Zalma’s Insurance Fraud Letter – September 1, 2022

Volume 26, Issue 17 – September 1, 2022

Posted on September 1, 2022 by Barry Zalma

The issue, available as a 25 page .pdf document here ZIFL-09-01-2022

See the full video at https://rumble.com/v1i44c7-zalmas-insurance-fraud-letter-september-1-2022.html?and at https://youtu.be/75WWxAt2UU0

Quote of the Issue

“The positive thinker sees the invisible, feels the intangible, and achieves the impossible.” - Winston Churchill

Public Adjuster Firm Accused of Pocketing $600,000 in Insurer Payouts in 2 States

Andrew Joseph Mitchell, according to the Texas Department of Insurance, who reported that a public adjusting firm that was sanctioned last month by Louisiana regulators has pocketed more than $300,000 in insurer payouts intended for Texas property owners. The allegations against Mitchell included:

On or around May 9, 2019, G.Z. and A.Z.’s roof sustained damage. G.Z. and A.Z. retained Mitchell to represent them as the public insurance adjuster on their roof damage claim. Mitchell inspected G.Z. and A.Z.’s roof and provided an estimate. On June 21, 2019, one of Mitchell’s employees filed a claim with QBE Insurance Corporation a/k/a North Queensland Insurance Company Limited (QBE) on behalf of the insureds.

On or around October 29, 2019, Mitchell received a settlement check for G.Z. and A.Z.’s claim in the amount of $4,171.27. Mitchell forged both G.Z. and A.Z.’s signatures on the check and negotiated the check without remitting any funds to them.

In addition, six other clients of Mitchell and is public adjusting firms resulted in the request of the Texas Department of Insurance Enforcement entity seeks:

If one or more of the above allegations is found to be true, the department asks the Administrative Law Judge to enter a Proposal for Decision recommending that the Commissioner of Insurance issue an order:

1. revoking Andrew Joseph Mitchell’s license;

2. directing Andrew Joseph Mitchell to pay an administrative penalty under TEX. INS. CODE §§ 84.021-84.022;

3. directing Andrew Joseph Mitchell to make restitution to the victims under TEX. INS. CODE § 82.053;

4. ordering International Consulting Group to cease and desist from engaging in the business of insurance without a license;

5. ordering Texas Wind Consultants, LLC to cease and desist from engaging in the business of insurance without a license;

6. ordering Loss Consultants of Texas LLC to cease and desist from engaging in the business of insurance without a license; and

7. imposing any other just and appropriate relief to which the department may be entitled to by law, including any combination of the above actions.

The department says Mitchell forged the signatures of property owners on checks from insurance companies in order to deposit their payout checks into his own bank account.

The department’s petition to SOAH lists seven victims, identified only by their initials, and alleges total losses of $335,082.56.

Mitchell did business under the name Mitchell Adjusting International. The Louisiana Department of Insurance on July 22 suspended a public adjuster licensed issued to his son, Kade Austen Mitchell, and Mitchell Adjusting International in Clear Lake Shores, Texas.

The Louisiana enforcement action says Kade Mitchell forged an endorsement signature on a $150,000 check from Nationwide Insurance intended for the New Hope Baptist Church in New Orleans. He also allegedly cashed another check for $117,441.43 sent to him by Jocelyn A. Hogan of Des Allemands and kept all of the money, according to a cease-and-desist order that the department issued to Mitchell and Mitchell International Adjusting.

The total amount of money allegedly stolen in the two states now tops $600,000, but Gonzalez refused to say whether the department had referred the case to state prosecutors.

Documents on the Texas SOAH website show that Andrew Joseph Mitchell — the father — changed his name from Andrew Joseph Aga on Dec. 5, 2019. On June 2, 2020, he became a designated responsible licensed person for Mitchell Adjusting International.

Mitchell, under the name Aga, had obtained a Texas public adjuster’s license in 2011 and notified the department of the name change, the SOAH records show.

Mitchell filed paperwork to create businesses named International Consulting Group, Texas Wind Consultants and Loss Consultants of Texas, according to TDI. None of those companies are licensed to conduct the business of insurance in the state, TDI says.

The department petitioned SOAH to take enforcement on June 22. Its petition says in 2019 and 2020 Mitchell cashed seven settlement checks from insurers that were intended for claimants by forging signatures. Metropolitan General Insurance Co. and Cypress Property and Casualty Insurance Co. filed complaints with the Insurance Department.

In one instance, Mitchell mailed two checks totaling more than $300,000 to a client whose settlement checks he had cashed, but the checks were returned due to insufficient funds, the petition says.

The department says Mitchell misappropriated, converted to his own use and illegally withheld money belonging to an insured, engaged in fraudulent or dishonest acts and engaged in acts constituting the business of insurance without a license.

At least two factoring companies are seeking to recover payments made to Mitchell Adjusting International and a third company has won a collection judgment from a New York State court.

Steven Badger, an attorney with the Zelle law firm in Dallas, represents insurers whose policyholders were allegedly victims of the scheme. He says the growing use of factoring companies by public adjusters is a disturbing trend.

Online records maintained by the Texas Secretary of State’s Office show Mitchell Adjusting International has received funding from several financial organizations in the past several months. On Aug. 2 — after the company was cited by regulators in Texas and Louisiana — Mitchell International received funding from Vitalcap Fund in New York City. The financing statement filed under the Uniform Commercial Code does not reveal the amount owed, only that a lien is in place. Corporation Service Co. in Springfield, Illinois filed a similar lien notice on June 17, naming Mitchell Adjusting International and Kade Austen Mitchell. Westwood Funding Solutions in Hollywood, Florida filed a lien notice on June 1. Eleven Capital in Brooklyn, New York filed a lien notice against Mitchell International and several affiliates on May 18. C T Corporation System filed a lien notice against Mitchell Adjusting and Andrew Joseph Mitchell on May 10.

The state documents show numerous other liens were filed and later terminated, which usually means the debt was paid. But some creditors allege Mitchell Adjusting International owes them money.

On July 18, the Kings County Superior Court issued a judgment requiring Mitchell Adjusting International and the Mitchells to pay Yes Capital Group $128,506.37. Yes Capital’s website describes it as an “investment banking boutique” that raises venture capital.

