair, Allstate adjusters reported questionable items on Exclusive’s repair estimate. Allstate retained an engineer to inspect the vehicle who determined that Exclusive charged for repairs that it did not perform.
Exclusive sued Allstate for additional compensation for vehicle repairs in the Superior Court of New Jersey, Law Division. Later, Exclusive began filing similar litigation against with special part lawsuits that involved a separate vehicle. Exclusive brought fourteen Special Civil Part cases to wear down Allstate’s defense. In response Allstate instituted an action against Exclusive for violation of the New Jersey Insurance Fraud Prevention Act.
Exclusive filed an Amended Complaint asserting claims for defamation and tortious interference.
Rule Of Law and Decision
In the First (Breach of Contract), Second (Unjust Enrichment), Third (Quantum Meruit), and Fourth (Failure to Negotiate) Counts of the Complaint, Exclusive seeks to compel Allstate to pay additional amounts above the final estimates for each of the repairs at issue in the litigation. Exclusive, as assignee of the insured, can only get that which the insured agreed to by the contract with the insurer, which was what the insured was going to receive based on the adjusted costs.
Allstate adjusted each motor vehicle claim and paid Exclusive the amount of the final estimate, after full inspection of the vehicle. Allstate paid the amount it was obligated to pay under the policy, and Exclusive has no other contractual relationship with Allstate. If Exclusive had any claim for additional payment for the repairs, that claim would be against its customer, rather than Allstate.
Allstate’s obligation to pay was limited to the price that would be accepted by one of its network shops. Thus, Exclusive has no legal basis to claim that it should be entitled to more payment from Allstate.
Furthermore, there can be no unjust enrichment or quantum meruit claim against Allstate as a matter of law because an express contract exists concerning the identical subject matter, namely the assignment between the insured and Exclusive, which automatically defeats any quasi-contract claim.
Contrary to Exclusive’s allegations there is no statutory nor common law cause of action for refusal to negotiate.
Allstate and Exclusive negotiated the scope of repairs through an initial inspection, and those negotiations are often extended through a re-inspection and repair supplement prepared by Allstate. The additional items in excess of the estimate, about which Exclusive complains, were never agreed to by Allstate. The common law duty of good faith applies only when an agreement is reached.
Exclusive’s Tort Claims
Exclusive asserted nebulous defamation and tortious interference claims against Allstate. However, in New Jersey, the litigation privilege is an absolute privilege that shields a litigant from tort actions based on “any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” Hawkins v. Harris, 141 N.J. 207, 216 (1995).
The purpose of the privilege is to encourage open channels of communication and the presentation of evidence in judicial proceedings. The privilege is not limited to in-court statements; it extends to all statements or communications in connection with the judicial proceeding.
Allstate began investigating Exclusive for insurance fraud in 2011. The parties have been in litigation against one another consistently since that time. All the allegedly defamatory statements were made by Allstate adjusters. Third, all the statements were made to achieve the object of the ongoing litigation between Exclusive and Allstate, namely its obligation to deter insurance fraud under the Insurance Fraud Protection Act, protect its insureds and defend against Exclusive’s improper attempt to subvert a statute requiring insurers in the State to submit plans to prevent fraud.
Exclusive’s tortious interference claim was dismissed for the same reason as the defamation claim; namely Allstate’s statements are absolutely privileged, the statements of opinions are not actionable, and Exclusive has no damages.
Allstate’s Motion for Summary Judgment was, therefore, granted.
ZIFL OPINION
When faced with an attempted fraud it is an insurer’s obligation to refuse to succumb to the claims of the fraud perpetrator and use the courts to defeat the fraud. Exclusive tried to recover more than they were entitled to receive for repairing a damaged vehicle by bringing multiple lawsuits against Allstate as assignee of the owner of the vehicles damaged. Allstate should be commended for its strength and refusal to be harassed into paying fraudulent claims.
ClaimSchool, Inc. – Insurance Education
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Free Insurance Videos
Barry Zalma, Esq., CFE has published five days a week videos on insurance claims, insurance claims law, insurance fraud and insurance coverage matters at
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 52 years in the insurance business. He is available at https://www.zalma.com and [email protected].
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.
A Proposal to Defeat Insurance Fraud
A Proposal that Every Insurer Should Establish a Corporate Position to Refuse to Pay a Fraud
See the full video of this proposal at https://rumble.com/vs8qes-how-to-defeat-insurance-fraud.html and at https://youtu.be/USCEdOuXs2A Every first party property policy of insurance contains the following language mandated by the statutory New York Standard Fire Policy.
This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto. [California Insurance Code Section 2071]
If, after a thorough investigation of a claim the insurer determines a fraud has been attempted and the insurer has obtained a preponderance of all available evidence that can establish a fraud was attempted, the insurer must advise the insured it will not pay and will declare the policy void in accordance with the policy language quoted above.
Good News From the Coalition Against Insurance Fraud
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Christopher Licata illegally bribed patient brokers to refer Medicare seniors and docs’ orders authorizing medically unnecessary genetic testing to his own testing lab in Delray Beach, Fla. He exploited patients’ fears of COVID-19 by bundling tests with more-expensive, medically unneeded testing. They included respiratory tests — and genetic tests for heart disease, cancer, diabetes, obesity, Parkinson’s, Alzheimer’s and dementia. Licata and the brokers made sham agreements to disguise the true purpose of the payments. He made more than $6.9M of false Medicare claims. Licata pled guilty to conspiring to commit healthcare fraud. He’s scheduled for sentencing March 24, and faces up to 10 years in federal prison.
Michael Leonard Morgan-Towe recruited people in need in the Virginia Beach, Va. area — falsely promising them months of “free” life coverage if they gave him their personal identifying info. Agent Antionette D. Pringle used their info to buy life insurance. She falsified their incomes to make it seem they could pay the monthly premiums. Pringle also misstated some people’s health conditions to ensure their applications would be approved. The life insurers sent Pringle $150K of advance commissions when the applications were approved. She shared the money with Morgan-Towe. Yet nearly all the policies lapsed immediately because the policyholders didn’t pay the premiums — they thought they had free coverage. Morgan-Towe got more than two years in federal prison, and Pringle four years.
“My name is Robert Foster. I’m a polygraph examiner, a police officer and I own Atlas Private Security,” the former San Jose, Calif. cop told the nation on ABC’s celebrity game show, To Tell the Truth. Not a bright career move. The cop’s private security firm was an unauthorized side gig. Foster also told his insurer that a security employee injured in a vehicle crash on the job didn’t work for Atlas. In fact, the employee was in uniform and driving a company car. Atlas told the employee “she needed to stop speaking to lawyers or he would speak to federal authorities and have her deported.” The insurance plot diverted $1M of medical costs to taxpayers via the state-run Medi-Cal. Foster also made a subcontracting deal to funnel millions of dollars in Atlas payroll through another security business, even though employees wore Atlas uniforms. Foster falsified hiring dates and under-counted his 400 employees to avoid $560K comp premiums. Atlas also hid about $8M in off-the-books payroll, saving Atlas $578K in payroll taxes. Foster pled no contest to varied charges involving his scheme that exploited mostly minority workers.