SOAH records show that attorney David W. Alexander filed a notice of appearance on Mitchell’s behalf on July 26 and filed an answer to the state’s allegations. SOAH has scheduled a hearing on TDI’s petition for Oct. 2 at its office in Austin.

Louisiana Dept. of Insurance Fines Public Adjuster Accused of Pocketing Insurer Payouts

The Louisiana Department of Insurance ordered Kade Austen Mitchell and Andrew Joseph Mitchell, a Texas father-and-son public adjusting team to pay a $50,000 fine for pocketing money that was intended for insurance claimants.

The department on August 18, 2022 revoked the public adjuster license issued to Kade and ordered him and his company, Mitchell Adjusting International, to pay the fine after learning that no money had been refunded to clients as promised. The department also suspended a non-resident public adjuster license issued to Andrew Mitchell.

According to Louisiana Insurance Commissioner Jim Donelon: “The actions by these two men to defraud insureds is especially egregious when folks are trying to get their homes, businesses, and lives back in order. … and the LDI will remain diligent in the investigation of fraud committed against Louisiana residents.”

Andrew Mitchell is listed as manager and director of Mitchell Adjusting International, located in Kemah, Texas, in business records filed with the Texas Secretary of State’s Office. Kade Mitchell is listed as a registered agent. LDI on July 22 suspended Kade Mitchell’s public adjusting license, charging that he had cashed insurer checks totaling $267,441.43 without passing any of the money along to the policyholders who hired him.

Wisdom

“There is something you must always remember. You are braver than you believe, stronger than you seem, and smarter than you think. — A.A. Milne

“Life is about not knowing, having to change, taking the moment and making the best of it.” – Gilda Radner

“We are all visitors to this time, this place. We are just passing through. Our purpose here is to observe, to learn, to grow, to love… and then we return home.” — Aboriginal Australian proverb

“Anyone who stops learning is old, whether at twenty or eighty. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young.”– Henry Ford

“Communism was the regime for the privileged elite, capitalism the creed for the common man.” — Margaret Thatcher

“America's abundance was created not by public sacrifices to 'the common good,' but by the productive genius of free men.” —Ayn Rand

“Every day I walk myself into a state of well-being and walk away from every illness. I have walked myself into my best thoughts, and I know of no thought so burdensome that one cannot walk away from it. — S?ren Kierkegaard

“The secret of success is to do the common thing uncommonly well.” — John D. Rockefeller Jr.

“I never knew a man come to greatness or eminence who lay abed late in the morning.” — Jonathan Swift

“When you talk, you are only repeating what you already know. But if you listen, you may learn something new.” — Dalai Lama

“The amount of sleep required by the average person is five minutes more.” — Wilson Mizner,

“Those who are crazy enough to think they can change the world usually do.” — Steve Jobs

“Trust yourself. Create the kind of self that you will be happy to live with all of your life. Make the most of yourself by fanning the tiny, inner sparks of possibility into flames of achievement.” — Golda Meir

Michigan Allows Fraudster to Receive PIP Benefits but no UM/UIM Benefits

Plaintiff appealed the trial court’s order granting summary disposition in favor of defendants Home-Owners Insurance Company (“Home-Owners”), American Country Insurance Company (ACIC), and Hartford Accident and Indemnity Company (“Hartford”), with respect to plaintiff’s claims for uninsured or underinsured motorist benefits and first-party personal protection insurance (PIP) benefits under the no-fault act, MCL 500.3101 et seq. Although defendants disputed their priority to pay PIP benefits, the trial court did not decide the priority issue, but instead dismissed all claims on the basis of antifraud provisions in defendants’ respective policies.

In Jonathan Jones v. Home-Owners Insurance Company, American Country Insurance Company, And Hartford Accident & Indemnity Company, and Sharneta Henderson, No. 355118, Court of Appeals of Michigan (August 18, 2022) the Court of Appeal produced a Solomon-like decision.

BASIC FACTS

This case arises from a motor vehicle accident on October 28, 2017, in which plaintiff’s vehicle was struck by a vehicle driven by defendant Sharneta Henderson in Detroit. Plaintiff alleges that he was operating a 2009 Ford Crown Victoria and was stopped at a red light when Henderson’s vehicle, traveling at a high rate of speed, drove through a red light and struck his vehicle.

Plaintiff sued all three insurers for recovery of no-fault PIP benefits and also uninsured or underinsured motorist benefits. All three insurers filed motions for summary disposition, asserting that plaintiff’s claims were barred by antifraud provisions in the respective policies.

In support of their allegations of fraud, defendants relied on surveillance evidence from February, June, and July of 2018, which contradicted plaintiff’s statements regarding the scope of his injuries and pain, his physical limitations, and his inability to work.?The trial court found that there was no genuine issue of material fact that plaintiff committed fraud by making material misrepresentations in his deposition and held that all three insurers were entitled to summary disposition on the basis of the antifraud provisions in the policies, and accordingly, dismissed all claims against the insurers.

SUMMARY DISPOSITION

PRIORITY UNDER MCL 500.3114

Initially, the Court of Appeal concluded that the trial court erred by failing to address which insurer had priority to pay PIP benefits under MCL 500.3114.

The general rule is that one looks to a person’s own insurer for no-fault benefits unless one of the statutory exceptions applies. An individual may be entitled to PIP benefits mandated by the no-fault act even if the person is not a named insured “under a no-fault policy, and such a person is not subject to the policy’s antifraud provision.” Because the plaintiff’s entitlement to no-fault benefits was governed by statute, the exclusionary provision in the defendant’s no-fault policy did not apply and could not operate to bar the plaintiff’s claims.

Accordingly, the Court of Appeal reversed the trial court’s order granting summary disposition and remanded the case for a determination of the priority of the potential insurers, whether plaintiff is entitled to benefits under a policy, and whether the benefits arise by statute or contract.