William Mize is a fugitive after playing a lead role in a $6M fraud ring that set up car wrecks and other scams mostly in Spokane, Wash., officials contend. As prosecutors frame the case: The ring launched at least 33 setup wrecks to cheat insurers for about five years. Most were two-vehicle accidents on remote roads. They were staged at night to avoid prying witnesses. Mize drove vehicles belonging to cohorts. He left the cars after the crashes, and cronies stepped in behind the wheel to claim they drove the at-fault vehicle. Mize left in a third vehicle before police and ambulances arrived. He also injured some passengers beforehand to make the wrecks seem realistic. Mize required some cronies to urinate in a bottle then pour it on their clothing to mimic a medical condition when they supposedly lost consciousness. Ring members often used fake names, SSNs and DOBs as well. Mize received a large cut of their insurance money. He also staged a stair fall at a home in California. A large dog supposedly jumped on Mize, causing him to fall down the stairs and suffer a serious head injury. He poured urine on his clothing to make it seem he blacked out. All this is part of a larger $6M case involving auto, boating, stair slip-and-falls, bogus pedestrian injuries by vehicles, and other supposed mishaps.
Addicted to cocaine, a psychologist poisoned his wife with antifreeze then made her death look like suicide so he could haul in $1M of life insurance to pay off his drug debts. Gregory “Brent” Dennis Henderson was handed 10 years in the Las Vegas area. Police initially ruled Susan’s death a suicide. Henderson told police that Susan killed herself with antifreeze; she died in their home. Susan did an internet search of info on antifreeze poisoning the night before she died, Henderson lied. Yet the last internet search was done at 5:15 a.m. — Susan was already unconscious and nearly dead from a cocktail of antifreeze and oxycodone. In fact, Henderson did all the searches for how long it took antifreeze to kill a person. Before Susan died, Dennis also drove to and from New Orleans to get cocaine and oxycodone from his drug dealer. Henderson then waited for Susan to stop breathing before calling 911. She was taken to a hospital and died after Henderson issued a do-not-resuscitate order. His cocaine addiction had led him deep in debt. They were on the verge of separating due to the financial stress Henderson’s addiction placed on their marriage. He stood to gain $1M of life money when Susan died, plus another $1M from her estate. Henderson made an Alford plea for manslaughter, thus avoiding trial and resulting in his 10-year sentence.
Struggling to pay rent, Connie L. Bigelow torched her consignment business for $110K of insurance money. The Edmonds, Wash. woman sold dollhouses, miniatures and other collectibles. Bigelow fell behind in rent and payments to consignors. Her checks also were bouncing. So, she set the fire underneath three Thomas Kinkade paintings worth thousands of dollars each. Someone broke in and set the blaze, Bigelow lied. She posted photos showing charred furniture and soot-covered dolls on her Facebook page. “We each did interviews with the investigators and boy did they make me feel like I was the person who started it,” she posted. “I even told them they made me feel that way.” She next posted a photo of herself, with teardrops rolling down her cheeks. “I am like a non-stop crying fountain most of the time. [A]dd on the pressure of … dealing with investigators, & knowing everything I worked so hard for gone & I am heart broken.” Bigelow pled federally guilty, receiving a year of home confinement.
His insurer empire in ruins, financier Alexander Chatfield Burns killed himself after illegally siphoning $35M from his insurers into his personal accounts. A one-time Wall Street star, Burns gained control of several insurers and a brokerage through his fancy firm Southport Lane Management in New York City, where he enjoyed lavish parties and members-only cigar clubs. Burns first bought Dallas National Insurance and renamed it Freestone. Next, he bought a Louisiana insurer and used $50M of Freestone’s money to buy Dallas National. He replaced the stolen money with assets that were “illiquid, grossly overvalued or hard to value, worthless and in some cases non-existent,” a Delaware court said. One strange asset found on the insurer’s books was a Caravaggio master painting. Burns claimed a mental breakdown and checked into a mental-health facility as the pressure mounted. His empire then collapsed, and regulators in Delaware and Louisiana took over his insurers. Burns killed himself by swallowing sodium nitrate in his apartment in Charleston, S.C. before he could be brought to trial for his fraud.
Brian Higgins received more than $100K of insurance money to repair water damage to his 8K-square-foot house, supposedly caused by a fish tank. The Dayton, Ohio businessman spent only a small portion on repairs — mostly just cosmetic upgrades. Higgins used most of the insurance money to fund a new restaurant, pay phone bills, gamble at a casino and other expenses. He also forged repair cost estimates and invoices. Higgins was found federally guilty of mail fraud and witness retaliation. He joins others who also are charged in an alleged public corruption and bribery scandal involving Dayton-area businesses and city government officials. Higgins will be sentenced later.
Five patients died from opioids spooned out by Dr. David Chisholm. The Wasilla, Alaska doc wrote 20.5K prescriptions to about 350 patients. That added up to nearly 2M dosage units of hydrocodone, methadone and other drugs. Chisholm wrote numerous scripts to patients using variations of their names. This allowed them to refill their drugs without raising red flags from Medicare or their private insurer. Chisholm’s prescribing grew so egregious that Walmart stopped filling scripts he wrote. So, Chisholm then told patients to use other pharmacies. He also prescribed potent drug cocktails, increasing the likelihood of drug abuse and overdose. Chisholm admitted his drug prescriptions were a major factor in the overdose deaths of five patients. He received 34 months in federal prison.
Taxpayers forked over a pasha’s (“prince” in Turkish) ransom of jewelry to Alfredo Ruiz, who masterminded a $4M Medicare ring in Miami. Ruiz ran a fake DME company called Universal Ortho Supplies. He billed Medicare for braces, prosthetics and other equipment that docs never prescribed — and seniors never received. Ruiz also had an active money-washing operation. He set up a network of shell firms and corporate bank accounts to hide the stolen Medicare money. Ring members Gonzalez Caballero and Napoles Manresa also were the sole officers of their own shell firms — RGC Flooring Corp. and JMP Flooring Corp., respectively. Each laundered over $400K through their corporate bank accounts. Federal investigators dismantled the ring. Ruiz was handed 105 months. He forfeited a Rolls-Royce and Lamborghini; a 14-karat rose gold ball chain; a King Power Hublot Watch with gold-on-black rubber strap; and $70K in cash. Ruiz also forfeited $4.4M of fraud proceeds. Caballero and Manresa took the latest falls. Each received 51 months for money-laundering.
Health Insurance Fraud Convictions
Nurse Practitioner Pleads Guilty to Conspiracy to Distribute and Dispense Oxycodone
Justina Aburime, age 53, of Bowie, Maryland, pleaded guilty January 11, 2022 to one count of conspiracy to distribute and dispense oxycodone and one count of distribution and dispensing of oxycodone.?
According to her guilty plea, from February 2017 to February 2020, Aburime conspired with others, including Thomas Charles Johnson, to distribute and dispense oxycodone outside the scope of professional practice and not for a legitimate medical purpose at Personal Touch Medical Spa, LLP (PTMS), a Largo, Maryland pain management clinic.?
As licensed and registered nurse practitioners under the Drug Enforcement Administration (DEA) and the state of Maryland, Aburime and Johnson were legally authorized to prescribe controlled substances for legitimate medical purposes.
During her employment with PTMS, Aburime wrote oxycodone prescriptions without a legitimate medical need and outside the scope of professional practice. Aburime allowed an unauthorized person to write oxycodone prescriptions using her medical credentials. Specifically, Aburime allowed PTMS’s owner—who was not authorized to prescribe controlled substances—to prescribe oxycodone to individuals using pre-signed blank prescriptions bearing Aburime’s name and DEA registration number.
In some instances, Aburime was traveling outside the United States at the time of treatment or did not see the patient who was prescribed oxycodone using her credentials. Further, Aburime agreed that she prescribed oxycodone to patients when there was no legitimate need and without considering alternative treatment options.?Aburime also agreed that she increased oxycodone dosage over time without a medical justification.
Co-defendant Thomas Charles Johnson, Jr. pled guilty to conspiracy to distribute oxycodone on October 28, 2021 and is scheduled to be sentenced on February 17, 2022 at 12:00 p.m.
Aburime faces a maximum sentence of 20 years in prison followed by up to a lifetime of supervised release for each count. U.S. District Judge Paula Xinis has scheduled sentencing for April 26, 2022 at 1:00 p.m.
Diabetic Shoe Company Agrees to Pay $5.5 Million To Resolve False Claims Act Allegations
Foot Care Store, Inc. d/b/a Dia-Foot (Dia-Foot), a diabetic shoe company based in Wellington, Florida, and its President and CEO Robert Gaynor, have agreed to pay $5,538,338 to settle allegations that the company sold custom diabetic shoe inserts that were not actually custom-fabricated in accordance with Medicare standards. The agreement is part of a civil settlement that resolves claims brought under the False Claims Act.
The United States alleged that between 2013 and 2018, Dia-Foot sold diabetic shoe inserts to customers nationwide, representing that many of those inserts were custom-made for an individual’s foot, when the inserts were actually made using generic foot models.?The inserts were dispensed to diabetic patients who had a prescription from a health care provider and who believed they were getting a custom product. According to the government, despite fabricating the inserts using generic models, Dia-Foot billed Medicare and Medicaid for the custom version, or sold the inserts to other providers who then billed government health care programs for custom inserts. This allowed Dia-Foot to produce and sell more inserts and increase profits by cutting corners.?The government also alleged that Dia-Foot advertised to customers that it was proud to be Medicare-compliant and had received Medicare approval for its custom diabetic shoe inserts, even though Dia-Foot received the Medicare approvals based on false information.
Individuals with diabetes can in some cases suffer from foot problems, including nerve damage, ulcers, and poor circulation. In severe cases, untreated problems can even lead to amputation. Foot orthotics such as custom shoe inserts are prescribed to help diabetic patients prevent such problems and are covered by Medicare and Medicaid.
In connection with the settlement, Dia-Foot and Robert Gaynor entered into a three-year Integrity Agreement (IA) with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).?The IA requires, among other things, that Dia-Foot implement updated policies and procedures as part of its compliance program, and hire an Independent Review Organization to review quarterly Dia-Foot’s claims to Medicare and Medicaid.
The allegations were brought under the qui tam or whistleblower provisions of the False Claims Act by a former Dia-Foot employee. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The whistleblower who brought the allegations in this case will receive a share of the settlement amount. The case is captioned U.S. ex rel. Newman v. Foot Care Store, Inc. d/b/a Dia-Foot, No. 9:18-CV-80702 (S.D. Fla.).
Surgery Centers and Medical Offices In New Jersey Settle Allegations of Federal Health Care Fraud
Six Medical Practices and a Physician-Owner to Pay Over $7.4 Million to Resolve Claims of Improper Billing of Medicare and the Federal Employees Health Benefit Program for Acupuncture Procedures
Pain Management Center P.C. (“IPMC”), a company owned by Dr. Amit Poonia, have agreed to pay $7,447,340.75 to resolve liability under the False Claims Act for claims submitted to federal health care programs for acupuncture treatment and six surgery centers and affiliated medical offices.
The defendants treated patients with electro-acupuncture devices called P-Stim and NeuroStim/NSS (“NSS”). P-Stim and NSS procedures transmit electrical pulses through needles placed just under the skin on a patient’s ear. Both treatments are considered acupuncture under Medicare and Federal Employees Health Benefit Program (“FEHBP”) guidelines and are therefore ineligible for reimbursement by the government. From January 2012 through April 2017, the IPMC surgery centers and medical offices submitted claims to Medicare and FEHBP for P-Stim and NSS treatment and associated administration of anesthesia.?In submitting the claims, the defendants used a billing code that mischaracterized the acupuncture treatment as a surgical implantation of a neurostimulator.
In addition to paying the civil settlement, Dr. Poonia, New Jersey Interventional Pain Management Center, PC; Advanced Interventional Pain Management Center, LLC; Global Anesthesia Group, LLC; Springfield Surgery Center, LLC; Park Avenue Surgery Center, LLC; and Endo Surgi Center of Old Bridge, LLC, have agreed to enter into an Integrity Agreement with the HHS-OIG.?The Integrity Agreement requires that these entities and their owners implement specific measures intended to prevent future health care fraud and address evolving compliance risks. These measures include training for staff on applicable health care fraud laws and submitting to a claims review conducted by an Independent Review Organization to ensure compliance with Medicare billing requirements.?
The allegations were brought to the government’s attention through the filing of a complaint captioned United States ex rel. Anu Doddapaneni and Christian Reyes v. Amit Poonia, MD., New Jersey Interventional Pain Management Center, P.C. et al., 18-CV-5214 pursuant to the qui tam provisions of the False Claims Act. Under the Act, private citizens can bring suit on behalf of the United States and share in any recovery. The claims resolved by the settlement are allegations only; there has been no determination of liability, nor a concession by the United States that its claims are not well founded.
The Defendants:
Dr. Amit Poonia, M.D.
New Jersey Interventional Pain Management Center P.C.
Advanced Interventional Pain Management Center LLC
Global Anesthesia Group LLC
Park Avenue Surgery Center LLC
Springfield Surgery Center LLC
Endo Surgi Center of Old Bridge LLC
Guilty of $6.9 Million Genetic Testing & Covid-19 Testing Fraud Scheme
Christopher Licata, 45, of Delray Beach, admitted that, as owner of Boca Toxicology LLC (dba Lab Dynamics), he bribed patient brokers who would refer Medicare beneficiaries and doctors’ orders authorizing medically unnecessary genetic testing to Licata’s laboratory. Licata and these patient brokers entered into sham agreements to disguise the true purpose of these payments. Once the COVID-19 pandemic began, Licata exploited patients’ fears of COVID-19 by bundling COVID-19 tests with more expensive, medically unnecessary testing, including respiratory pathogen panel testing and, at times, genetic testing for cardiovascular diseases, cancer, diabetes, obesity, Parkinson’s, Alzheimer’s and dementia.
In total, Licata caused his laboratory to submit over $6.9 million in false and fraudulent claims to Medicare for these medically unnecessary tests.