POST-PROCUREMENT FRAUD

Although the trial court concluded that summary disposition was appropriate because of the antifraud provisions of the insurance policies at issue, it failed to determine whether plaintiff was considered an insured for purposes of the policies and whether any alleged fraud occurred to induce the policies as opposed to post-procurement fraud and whether statutory or common-law defenses were available in light of the fraud at issue. See Meemic Ins Co v Fortson, 506 Mich. 287, 305; 954 N.W.2d 115 (2020); Williams v Farm Bureau Mut Ins Co of Mich, 335 Mich.App. 574, 578, 580; 967 N.W.2d 869 (2021) (holding that if the alleged fraud did not influence or induce the policy’s procurement, and antifraud provisions are invalid when they purport to apply to misrepresentations or fraud that occurs after the policy has been issued.

UNINSURED AND UNDERINSURED MOTORIST BENEFITS

Plaintiff’s complaint also included claims for uninsured and underinsured motorist coverage. The insurance policy itself will govern the interpretation of its provisions regarding uninsured motorist coverage benefits, which are not required by statute. In cases in which uninsured motorist benefits are at issue, the policy definitions are controlling. Accordingly, because uninsured and underinsured motorist coverage is not mandated by the no-fault act, there is no prohibition against enforcement of the antifraud provisions in the defendant insurers’ policies as applied to this coverage.

The evidence reflects that plaintiff made repeated statements at his December 2018 deposition regarding his pain and physical limitations following the accident, which he claimed affected his mobility and ability to lift items, and his ability to work. These statements were directly contradicted and established to be factually inaccurate by the surveillance evidence, which showed plaintiff moving freely without apparent pain and discomfort, and repeatedly lifting heavy items into a vehicle. Accordingly, the trial court properly concluded that the evidence, specifically plaintiff’s deposition testimony and the surveillance evidence, establishes that there is no genuine issue of material fact regarding whether plaintiff made false and material misrepresentations, knowing the representations to be false.

False statements made during discovery do not provide grounds to void the policy. To be clear, once an insurer fails to timely pay a claim and suit is filed, the parties’ duties of disclosure are governed by the rules of civil procedure, not the insurance policy. A plaintiff-insured only commences suit after the defendant-insurer denies the plaintiff’s claim and that the denial cannot possibly be based on an event that has not yet taken place. This does not mean that a defendant cannot rely on evidence of fraud obtained after litigation commences. It simply means that the evidence must relate to fraud that took place before the proceedings began.

Plaintiff’s statements during his deposition, which took place after litigation commenced, cannot be used to implicate an antifraud provision in an insurance policy. However, fraudulent statements made before litigation is commenced properly can be considered and can implicate an antifraud provision in an insurance policy.

In this case, plaintiff participated in a recorded interview with a Home-Owners representative on February 16, 2018, before this litigation was commenced. Plaintiff made all of the same false statements he made in his later deposition.

At the time of his recorded statement, plaintiff lied about the extent of his injuries and his condition that was proved false by the surveillance evidence.

Viewing the evidence in a light most favorable to plaintiff, there is no genuine issue of material fact that plaintiff made material misrepresentations regarding his physical limitations, including his ability to conduct his daily activities of living, that were established by the surveillance evidence to be factually incorrect and untruthful. The surveillance evidence was clear, uncontroverted, and undermined plaintiff’s claim that his injuries hindered his ability to care for himself.

The evidence was also such that reasonable minds could not disagree that plaintiff made the statements during his recorded interview knowing that they were false, and with the intent that a no-fault insurer would act on them to determine that he was entitled to coverage. Accordingly, the Court of Appeal concluded that trial court did not err by dismissing plaintiff’s claims for uninsured and underinsured motorist benefits on the basis of plaintiff’s fraudulent misrepresentations.

In sum, the Court of Appeal affirmed the trial court’s order granting defendants summary disposition with respect to plaintiff’s claim for uninsured or underinsured motorist benefits but reversed the order to the extent that it dismissed plaintiff’s claim for PIP benefits and remand for further proceedings.

ZIFL OPINION

The Michigan no-fault statute needs amendment to deprive a person of benefits if he or she commits fraud in the presentation of the claim. This case allows the plaintiff to collect no-fault benefits even though his presentation of claim is clearly false and fraudulent. Trial to determine the extent of those benefits – because of the fraud – will be interesting and limited. Of course, since the fraud is so obvious, plaintiff Jones should be arrested, tried and convicted for insurance fraud under the state’s criminal statutes. Michigan Insurance Code Section 500.4503, and Section 500.4511 make it a felony to knowingly lying about or concealing an important fact in connection with an insurance claim or payment made under an insurance policy. Applies to issuing fake insurance policies and rate-fixing. Also includes conspiring to do any of the above. The court should have referred Jones to the district attorney.

Convicted of Insurance Fraud but Still a High School Principal

The Law Applies to Thee but not to Me – Insurance Fraud Pays in New York

Oneatha Swinton, the former acting principal of Port Richmond High school in Staten Island, New York, convicted of car insurance fraud kept her employment with the New York Department of Education – and even got a raise – despite what school investigators called her “pattern of dishonesty.”

The DOE gave Swinton, a deal to stay on despite the criminal conviction plus findings that she improperly funneled $100,000 in school funds to a vendor, and “failed to safeguard” 600 DOE computers, printers and laptops which vanished under her watch.

Instead of terminating Swinton, 43, as recommended by the Special Commissioner of Investigation for city schools, the DOE gave her an unspecified place in its Office of Safety and Youth Development with a $187,000 salary plus health and pension benefits — $25,000 more than she made when arrested in 2018 for insurance fraud. Former Staten Island principal Oneatha Swinton started a fashion brand as a side job.

In November 2017 Swinton, the interim acting principal of Port Richmond HS, lived and worked on Staten Island, but registered her Lexus SUV at an East Stroudsburg, PA, address. The car bears Pennsylvania license plates and is a type of insurance fraud since the rates are lower than those if the car is garaged in Long Island.

Originally charged with six felony counts, she pleaded guilty in December 2018 to registering two Lexus SUVs in Pennsylvania to avoid New York’s high insurance rates. She was sentenced to three years’ probation and ordered to pay $6,200 in restitution plus an $800 fine.

The Special Commissioner of Investigation for city schools found that former principal Swinton mishandled more than 600 computers, laptops and printers. The Council of School Supervisors and Administrators defended Oneatha Swinton as “a proven school leader.”