Licata pleaded guilty January 13, 2022, in the Southern District of Florida to a $6.9 million conspiracy to defraud Medicare by paying kickbacks and bribes to obtain doctors’ orders for medically unnecessary lab tests that were then billed to Medicare. The defendant exploited the COVID-19 pandemic by bundling COVID-19 testing with other forms of testing that patients did not need, including genetic testing and tests for rare respiratory pathogens.
Licata pleaded guilty to one count of conspiring to commit health care fraud. He is scheduled to be sentenced on March 24 and faces a maximum penalty of 10 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Pharmacy Operator Pleads Guilty to Fraudulently Bill Medicare, Medicaid and Private Insurance Companies
Melisha Oxendine West pleaded guilty to Conspiracy to Commit Healthcare fraud. The charge to which West pled guilty alleges that from 2006 through July of 2017, West was employed at Townsend’s Pharmacy, located at 111 S. Main Street in Red Springs, North Carolina. During that time, West conspired with the owner of the pharmacy and others to bill fraudulent claims to Medicare, Medicaid, and private health insurers, such as Blue Cross and Blue Shield of NC. According to the charge, West and others did this by fraudulently reauthorizing previously existing prescriptions from licensed medical providers, and billing health care benefit programs as though those drugs had been dispensed.
West, a Pembroke, North Carolina woman pleaded guilty January 13, 2022 to Conspiracy to Commit Healthcare Fraud.
West pleaded guilty to a violation of Title 18, United States Code, Section 1349, and faces a statutory maximum of 10 years in prison and a fine amounting to as much as twice the gross gain or loss from the offense. The sentencing before United States District Judge Louise W. Flanagan will not occur earlier than 90 days from today.
Washington Doctor Settle False Claims Act Allegations Over Drug Testing
Doctor Submitted Bills to State and Federal Medical Programs for Tests That Were Not Conducted
Dr. Vuthy Leng is the sole owner and operator of Family Medicine Clinic of Federal Way LLC. Dr. Leng will pay state and federal health programs $228,000 to resolve allegations that Dr. Leng billed government health programs for useless urine drug tests.
According to the settlement agreement, the Federal Way clinic had a certified lab, capable of performing urine drug tests so that patients could be screened for appropriate prescribing of medications including substance use disorder treatment.?Between January 1, 2019 and July 30, 2019, Dr. Leng submitted bills to Medicare and Medicaid for urine drug tests.?In fact, for long periods during this timeframe, the medical equipment for testing urine was broken, the samples were simply frozen for testing at a later date.?Some were never tested at all.
While not admitting the allegations in the settlement, Leng will pay $76,000 in restitution to the government medical programs. Under the False Claims Act, the government can seek treble damages resulting in an additional $152,000 to be paid by Dr. Leng over the next 12 months. The amount will be split between the state and federal programs based on the share each paid of the false bills.
Under the terms of the settlement each party will pay their own legal fees.
领英推荐
Sioux City, Iowa-Based Physician Group, To Pay Over $600,000 To Resolve False Claims Act Allegations
Tri-State Specialists, L.L.P. (Tri-State), agreed to pay $612,501.44 to the United States, the State of Iowa, and the State of South Dakota to resolve allegations that it violated the False Claims Act by billing Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program for medically unnecessary procedures and for procedures in excess of those actually performed.
The government alleged that, from August 2014 until August 2019, Tri-State submitted false claims for payment to government healthcare programs for surgical procedures and office visits performed by a plastic surgeon who previously was a partner with Tri-State. The government contended that claims submitted during this period violated the False Claims Act in three ways. First, the government alleged that the surgeon performed cosmetic procedures not reimbursable by government healthcare programs, including panniculectomies and abdominoplasties (also known as tummy tucks) and cosmetic breast reductions, that were falsely billed as medically necessary procedures. Second, the government alleged that the surgeon did not perform services sufficient to justify billing for high-value muscle flap and adjacent tissue transfer surgical procedures. Third, the government alleged that the surgeon did not perform services sufficient to bill for high-value office visits that require a comprehensive exam, comprehensive history, and detailed supporting documentation for patients that require moderately or highly complex medical decision making.
The United States alleged that Tri-State was liable for the surgeon’s acts both because the surgeon was an agent of Tri-State and because Tri-State knew of the surgeon’s acts.?
This civil matter arose from an action brought under the whistleblower provisions of the False Claims Act. Pursuant to that Act and the settlement agreement, the whistleblower will share in the United States’ financial recovery.
The claims asserted against Tri-State are allegations only; there was no determination or admission of liability.
Seven Texas Doctors and A Hospital CEO Agree to Pay Over $1.1 Million To Settle Kickback Allegations
Hospital CEO Excluded from Federal Healthcare Programs for Three Years
Seven Texas doctors and a hospital executive have agreed to pay a total of $1,106,449 to resolve False Claims Act allegations involving illegal remuneration in violation of the Anti-Kickback Statute and Stark Law, and to cooperate with the Department’s investigations of and litigation against other parties, announced Eastern District of Texas U.S. Attorney Brit Featherston today.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. The Stark Law forbids a hospital or laboratory from billing Medicare for certain services referred by physicians that have a financial relationship with the hospital or laboratory.?The Anti-Kickback Statute and the Stark Law are intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.
The settlements announced January 20, 2022 resolves allegations that seven Texas doctors received thousands of dollars in illegal remuneration from eight management service organizations (MSOs) in exchange for ordering laboratory tests from Rockdale Hospital d/b/a Little River Healthcare (Little River), True Health Diagnostics LLC (True Health), and Boston Heart Diagnostics Corporation (Boston Heart). Little River allegedly funded the illegal remuneration to the doctors, in the form of volume-based commissions paid to independent contractor recruiters, who used MSOs to pay numerous doctors for their referrals.?The MSO payments to the doctors were allegedly disguised as investment returns but in fact were based on, and offered in exchange for, the doctors’ referrals.
As part of their settlements, the physicians have agreed to cooperate with the Department of Justice’s investigations of and litigation against other parties involved in the alleged violations of law.
In addition, the United States announced a settlement with Richard DeFoore of Anson, Texas, the former Chief Executive Officer of Jones County Regional Healthcare d/b/a Stamford Memorial Hospital (Stamford), which was a small hospital in Stamford, Texas. In late 2015 and early 2016, DeFoore allegedly was approached by representatives of True Health and a partner company, who proposed an arrangement by which Stamford could profit by billing for diagnostic laboratory tests. Under the arrangement, which expanded to include Boston Heart tests, Stamford allegedly coordinated with True Health and Boston Heart representatives and paid volume-based commissions to independent contractor recruiters, who used MSOs to make payments to doctors that were disguised as investment returns but in fact were based on, and offered in exchange for, the doctors’ referrals.?Pursuant to the alleged arrangement, Stamford billed the resulting claims to commercial insurers and True Health and Boston Heart billed the resulting claims to Medicare and other federal healthcare programs.?Under the terms of the settlement agreement, DeFoore agreed to pay $50,000, to cooperate with the Department’s investigations of and litigation against other parties, and to be excluded from participation in federal healthcare programs for three years.