California Claims Regulations

SIU Regulations

Insurers licensed or operating in California must file their SIU annual reports by Wednesday, Sept. 28, Insurance Commissioner Ricardo Lara reminded insurers recently. ?Failing to file by the 11:59 pm deadline may lead to fines or other regulatory actions. Information about the annual report requirement is available on the CDI website. Insurers may access an electronic portal to file reports.

For further information, including how to fulfill the training requirements of the SIU Regulations before the deadline, see my book in Kindle or Paperback at amazon.com and at this link for: California SIU Regulations 2020

Fair Claims Settlement Practices Regulations 2022

If You Haven’t Complied by Today You are in Violation

Insurers licensed or operating in California must ascertain that their entire claims staff has read, understood or be trained about the California Fair Claims Settlement Practices Regulations by September 1 of Each Year and be ready to swear under oath that the Regulation has been complied with by the insurer.

Knowledge of the requirements of the Regulations is important to everyone involved in the business of insurance whether as an insurance adjuster, insurance claims management, public insurance adjuster, policyholder, defense lawyer, insurance coverage lawyer, and policyholder’s lawyer. One way for claims personnel to fulfill the requirements of the law see my book “California Fair Claims Settlement Practices Regulations 2022” which is now available as a Kindle Book and available as a Paper Back.

Before Electing to Rescind

Before a party considers rescission of an insurance policy, whether insured or insurer, the following must be established, regardless of the jurisdiction:

?????????????????????The facts represented in the acquisition of the policy.

?????????????????????Evidence that establishes whether a fact was misrepresented.

?????????????????????Evidence that establishes that a material fact was concealed.

?????????????????????Evidence that establishes that the fact(s) misrepresented or concealed was material to the decision to insure or not insure.

?????????????????????Evidence that the person seeking rescission did not have better knowledge of the facts claimed misrepresented or concealed.

?????????????????????A sworn declaration from the underwriter who made the decision to insure or not insure concerning the effect true facts would have had on the underwriting decision.

?????????????????????A review of the policy, application process, investigation results and applicable law by a competent insurance coverage lawyer in the jurisdiction where the policy was made or to be performed.

?????????????????????A thorough investigation of the negotiations for the policy.

?????????????????????A sworn statement from the underwriter who made the decision to insure or not insured, as to his or her reliance on the material facts presented and what different decisions would have been made had the truth been told.

Bases for Rescission

The primary bases for rescission are:

1.??????????????????misrepresentation or material fact(s),

2.??????????????????concealment of material fact(s),

3.??????????????????mistake of material fact(s),

4.??????????????????mistake of law, or

5.??????????????????fraud.

Statutory Authority for Rescission of Insurance Contracts

States attempt to control rescission by statute. Note, as you read the statutes, that they differ by state. Some are detailed and comprehensive, some make it relatively easy for an insurer to rescind while others make it difficult.

Rescission of Marine Insurance

Marine insurance, as the first type of modern insurance, is different from basic property and casualty insurance and special rules relating to the enforcement of the contract of insurance and rescission apply. For example, rescission of property and casualty insurance as quoted above requires that the fact misrepresented or concealed must be material. With regard to marine insurance, however, note that California Insurance Code § 1904 allows rescission of marine insurance even if the fact misrepresented is immaterial.

Property and Casualty insurance can only be rescinded if the insured is asked a question that is misrepresented or if the prospective insured knows that the fact not provided is material. Marine insurance can be rescinded even if the question is not asked.

Rescission of Fire Insurance

With regard to fire insurance other grounds to rescind also exist.

A party who has received benefits by reason of a contract that is subject to rescission and who in an action or proceeding seeks relief based upon rescission shall not be denied relief because of a delay in restoring or in tendering restoration of such benefits before judgment unless such delay has been substantially prejudicial to the other party; but the court may make a tender of restoration a condition of its judgment.

When notice of rescission has not otherwise been given or an offer to restore the benefits received under the contract has not otherwise been made, the service of a pleading in an action or proceeding that seeks relief based on rescission shall be deemed to be such notice or offer or both.

Rescission – the Equitable Remedy

Since, the Eighteenth Century insurance has been considered a business of the utmost good faith.

Parties to an insurance contract are required to deal with each other fairly and in good faith. Neither party should conceal any material facts from the other nor should either misrepresent any facts material to the decision to insure or not insure.

Rescission Without Sufficient Evidence is Dangerous

Although it appears to be relatively easy to rescind a policy of insurance in California. If evidence is available to prove misrepresentation, concealment or mistake of a fact material to the decision to insure or not insure, rescission will only be enforced because equity requires fairness. California, by statute, recognizes that it would not be fair to require an insurer to insure a person who had deceived it about the risk it was being asked to take. California also believes it would be unfair for an insured to be bound by a policy of insurance about whose provisions the insured was deceived. The decision to rescind must be tempered by the warning from the court of appeal that:

Our conclusion here should not result in an assumption by insurers that policy liability can, with impunity, be avoided or delayed by assertion of a claim for rescission. That is a tactic which is fraught with peril. Where no valid ground for rescission exists, the threat or attempt to seek such relief may itself constitute (1) a breach of the covenant of good faith and fair dealing which is implied in the policy (Fletcher v. Western National Life Ins. Co. (1970) 10 Cal. App. 3d 376, 392, 401 [89 Cal. Rptr. 78, 47 A.L.R.3d 286]) and/or (2) the commission of one or more of the unfair claims settlement practices proscribed by Insurance Code section 790.03, subdivision (h). (Emphasis added.) [Imperial Casualty & Indemnity Co. v. Sogomonian (1988) 198 Cal.App.3d 169]

Whenever an insurer or an insured attempts to rescind a policy of insurance it must have conducted a complete and thorough investigation into the acquisition of the policy, the representations made by all parties before the policy was acquired, interviewed the agents, brokers and insureds to determine representations made and intent of the parties. Then, after the investigation is completed, the party seeking rescission must seek the advice and counsel of an experienced coverage lawyer.

Depending on the facts and the advice of counsel rescission can be completed by letter or the filing of a suit seeking declaratory relief from a court of competent jurisdiction affirming the opinion that the contract should be rescinded, and the parties placed in the same status as they were before the contract was first made.

“Post Loss Underwriting” is an Oxymoron

Some plaintiffs’ lawyers contend that rescission is “post loss underwriting” rather than the exercise of a legitimate equitable remedy as old as the common law. They have gone so far as to convince legislatures to place the term “post loss underwriting” in statutes relating to health insurance plans.

Underwriting, by definition, always occurs before the policy comes into being. Those concerned about rescission should not be concerned about “post loss underwriting” but, rather, should be concerned about the abusive use of the rescission remedy by unscrupulous insurers.

Rescission & the Insurance Fraud Investigator

Every claims handler and every Special Investigative Unit (SIU) investigator must understand that rescission is a device that can, depending on state law, allow a fraudulent claim to be defeated even if evidence is not available to establish an intent to defraud. If evidence exists that the policy was acquired by a misrepresentation or concealment of a material fact or more than one material fact the policy, with the advice of coverage counsel can be declared void from its inception and the claim can be denied.

For details on the remedy of rescission see my book: “Rescission of Insurance – 2nd Edition” available as a Kindle book or a paperback from Amazon.com and other insurance books by Barry Zalma here.

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 https://www.rumble.com/zalma.https://rumble.com/c/c-262921.

He 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.

See the more than 400 videos at https://www.rumble.com/zalma

New York StateWide Senior Action Council Announces It's Medicare Fraud of the Month

New York StateWide Senior Action Council (StateWide), an organization dedicated to advocacy for the rights of seniors in?New York State today announced its Medicare Fraud of the Month for August:

Telemedicine Fraud.

"Telemedicine Fraud, often called Telehealth Fraud is a growing trend in Medicare. The COVID-19 pandemic created unprecedented challenges for how patients accessed health care with the need for social isolation leading to an explosion in remote Telemedicine care," stated?Maria Alvarez, Executive Director of StateWide in announcing this month's Medicare Fraud of the Month.

The StateWide Fraud of the Month is a component of the Senior Medical Patrol, the definitive resource for New York State's senior citizens and caregivers to help detect, prevent, and report Medicare fraud and waste. StateWide is New York's grantee/administrator for this Federal Program.

Alvarez continued, "Patients can receive a wide range of Telemedicine services, including check-ins with their primary care providers, mental health care, and specialty services. Similarly, telehealth can be provided through a wide range of technologies, including video chats, remote patient monitoring devices, and phone calls."

How Telemedicine scams typically operate:

• There are some common characteristics of these fraud schemes.
• For example, telemarketers contact Federal health care program beneficiaries to solicit identifying information related to an individual's health conditions and health insurance number
• A purported Telemedicine company then pays a medical provider to review records and electronically sign orders or prescriptions for medically unnecessary durable medical equipment, genetic testing, or prescription medications.
• The medical provider typically does not interact with or otherwise treat the Federal health care program beneficiary prior to ordering the medically unnecessary items and services
• A durable medical equipment (DME) company, laboratory, or pharmacy subsequently purchases the complete paperwork package that includes the Federal health care program beneficiary's information and medical provider's order or prescription, and submits false claims for payment to Medicare, Medicaid, and other Federal health care programs.

It is estimated that Medicare fraud costs New York taxpayers over $5 billion dollars a year. To help combat this illicit industry StateWide earlier this year announced its Fraud of the Month program to highlight these scams being perpetrated on the State's seniors.

Good News From the Coalition Against Insurance Fraud

State Farm has agreed to pay the federal government $100M for potential liability over its handling of flood insurance claims after Hurricane Katrina, news reports say. That settles a lawsuit that two whistleblowers filed against the insurer more than 16 years ago. Two independent adjusters — who also are sisters — filed the suit in Mississippi in 2006. The U.S. Supreme Court unanimously agreed with the Rigsbys in 2016 that State Farm defrauded the National Flood Insurance Program by charging it for flood damage to a policyholder’s Biloxi home when wind caused the destruction. State Farm’s policy was supposed to cover the wind damage. The insurer was ordered to pay $750K, triple the amount of the claim State Farm made to the flood program, and $2.9M in attorney’s fees and expenses for the Rigsbys. Winning that fraud case opened the door for the Rigsbys to examine thousands of other State Farm claims for fraud after Hurricane Katrina. The settlement means State Farm will pay restitution to the federal government, not individual policyholders, over any liability the insurer may have faced for its handling of other flood insurance claims.

Health Insurance Fraud Convictions

South Bay Chiropractor Sentenced to Prison for Receiving Kickbacks

A Redondo Beach chiropractor was sentenced to 14 months in prison for soliciting kickbacks from other hospitals.?(Shutterstock)

Brian Carrico, 68, of Redondo Beach, was sentenced August 26, 2022 to 14 months in federal prison by U.S. District Judge Josephine L. Staton, who also ordered him to pay a fine of $25,000.

The South Bay chiropractor was sentenced for taking kickbacks from Pacific Hospital — a medical center in Long Beach whose then-owner was later imprisoned — and for soliciting kickbacks from another Southern California hospital. Carrico pleaded guilty in February to one count of soliciting kickbacks — the same day his two Redondo Beach-based companies, Performance Medical & Rehab Center Inc. and One Accord Management Inc. — each pleaded guilty to one count of conspiracy to solicit kickbacks.

Judge Staton also sentenced Carrico's companies to one year of probation and fined them each $250,000, prosecutors said.

Carrico is a licensed chiropractor who owned Performance Medical & Rehab Center, which treated injured workers. Surgeons saw patients at Performance Medical's offices. Carrico also owned One Accord Management, which provided billing, collection and other support services for Performance Medical.

His partner, William Parker, 68, of Redondo Beach, owned Union Choice Therapy Network, which had a contract with Pacific Hospital and paid One Accord money from that contract. Last month, Parker was sentenced to a year and one day in federal prison and was fined $5,500. He also pleaded guilty in February to one count of soliciting kickbacks.

From June 2004 to December 2013, Carrico and Parker participated in a kickback scheme in which Pacific Hospital overpaid for the value of services performed under its Union Choice contract to induce Carrico and Parker to refer patients to the medical center for surgeries and other treatment.

Pacific Hospital specialized in surgeries, especially spinal and orthopedic procedures. The owner of Pacific Hospital, Michael D. Drobot, conspired with doctors, chiropractors and marketers to pay kickbacks in return for the referral of thousands of patients to Pacific Hospital for spinal surgeries and other medical services paid for primarily through the California workers' compensation system, federal prosecutors said.