Cape Girardeau, Missouri Woman Sentenced to 3 years For Medicare and Medicaid Fraud
Brandy McKay, 42, of Cape Girardeau, Missouri appeared before United States District Court Judge Stephen R. Clark on January 18, 2022. McKay previously pleaded guilty and was sentenced to 3 years imprisonment and ordered to pay $7,520,779.00 in restitution.
According to the plea agreement, between 2017 and 2019, McKay owned or managed multiple durable medical equipment (DME) companies, including three located in Cape Girardeau, Missouri. The DME companies paid kickbacks for orders and prescriptions signed by telemedicine doctors and nurse practitioners, who in almost all cases did not examine the patients, had no contact with the patients, and did not otherwise determine that the patients needed durable medical equipment.
The DME companies then submitted reimbursement claims to Medicare and Medicaid.?Based on the fraudulent claims submitted by McKay and her co-conspirators, Medicare and Medicaid reimbursed the DME companies for the medically unnecessary equipment. In many cases, patients received DME equipment from several DME companies, none of which they had requested or needed.
Former Tennessee Clinic Owner Sentenced for Opioid Distribution
Mark Daniel Allen, 64, of Venice, Florida, was found guilty of six counts of unlawfully distributing controlled substances not for a legitimate medical purpose outside the scope of professional practice and one count of maintaining a drug-involved premises after a three-day trial on Sept. 1, 2021.
A former nurse practitioner and clinic owner Allen was sentenced in the Eastern District of Tennessee today to 14 years in prison for illegally distributing prescription opioid pills to his patients.
According to evidence presented at trial, Allen unlawfully prescribed roughly 15,000 opioid pills to three women with whom he had sexual relationships, and to a male patient who later passed away.
Ohio Physician Pleads Guilty to Illegally Prescribing Controlled Substances That Caused the Deaths of Two Patients
Martin Escobar, 58, of Youngstown, Ohio, pleaded guilty in federal court January 24, 2022 to illegally distributing controlled substances, causing the deaths of two patients, unlawfully distributing a controlled substance to a person under the age of 21 and health care fraud.
According to court documents and the plea hearing, between March 2015 and October 2019, Escobar admitted to prescribing controlled substances out of his Lake Milton medical office, including opioids such as oxycodone and hydrocodone, often in combination with benzodiazepines and stimulants, all outside the usual course of professional practice and without a legitimate medical purpose.
Escobar admitted that, in order to support his unlawful prescription practices, he used false diagnoses, falsified patient pain intensity scales in medical charts, increased dosages of controlled substances and prescribed them for prolonged periods without evidence of efficacy. Furthermore, Escobar admitted to inadequately investigating patient pain complaints, failing to pursue treatment options other than controlled substances and falsely claiming to have performed extensive physical examinations on his patients.?
Escobar also admitted to ignoring warning signs of his patients’ drug addiction and abuse. This included ignoring the results of his patients’ urine drug screen tests, many of which were performed in Escobar’s medical office and later billed to the government. These tests suggested that patients were abusing the drugs that Escobar had prescribed, using other controlled substances and selling their prescription drugs on the illegal secondary market. As a result, Escobar pleaded guilty to health care fraud.
Escobar also admitted that, in July of 2015 and 2016, he unlawfully prescribed opioids and other controlled substances to two patients without a legitimate medical purpose.?Both patients later fatally overdosed from the drugs.?In another instance, in April of 2018, Escobar admitted that he unlawfully prescribed opioids to an individual under the age of 21 without a medical need.
Escobar is scheduled to be sentenced on May 17, 2022.
Connecticut Doctor Admits Illegally Prescribing Controlled Substances
David Ciancimino, 62, of Trumbull, Connecticut, waived his right to be indicted and pleaded guilty January 24, 2022 via videoconference before U.S. District Judge Omar A. Williams to a controlled substance offense related to his illegal distribution of prescription medication.
According to court documents and statements made in court, Ciancimino was a sole practitioner practicing psychiatry and neurology/psychiatry from an office located at 4 Corporate Drive in Shelton. In October 2020, law enforcement began investigating Ciancimino’s prescribing practices of various benzodiazepines, such as Xanax, and stimulants, such as Adderall. During the investigation, federal task force officers acting in an undercover capacity paid Ciancimino $200 during visits to receive a prescription for Xanax or Adderall, or their generic equivalents, with little to no medical examination.
Ciancimino pleaded guilty to one count of distribution of a controlled substance without a legitimate medical purpose and outside the scope of professional practice, an offense that carries a maximum term of imprisonment 20 years.
As part of his plea, Ciancimino has agreed to forfeit $175,773.45.
Ciancimino is released on a $500,000 bond pending sentencing, which is not scheduled.
As disclosed during today’s court proceedings, Ciancimino surrendered his medical license a week earlier.
Judge Sentences Cape Girardeau, Missouri Woman to Three Years for Medicare And Medicaid Fraud
Brandy McKay, 42, of Cape Girardeau, Missouri appeared before United States District Court Judge Stephen R. Clark on January 18, 2022. McKay previously pleaded guilty and was sentenced to 3 years imprisonment and ordered to pay $7,520,779.00 in restitution.
According to the plea agreement, between 2017 and 2019, McKay owned or managed multiple durable medical equipment (DME) companies, including three located in Cape Girardeau, Missouri. The DME companies paid kickbacks for orders and prescriptions signed by telemedicine doctors and nurse practitioners, who in almost all cases did not examine the patients, had no contact with the patients, and did not otherwise determine that the patients needed durable medical equipment.
The DME companies then submitted reimbursement claims to Medicare and Medicaid. Based on the fraudulent claims submitted by McKay and her co-conspirators, Medicare and Medicaid reimbursed the DME companies for the medically unnecessary equipment. In many cases, patients received DME equipment from several DME companies, none of which they had requested or needed.
Chiropractor Richard Davidson Now Federal Inmate
Dr. David Richardson of Delray Beach, Florida is now in federal prison.?Davidson, the Delray Beach Chiropractor who pleaded guilty to federal insurance fraud, has started his six-year sentence in federal prison. His Seven Bridges home is now owned by the United States Government. “USA” became the owner of the $1,585,514 property in September of 2021.
Davidson, according to the Bureau of Prisons, reported within the past several days to the Residential Re-Entry Office in Orlando, apparently on his way to the Federal Prison Camp in Pensacola, Florida. The prison camp is described as a “minimum-security federal prison camp”
Davidson pleaded guilty within weeks of a federal indictment in 2019 accusing him of filing nearly $11M in false Medicare claims. Davidson was required to repay the stolen funds as part of his sentencing agreement. The court entered a money judgment of $2.47 Million and a restitution demand of $10.72 Million. As part of the deal, Davidson turned over the house he lived in with his wife — and children — in West Delray Beach’s Seven Bridges.
Davidson’s sentence was on the lower end of federal guidelines. He cooperated with federal authorities almost immediately after the indictment was returned.
Former NFL Star Clinton Portis Sentenced To Jail In $3m Insurance Fraud Scheme
Clinton Portis, a retired NFL player has been sentenced to six months in prison for his role in a $2.9 million scheme that saw 15 former players plead guilty to defrauding a league-funded health care program.