During its final five years, the scheme resulted in the submission of more than $500 million in medical bills for spine surgeries involving kickbacks. To date, 22 defendants have been convicted for participating in the kickback scheme.

In April 2013, law enforcement searched Pacific Hospital. Later that year, Carrico learned Pacific Hospital was going to be sold and the kickback scheme would end. Rather than cease their criminal conduct after the Pacific Hospital search, Carrico and Parker then approached an executive at a different hospital and solicited kickbacks from him, according to the U.S. Attorney's Office.

As the licensed medical professional, Carrico "had control and influence over the location where patients had spinal surgeries," prosecutors wrote in a sentencing memorandum. "Patients are not commodities that can be traded for kickbacks."

Carr: Medicaid Fraud Division Secures $650,000 Settlement with Atlanta Behavioral Medicine

Atlanta Behavioral Medicine, Inc., an Atlanta-based psychotherapy services provider, has agreed to pay $650,000 to resolve allegations that it improperly billed Georgia Medicaid for therapy services that never occurred. According to Georgia Attorney General Chris Carr.

An investigation by the Georgia Attorney General’s Medicaid Fraud Division uncovered evidence that between 2016 and 2020, Atlanta Behavioral Medicine improperly billed the Medicaid program for family psychotherapy sessions on a number of occasions when its patients only received basic medication management. According to accepted coding standards in the industry, these visits failed to qualify as therapy sessions, which resulted in Atlanta Behavioral Medicine receiving overpayments for the actual service rendered.

When approached concerning the State's allegations, Atlanta Behavioral Medicine cooperated to reach an efficient resolution to the matter. As a part of the settlement, the defendants denied the factual allegations. The claims resolved by this settlement are allegations only, and there has been no determination of liability.

Mallinckrodt to Pay More Than $230 Million to Settle Lawsuit Alleging Underpayment of Medicaid Drug Rebates

Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc. Idaho Attorney General Lawrence Wasden announced Idaho joined 49 other states, Washington, D.C., Puerto Rico, and the federal government to settle allegations of fraud against. It is a U.S. subsidiary of the Irish pharmaceutical company Mallinckrodt plc (collectively Mallinckrodt), which sells and markets pharmaceutical products throughout the nation. Mallinckrodt’s U.S. headquarters is in Bedminster, New Jersey. The total value of the settlement is $233,707,865.18, plus interest, to be paid over a period of seven years.

The settlement resolves allegations that from January 1, 2013, through June 30, 2020, Mallinckrodt knowingly underpaid Medicaid rebates due for its drug H.P. Acthar Gel (Acthar). The government alleges that Mallinckrodt’s conduct violated the Federal False Claims Act and resulted in the submission of false claims to the Idaho Medicaid program.

Under the Medicaid Drug Rebate Program, when a manufacturer increases the price of a drug faster than the rate of inflation, it must pay the Medicaid program a per-unit rebate. The rebate is the difference between the drug’s current price and the price of the drug if its price had gone up at the general rate of inflation since 1990 or the year the drug first came to market, whichever is later.

The government alleges that Mallinckrodt and its predecessor Questcor began paying rebates for Acthar in 2013 as if Acthar was a “new drug” just approved by the U.S. Food and Drug Administration (FDA), rather than a drug that was first introduced to market in 1952. Allegedly, this practice meant the companies ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 until 2020. In particular, the government alleges that Acthar’s price had already risen to over $28,000 per vial by 2013; therefore, ignoring all pre-2013 price increases for Medicaid rebate purposes significantly lowered Medicaid rebate payments for Acthar. Under the settlement agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013 but rather was approved by the FDA and marketed prior to 1990. Mallinckrodt agreed to correct Acthar’s base date AMP and that it will not change the date in the future.

As part of the settlement, Idaho will receive $164,970 in restitution and other recoveries. Approximately $158,000 will go to the state’s Medicaid program and $6,400 to the state’s general fund. Idaho received its first payment of $9,444 on July 28, 2022.

California Attorney General Bonta, U.S. Department of Justice, Secure $70.7 Million in Settlements Against a Southern California County Organized Health System and Three Healthcare Providers for Violations of the False Claims Act

Gold Coast Health Plan (Gold Coast), and three Medi-Cal providers: Dignity Health (Dignity), Clinicas del Camino Real, Inc. (Clinicas), and Ventura County, the owner and operator of Ventura County Medical Center General Rob Bonta, in partnership with the U.S. Department of Justice, on August 18, 2022 secured three settlements totaling $70.7 million against a Southern California County Organized Health System, for submitting fraudulent claims to Medi-Cal in violation of the state and federal False Claims Acts. The settlements resolve allegations that Gold Coast, Dignity, Clinicas, and Ventura County submitted false claims in an organized scheme to?wrongfully retain federal funds intended for Medicaid Adult Expansion under the Affordable Care Act (ACA). Today’s settlements amount to a total of $70.7 million total, with the state of California receiving $2.45 million, plus accrued interest.

Pursuant to the ACA, beginning in January 2014, Medi-Cal was expanded to cover the previously uninsured “Adult Expansion” (AE) population—adults between the ages of 19 and 64 without dependent children with annual incomes up to 133 percent of the federal poverty level. The federal government fully funded the expansion coverage for the first three years of the program. The AE program was intentionally overfunded to provide a substantial cushion to cover any additional medical needs this newly insured population of patients might present. Through its contract with the California Department of Health Services (DHCS), Gold Coast agreed that if?it?did not spend at least 85% of what it received for the AE population on eligible services, the surplus funds would be returned to the Medi-Cal program. California, in turn, was required to return that amount to the federal government.

The three settlements resolve allegations that Gold Coast, Ventura County, Dignity, and Clinicas knowingly submitted or caused the submission of false claims to Medi-Cal for “Additional Services” provided to Adult Expansion Medi-Cal members between January 1, 2014, and May 31, 2015. California and the United States alleged that the payments were not “allowed medical expenses” under Gold Coast’s contract with DHCS, were pre-determined amounts that did not reflect the fair market value of any Additional Services provided, and/or the Additional Services were duplicative of services already required to be rendered.

As a result of the settlements, Gold Coast will pay $17.2 million to the United States; Ventura County will pay $29 million to the United States; Dignity will pay $10.8 million to the United States and $1.2 million to the State of California; and Clinicas will pay $11.25 million to the United States and $1.25 million to the State of California.

The settlements include the resolution of claims brought under the?qui tam?or whistleblower provisions of the California False Claims Act by Atul Maithel, Gold Coast’s former controller, and Andre Galvan, Gold Coast’s former director of member services. Under those provisions, a private party can file an action on behalf of California and receive a portion of any recovery.

This investigation was made possible through collaboration with the United States Department of Justice and the United States Attorney’s Office for the Central District of California.

The California Department of Justice’s DMFEA protects Californians by investigating and prosecuting those who defraud the Medi-Cal program as well as those who commit elder abuse. These settlements are made possible only through the coordination and collaboration of governmental agencies, as well as the critical help from whistleblowers who report incidences of abuse or Medi-Cal fraud.

Lawrence, Kansas Woman Fined, Ordered to Repay More Than $5,000 To Kansas Medicaid Program

Terri Lisa Schwager, 56, of Lawrence, Kansas was ordered to repay the Kansas Medicaid program more than $5,000 for filing what the state alleged were false billing claims.

Schwager, agreed to a consent judgment approved August 19 by Douglas County District Court Judge Mark Simpson. Schwager agreed to repay the Kansas Medicaid program $5,085.62 to resolve the state’s civil lawsuit alleging violations of the Kansas False Claims Act. Schwager also agreed to pay $5,085.62 in fines and $2,700.35 for investigative costs incurred by the Medicaid Fraud and Abuse Division of the attorney general’s office.

The case was investigated by the Medicaid Fraud and Abuse Division of Schmidt’s office. Investigators determined that Schwager served as the personal care attendant for her adult son, who is a Medicaid beneficiary. The investigation revealed that between January 1, 2018, and March 31, 2022, she had provided her confidential user information to her son, who logged into an app 91 times indicating that his mother was providing services. Investigators determined that Schwager was in fact working as an emergency room nurse in Olathe at the times the claims were logged.

Health care giant Centene to pay Washington $19 million for overcharging state Medicaid program in 2nd largest Medicaid fraud recovery in WA history

Fortune 50 Company Allegedly Overcharged for Pharmacy Benefit Management Services

Managed health care giant Centene will pay $19 million to Washington state. The payment resolves allegations that the Fortune 50 company overcharged the state Medicaid program for pharmacy benefit management services.?

The resolution is the second-largest Medicaid fraud recovery for Washington state.

The Health Care Authority (HCA) contracts with managed care organizations like Coordinated Care of Washington, a Centene subsidiary, to manage its Medicaid program. Coordinated Care of Washington in turn contracts with pharmacy benefit managers, or PBMs, that negotiate prescription drug prices and other pharmacy related costs, including negotiating rebates and discounts on the cost of drugs.

The Attorney General’s Office and HCA’s Program Integrity Team began investigating pharmacy benefit managers in 2019 after a whistleblower provided information that they were failing to disclose true pharmacy benefits and services costs. Centene allegedly failed to pass on discounts it received to the state Medicaid program and inflated dispensing fees. The whistleblower later filed a separate claim against Centene.

The resolution was the result of a joint investigation conducted by the Washington Attorney General’s Office’s Medicaid Fraud Control Division and the Health Care Authority.

Centene’s Payment to Washington

As part of the resolution, Washington recovers a total of $18,999,999.80. Like all recoveries by the Medicaid Fraud Control Division, the amount goes back to the state through the state Medicaid Fraud Penalty Account.

As part of the resolution, an additional $13 million from Centene will be paid to the federal government for administration of Medicaid in Washington state. Ferguson’s resolution with Wyeth in 2016 is the only Medicaid fraud recovery larger than Centene.

Centene has resolved cases with 10 other states over the same conduct.

Hospice Agrees to Pay Nearly $1M To Settle False Claims Liability

Familia Healthcare Services Inc. dba Del Cielo Hospice and Palliative Care, a Corpus Christi, Texas health care company agreed to pay $990,478.46 to resolve allegations they violated the False Claims Act by submitting claims to Medicare for non-covered hospice services.

The settlement resolves allegations that they knowingly submitted false claims from May 12, 2017, through Jan. 31, 2022. The claims allegedly involved hospice services for patients who were not eligible for, and did not qualify for, the hospice benefit in violation of the False Claims Act.

Hospice care is special, end-of-life care intended to comfort terminally ill patients. To be eligible for the Medicare hospice benefit, a patient must be “terminally ill,” meaning that the patient has a medical prognosis that their life expectancy is six months or less if the illness runs its normal course.

Del Cielo Hospice didn’t just unscrupulously rob the Medicare program out of hundreds of thousands of dollars, it also took advantage of ill patients who were unknowingly used for its scam, according to Special Agent in Charge James Smith of the FBI.

The settlement includes the resolution of claims a former employee of Del Cielo Hospice brought under the?qui tam?or whistleblower provisions of the False Claims Act. 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 will receive 16% of the proceeds from the settlement with Del Cielo Hospice.

There was no explanation why it took the FBI five years to catch on about the fraud.

Essilor Agrees to Pay $16.4 Million to Resolve Alleged False Claims Act Liability for Paying Kickbacks

Essilor International, Essilor of America Inc., Essilor Laboratories of America Inc. and Essilor Instruments USA (collectively, “Essilor”), headquartered in Dallas agreed to pay $16.4 million to resolve allegations that the company violated the False Claims Act by causing claims to be submitted to Medicare and Medicaid that resulted from violations of the Anti-Kickback Statute.

Essilor manufactures, markets and distributes optical lenses and equipment used to produce optical lenses. The United States alleged that between Jan. 1, 2011, and Dec. 31, 2016, Essilor knowingly and willfully offered or paid remuneration to eye care providers, such as optometrists and ophthalmologists, to induce those providers to order and purchase Essilor products for their patients, including Medicare and Medicaid beneficiaries, in violation of the Anti-Kickback Statute. The Anti?Kickback Statute prohibits offering or paying anything of value to induce the referral of items or services covered by Medicare, Medicaid and other federally funded programs. The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives.