Portis, who was an acclaimed student athlete at the University of Miami before playing professionally in Denver and Washington, pleaded guilty to filing false claims for medical equipment to the tune of nearly $100,000. He’s been sentenced to six months in prison and an additional six months of home confinement.
The Department of Justice, in a pre-sentencing filing, that they intended on recommending the higher end of the suggested 10-16 month guideline associated with Portis’ crimes because he had continued to maintain his innocence. It wasn’t until a hung jury lead to a retrial that he finally pled guilty.
At the root of the scheme is the Gene Upshaw NFL Player Health Reimbursement Account Plan, which was established by the NFL in 2006 to help retired athletes pay for medical expenses. The fifteen players involved took advantage of the programs allotted $350,000 in individual benefits by filing false reimbursement claims for everything from medical equipment to appointments and home health aid.
Over the course of two months, Portis submitted a total of $99,624 in false claims, for which he faced up to 10 years in prison. His sentence is the result of a guilty plea to the charge of conspiracy to commit health care fraud and an agreement to repay the funds disbursed by the program.
Portis’s former Washington teammate Robert McCune, who was considered the ringleader of this operation, pleaded guilty to 13 counts of health care fraud, 11 counts of wire fraud and three counts of aggravated identity theft.
John Eubanks and Carlos Rogers, who were with the Washington Football Team for a year alongside Portis and McCune, have also pleaded guilty to their involvement in the scam.
The list of players to admit their involvement in this scheme includes Reche Caldwell, who was shot and killed in an apparent robbery in June 2020.
Michigan Woman Sentenced For Committing $15,000 in Auto Insurance Fraud
Amelia Zea-Behnke, of Delta Township, Michigan, submitted fraudulent automobile insurance claims seeking reimbursement for providing attendant care services to her son, who had previously been injured in an auto accident. A subsequent joint investigation by the DIFS Fraud Investigation Unit (FIU) and the Michigan Department of Attorney General proved that Ms. Zea-Behnke did not provide those attendant care services during the claimed time period and was therefore not entitled to the payments she had received.
Michigan Attorney General Dana Nessel and Michigan Department of Insurance and Financial Services (DIFS) Director Anita Fox announced that a Michigan resident who pled guilty to auto insurance fraud has been sentenced to pay restitution and fines of more than $15,000.
Over the course of several months in 2016,
As a result of the investigation, Ms. Zea-Behnke was charged with the following:
Ms. Zea-Behnke pled guilty to one count of false pretenses on October 27, 2021. Her plea bargain included the payment of $15,498.75 in restitution to the defrauded insurance company and the dismissal of the other pending charges. On January 12, 2022, Zea-Behnke was officially sentenced to pay that restitution as well as fines and costs, by Judge Rosemarie Aquilina in 30th Circuit Court, bringing the case to a close.
Mississippi Pharmacist Sentenced In $180 Million Cream Scheme
David Rutland, 42, of Bolton, pleaded guilty to getting paid kickbacks to distributors for the referral of medically unnecessary compounded creams and other prescriptions, the U.S. Department of Justice said in a news release. The scheme resulted in more than $180 million in fraudulent billings, including more than $50 million by federal health care programs.
Rutland, a Mississippi pharmacist was sentenced Wednesday to five years in prison for a multimillion dollar scheme to defraud private insurance companies and a healthcare program for military members, retirees and their families.
According to court documents, the pharmacist and co-owner of compounding pharmacies schemed to defraud TRICARE, the military health care program, and other health care benefit programs by distributing medically unnecessary compounded medications. Rutland adjusted prescription formulas to ensure the highest reimbursement, investigators said.
Co-conspirators Mitchell “Chad” Barrett, of Florida, and Tommy Shoemaker, of Louisiana, also have admitted their culpability in the fraud, according to news reports. The indictment details the extent of the scheme.
In addition to the prison term, Rutland was ordered to pay restitution and forfeit all assets traced to his illegal activity.
The Problem When a Qui Tam Suit Fails
Qui Tam actions are a major tool allowing an insurer to act as a private attorney general and bring suit against fraud perpetrators when the state fails or refuses to prosecute an insurance fraud perpetrator. However, just because an insurer can bring such an action and even have the state join and take over the case, qui tam actions are not guaranteed success.
In The People ex rel. Department of Insurance et al. v. Symons Emergency Specialties, Inc., et al., E075600, California Court of Appeals, Fourth District, Second Division (November 22, 2021) that fact came to the fore and had the relator/insurer defending itself against demands for attorneys fees and damages from the defendant.
A Mexican health care plan, Sistemas Medicos Nacionales S.A. de C.V. dba SIMNSA Health Plan (SIMNSA), licensed to do business on a limited basis in California started a qui tam action where SIMNSA alleged that defendants committed insurance fraud. The California Department of Insurance intervened and litigated the case on behalf of the state, although SIMNSA continued to participate as the relator. The case went to trial, and the jury rendered a verdict for defendants.
After the court entered judgment, defendants moved for attorney fees and costs as sanctions against SIMNSA and its counsel. Defendants argued that the trial court erred by denying their sanctions motion. They contend that SIMNSA and counsel engaged in sanctionable conduct by prosecuting this action while SIMNSA lacked a certificate of qualification to transact intrastate business.
BACKGROUND
In 2014, Symons provided emergency services in California to an individual insured by SIMNSA. SIMNSA refused to pay Symons’s claim, so Symons sued SIMNSA. The parties settled that lawsuit.
In May 2016, SIMNSA brought this qui tam action against Symons and the other defendants, alleging that defendants committed insurance fraud. A qui tam action is one brought pursuant to a statute allowing a private person to sue as a private attorney general to recover damages or penalties, all or part of which is paid to the government. The Department of Insurance intervened in July 2017. The amended complaint in intervention alleged that defendants submitted false, fraudulent, or misleading health care insurance claims to SIMNSA and other health care insurers. The department assumed primary responsibility for litigating the case and controlled the overall strategy, but it permitted SIMNSA to participate extensively as the relator. The Department of Insurance intended to prosecute the case whether or not SIMNSA participated.
The trial began in February 2020. Early in the trial, defendants orally moved to sever SIMNSA from the case on the ground that SIMNSA had not obtained a certificate of qualification to transact intrastate business in California. SIMNSA’s counsel was unaware that SIMNSA lacked a certificate of qualification until defendants raised the issue at trial. But counsel knew that SIMNSA had a license to sell health care plans in California under Health and Safety Code section 1351.2. Counsel investigated whether SIMNSA was required to have a certificate of qualification and believed that it was not, because the license under Health and Safety Code section 1351.2 qualified it to do business in the state. Counsel argued to the trial court that SIMNSA was not required to have the certificate, but “in an abundance of caution,” SIMNSA sought the certificate of qualification on an expedited basis. SIMNSA obtained the certificate within days, and the trial proceeded without delay.
After the court entered judgment for defendants, they moved for attorney fees and costs in the amount of $355, 880.07.
The trial court denied the sanctions motion.
DISCUSSION
In this case, the court did not abuse its discretion by denying defendants’ sanctions motion. The motion was improper in that defendants attempted to circumvent the safe harbor provisions and the remedial purpose of sections 128.5 and 128.7. Defendants sought sanctions for SIMNSA’s failure to have a certificate of qualification while litigating this action. According to defendants, this amounted to bad faith prosecution of a frivolous lawsuit under section 128.5 and a violation of section 128.7’s implied certifications.
But regardless of whether SIMNSA needed the certificate of qualification, SIMNSA corrected any defect by obtaining the certificate promptly after defendants raised the issue.
SIMNSA’s counsel promptly took corrective action when defendants raised the certificate of qualification. And there is no evidence that SIMNSA’s counsel knew of the issue for an extended period of time and willfully concealed it from the court and defendants. For all of these reasons, the court did not abuse its discretion by denying the sanctions motion under sections 128.5 and 128.7.
The order denying defendants’ motion for attorney fees and costs as sanctions was affirmed. SIMNSA was allowed to recover its costs of appeal.
ZIFL OPINION
It is appropriate and important that insurers, who have evidence that they believe will establish that they were the victims of fraud, to file a qui tam action to protect themselves and the public from fraud perpetrators. Obviously, there was a great deal of evidence since the state of California, Department of Insurance, took over the case. The jury did not believe the evidence.
If an insurer is considering filing a qui tam action it should carefully evaluate, with its counsel, the evidence available and only bring such an action if there is sufficient evidence to prove the fraud.
Other Insurance Fraud Convictions
Insurance Agent Sentenced in Burial Policy & Life Insurance Fraud
Saul Hinojosa, 48, of Calipatria, California was sentenced to one felony count of identity theft and one felony count of grand theft after stealing his clients’ identities to write fraudulent insurance policies to collect unearned commissions.
Hinojosa was sentenced to 150 days in jail through work release and to pay $18,252 in restitution.
In February 2017, Hinojosa’s employer reported an internal investigation in which they suspected Hinojosa had written fraudulent preneed burial policies and collected unearned commissions. In July 2017, a consumer reported to the California Department of Insurance that they had received a new, unrequested, life insurance policy produced by Hinojosa — whom the consumer had previously dealt with when Hinojosa was as an agent at another insurance company.
A joint investigation by the Department and the Riverside County District Attorney’s Office found that between May 2016 and February 2017 Hinojosa wrote 15 fraudulent preneed burial policies and 13 fraudulent life insurance policies. To write the policies, Hinojosa used his former insurance clients’ identities without their knowledge. Hinojosa received approximately $18,000 in commissions from the fraudulent policies.
The Department of Insurance will be taking appropriate action against Hinojosa’s license. The Riverside County District Attorney’s Office prosecuted this case.
Palmdale Insurance Agent Sentenced in Theft and Embezzlement Scheme
Blanca Lidia Guzman, 40, of Palmdale, California, a former insurance agent, was sentenced in Los Angeles County Superior Court yesterday on one felony count of grand theft after pleading no contest for defrauding consumers. Guzman stole over $16,000 in premiums from the insurance company she worked for and her clients while leaving many of those clients without insurance coverage. She was sentenced to pay restitution and to complete 10 days of community labor.
An investigation by the California Department of Insurance began after receiving complaints from Guzman’s employer.
The investigation revealed that Guzman entered false information into the company’s database to avoid submitting client funds. She submitted fabricated proof of insurance documents to escrow companies in order to close the sale or refinance of the victims’ homes and then cashed the checks from the escrow companies that were issued for insurance. Guzman also forged her clients’ e-signatures on insurance policy applications to place other policies at a much later date with another company without her clients’ knowledge. Her actions left several clients without insurance coverage and resulted in a theft of at least $16,128.
The Department of Insurance revoked Guzman’s license on February 1, 2021. The Los Angeles County District Attorney’s Office prosecuted this case.
A Series of Video Presentations and Text on Insurance Claims
Go to “Excellence in Claims Handling” and subscribe at https://barryzalma.substack.com/welcome and go to https://zalmaoninsurance.locals.com/subscribe subscribe to my locals account. See the introductory video at https://youtu.be/kLSSBG7kZy0 and at https://rumble.com/vrhaka-excellence-in-claims-handling.html
Professional Insurance Adjusting
At the turn of the century, insurers, in a search for profit, decimated their professional claims sta. They laid off experienced personnel and replaced them with young, untrained and unprepared people.
A virtual clerk replaced the old professional claims handler. Process and computers replaced skill and judgment.
Insurers intentionally forgot that the promises made by an insurance policy are kept by the professional claims person. A professional claims staff is a cost-effective method to avoid litigation.
The professional claims person is an important part of the insurer’s defense to litigation against insurers for breach of contract.
A staff of claims professionals dedicated to excellence in claims handling are a profit center for an insurance company. Experience establishes that claims professionals resolve more claims for less money without the need for either party to involve counsel. A happy insured or claimant satisfied with the results of his or her claim will never sue the insurer.
Incompetent or inadequate claims personnel force insureds and claimants to lawyers. Every study performed on claims establish that claims with an insured or claimant represented by counsel cost more than those where counsel is not involved.
Prompt, effective and professional claims handling saves money and fulfills the promises made when the insurer sold the policy.
Insurers who believe they can handle first or third-party claims with young, inexperienced and inexpensive claims handlers will be faced with the screams of angry stockholders. Profits, thin as they are, will move rapidly into negative territory. Punitive damages as punishment for bad faith claims handling will deplete reserves. Insurers will quickly question why they are writing insurance. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff, or they will fail.
Insurance is a business. It must change if it is to survive. It must rethink the firing of experienced claims staff and reductions in training to save “expense.”
Excellence in Claims Handling
Excellence in claims handling is a program that can help insurers avoid charges of bad faith in both first and third party claims.
An insurer must understand that it cannot adequately fulfill the promises it makes to it insured and the Fair Claims Practices Act which exist in almost every state, when dealing with claimants without excellence in claims handling. An insurer must work intelligently and with vigor to create a professional claims department.
A Proposal to Create Claims Professionals
To avoid claims of bad faith; to avoid punitive damages; to avoid losses; and to make a profit insurers must maintain claim staffs who are dedicated to excellence in claims handling. That means they will make sure every promise made in every policy is satisfied by the:
What Sources Are Available to Obtain Training?
Insurance training is available across the country by correspondence, in local colleges and universities and from law firms that will provide the training as a marketing tool. None of these sources are directed to producing insurance claims professionals. They do provide the basic background information necessary to begin the process of becoming an insurance claims professional. In that regard, I have created electronic training programs on professional claims handling that are available from experfy.com and a different set of courses from illumeo.com.
An excellence in claims handling program can include a series of web-based lectures supported by text materials like my claims books available at amazon.com and over the insurance claims library at my web site at https://zalma.com.
The web lectures must be supplemented by meetings between supervisors and claims staff on a regular basis to reinforce the information learned in the lectures.
In addition, the insurer must institute a regular program of auditing claims files to establish compliance with the subjects studied. There is no quick and easy solution. The training takes time. Learning takes longer. The insurer’s management must support and reinforce the training regularly.
The excellence in claims handling program requires a minimum of the following:
It Takes Courage to Fight Insurance Fraud
The legislatures of the various states, the United States Congress, the National Association of Insurance Commissioners, The National Insurance Crime Bureau and insurance industry groups have finally decided that the war against insurance fraud is worth fighting.
Until the states, the local police agencies, the district attorneys, the United States Attorneys, and the Attorneys General of the various states join in the battle it will be fought to a stalemate. The insurance industry cannot successfully fight insurance fraud alone.
Insurance industry sources estimate insurance fraud from lows of $80,000,000,000 ($80 billion) a year to highs of $300,000,000,000 ($300 billion) a year. Regardless of which, if any, estimate is accurate the amount of money going to insurance criminals is staggering and approaches no less than 3% to 10% of premium collected.
Every two weeks Zalma’s Insurance Fraud Letter publishes lists of convictions. The major volume of such convictions deal with Medicare and Medicaid fraud. Basic property and casualty fraud convictions are seldom described except when the perpetrator confesses or pleads guilty. Few go to trial. Those who are convicted usually are sentenced to short stays in jail or to home confinement.
Proposal
Insurance fraud is not a local problem. It is a depletion of the wealth of the entire country. The lawyer for the Department of Insurance of each state is the State Attorney General. A special unit could be established in the office of the Attorney General, funded with the monies taken from the insurance industry to support the war against insurance fraud. This unit should be given a simple mandate:
File and prosecute every insurance fraud brought to the unit by the Fraud Division that has a better than 50% chance of success.
The unit should not concentrate its efforts on major insurance frauds. Those can best be prosecuted by major fraud units already existing in the District Attorney’s offices and in offices of the US Attorney.
The state’s unit should concentrate on prosecuting every-day insurance fraud, the frauds of opportunity that take 90% of the money paid to fraud perpetrators, in the range of $5,000 to $50,000.
Single counts should be prosecuted. When prosecutors file multiple charges against individual defendants the case becomes a major action requiring a great deal of time to prosecute. Judges and juries do not want to be involved in a prosecution that takes months to prosecute.
If there are multiple counts available, the prosecutor should charge only the one where the evidence of fraud is overwhelming. If the jury finds for the defendant the prosecutor can charge the next count continuously until the statute of limitation runs.
If all available are charged in one case the prosecutor will offend the judge and jury and the defendant will get mercy from the jury. Overcharging prosecution is as bad as not charging at all.
Teeth must be put in the posters that say “commit insurance fraud, go to jail.” Departments of Insurance are receiving reports from insurers of thousands of potential fraudulent claims a month. They do not have the staff, the ability or the desire to investigate and prosecute every case brought to them. If only 5 percent of those claims are investigated and prosecuted to conviction, the deterrent effect will be enormous. The Department of Insurance should issue a press release concerning every arrest and conviction. Newspapers should report daily that insurance criminals have been arrested and are going to trial or were convicted and are going to jail. Jail sentences should be made mandatory and remove from local judges the right to grant convicted felons probation and restitution only.
Sentences across the state must be consistent and true punishment. I have seen such inconsistency where cases, after conviction, the criminals received sentences that ranged from 24 hours to 24 years.
It is not enough for the state to say that the insurance companies must investigate and work to fight fraud. The state must also aggressively and vigorously fight insurance fraud.
Today, a person perpetrating an insurance fraud need only be concerned that an aggressive fraud investigation might delay, or reduce, the amount he might recover from his crime. Criminal prosecution for the crime of insurance fraud is so minuscule, in relation to the amount of fraud, as to be nonexistent. It certainly does not act as a deterrent. In conjunction with the formation of a special insurance fraud prosecution unit in the attorney general’s office, the legislatures should enact the following statutes:
·????????As of the effective date of this statute there is no tort of bad faith in this state.
·????????Punitive damages may not be awarded in this state.
·????????Any insurer that, without malice, reports to the Fraud Division, Department of Insurance that it has rejected a claim because of fraud may not be sued in any court of this state, for any tort cause of action.
·????????This section is not intended to eliminate the right of any insured to sue its insurer for breach of the insurance contract.
·????????If the legislatures really want insurers to fight insurance fraud; if the legislatures wish to keep strong and viable this important industry; if the legislatures want to reduce the insurance premiums paid by their constituents, they must make practical the war on insurance fraud. As long as the tort of bad faith and the exposure of punitive damages hangs over insurance companies, the war will be one of attrition where no one will win.
If enough people complain perhaps, the prosecution levels will increase. Although each of the stories in this book are based in fact, the names, locations and facts of the claims have been changed to protect the guilty. No resemblance to any person, except those specifically named, is intended and any resemblance is purely coincidental.
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].
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;
Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at [email protected]; https://www.zalma.com; https://zalma.com/blog; I publish daily articles at https://zalma.substack.com, 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 Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
Construction Defects and Insurance Volumes One Through Five Second Edition Now Available
Construction defects have grown into one of the most active areas of litigation in the United States.
This, the fifth volume, of the eight-volume series is the newest addition to Barry Zalma’s insurance claims books that thoroughly explain how to identify construction defects, how to insure, investigate, prosecute, and defend cases that result from construction defect claims.
Construction Defects & Insurance addresses a wide range of topics associated with this escalating and expensive problem. As you read through the various volumes and pages, you will find comprehensive insights into:
Barry Zalma, has more than 54 years’ practical experience in this area. He is a highly sought after consultant and insurance claims handling expert witness nationally.
In this eight-volume treatise he has also provided checklists that walk the reader through an analysis of construction defects, the process of purchasing and later invoking construction defect insurance, and what is necessary to prosecute or defend a construction defect lawsuit. The books also include helpful sample forms to assist in the identification of defects and numerous case studies to illustrate the state of litigation.
Thorough, yet practical, this series of books form the ideal guide for any professional who works in or frequently interacts with the construction industry, construction defect insurance or the legal practice.
Claims professionals, risk managers, producers, underwriters, attorneys (both plaintiff and defense), and business owners will benefit greatly from the multiple volumes. It is also the perfect resource for insurance educators, trainers, and students whose role requires an understanding of construction defect law and construction insurance law.
As you read through the various volumes of Construction Defects and Insurance, you will find comprehensive—yet comprehensible—coverage of key topics, including:
This product may include information which is proprietary to Insurance Services Office, Inc. ISO does not guarantee the accuracy or timeliness of the ISO information provided. ISO shall not be liable for any loss or damage of any kind and howsoever caused resulting from your use of the ISO information.
This, the fifth volume of the treatise Construction Defects & Insurance, includes materials concerning the Tort of Bad Faith as it relates to construction defect claims and suits.
In this volume you will see material including:
·????????Avoiding Charges of Bad Faith
·????????Survey of Bad Faith by State
·????????Defenses to the Tort of Bad Faith
·????????Required Continuing Education
?All eight volumes are available at Amazon.com.
Just saw the ZIFL's July '23 insight on behavioral health insurance fraud. Really opened my eyes to the complexities and nuances in claims. As ever, staying informed is key! ?? #insuranceclaims #behavioralhealthcare
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