In connection with the settlement, Essilor entered into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG. The CIA requires, among other things, that Essilor hire an independent review organization to review its systems, policies, processes and procedures for ensuring that any discounts, rebates, or other reductions in price offered to providers comply with the Anti-Kickback Statute. The CIA also requires Essilor to implement a new written review and approval process to ensure all existing and new discount arrangements comply with the Anti-Kickback Statute.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by relators Laura Thompson, Lisa Brez, and Christie Rudolph, former Essilor district sales managers. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.?The qui tam cases are captioned United States ex rel. Laura Thompson & Lisa Brez v. Essilor Int’l, No. 3:15-CV-2853-C (N.D. Tex.) and United States ex rel. Christie Rudolph v. Essilor Labs. of Am., Inc., No. 16-CV-0537 (WB) (E.D. Pa.).

Missouri Doctor Sentenced to Year in Prison for Healthcare Fraud

Dr. Abdul Naushad, 58, and Wajiha Naushad from Town and Country, Missouri were sentenced by U.S. District Judge E. Richard Webber on August 25, 2022. Dr. Naushad was sentenced to a year in prison for a health care fraud scheme and ordered he and his wife to repay $235,977.

On over 1,000 occasions spanning nearly a decade, Dr. Naushad and Wajiha Naushad, 47, had their unwitting patients injected with cheaper, foreign Orthovisc that had not been approved by the Food and Drug Administration. The Naushads betrayed the trust of elderly and impoverished patients to fund a lavish lifestyle that included a $2 million mansion, two vacation houses and four luxury cars.

FDA-approved Orthovisc, which is sold by authorized distributors in the United States, comes in a pre-filled syringe. It is injected into the knee to relieve osteoarthritis pain and is available only by prescription.

The Naushads concealed their actions from patients, employees and publicly funded health insurance programs by, among other things, stonewalling questions from their chief of purchasing. After a shipment of foreign, unapproved injections was seized by the FDA, the Naushads had the next shipment sent to their home.

Wajiha Naushad lied to her compliance officer and friend by telling her the injections came from a distributor in the U.S., and fraudulently persuaded the compliance officer that the Orthovisc had a required National Drug Code number.

A jury in April convicted the couple of one conspiracy count and one count of health care fraud. Wajiha Naushad was sentenced Thursday to three years of probation.

Charlotte Medical Device and Equipment Manufacturer Agrees to Pay Over $780,000

BSN Medical Inc. (BSN) has agreed to resolve allegations that it marketed and promoted various products that did not meet the Medicare or Medicaid program’s reasonable and necessary requirements, thereby causing the submission of false claims for payment to the health care programs. BSN agreed to pay $785,672.14 to resolve the allegations.

BSN is a medical device and equipment manufacturer located in Charlotte, that specializes in the areas of compression therapy, wound care and orthopedics. The settlement resolves allegations that from January 1, 2015, through December 31, 2017, BSN marketed and promoted various products that were not reimbursable because BSN had either not obtained approval from the Medicare Pricing, Data Analysis and Coding (PDAC) contractor, or for which PDAC approval had expired, in connection with three Healthcare Common Procedural Coding System (HCPCS) Codes, specifically, E2607, L0625 and L0626.

The allegations arose from a lawsuit filed by a whistleblower under the qui tam provisions of the federal False Claims Act and multiple state false claims act statutes. Under the federal False Claims Acts, private citizens can bring suit on behalf of the government for false claims and share in any recovery. The act also allows the government to intervene and take over the action.?The government conducted the investigation and intervened in this action to effectuate the settlement.

John Hancock to repay $23.8M over N.Y. insurance law violations

John Hancock Life & Health Insurance Company must return a total of $23.8 million to customers and the state of New York and pay a $2.5 million fine for violations of the state’s law regarding the handling of long-term care insurance policies.

The New York State Department of Financial Services (NYDFS) announced August 18, 2022 that John Hancock will return nearly $21.6 million to consumers and/or their beneficiaries and $2.2 million to the New York State Medicaid Program following a compliance review with state requirements on long-term care insurance.

A joint investigation by the NYDFS and the state’s Department of Health concluded from 2001-19, John Hancock “prematurely terminated” 156 long-term care policies for New Yorkers before the customers had fully exhausted the benefits to which they were entitled, the NYDFS said. The early terminations resulted in 27,161 days of unpaid benefits, leaving customers to either pay the expenses out of pocket or go on Medicaid prematurely.

Idaho Man Sentenced for Misusing National Health Service Corps Loan Repayment Funds

Steven L. Young Pled Guilty To Theft Of Government Property And Admitted To Civil Violations Of The False Claims Act

Steven L. Young, an Idaho man already incarcerated in Utah on unrelated charges, was ordered to repay $63,192.96 and sentenced to 15 months (which he has already served), and three years of supervised release for theft of government funds. Young also settled a parallel civil matter after admitting to violating the False Claims Act.

According to court records, Young was licensed as a physician assistant in Utah. He applied for and received a $50,000 payment as part of the National Health Service Corps Loan Repayment Program (NHSCLR), a program intended to recruit and retain healthcare professionals in eligible communities of need. As part of the program, healthcare professionals can receive award money to help them repay qualifying student loans.

Young received a NHSCLR payment on September 30, 2016. Prior to receiving the payment, he agreed to certain terms as part of his participation in the program. Young knowingly violated the terms of his agreement when he surrendered his medical license on June 28, 2016 and was fired from his job. Although he agreed to use the loan money to repay his eligible student loans, Young spent the money on ineligible expenses.

Young pleaded guilty to theft of government funds on March 30, 2022. At sentencing, Chief U.S. District Judge David C. Nye ordered Young to repay the $50,000 loan and $13,192.96 in accrued interest. The loan accrues interest if the obligations and requirements of the NHSCLR program are not met, and the loan is not repaid.

Georgia Man Sentenced to 130 Months in Prison for his Role in Oxycodone Prescription Scheme

Maurice Daughtry, 38, of Marietta, Georgia, was sentenced on Tuesday, July 26, 2022, to 130 months in prison for his role as one of the organizers of a conspiracy to illegally distribute oxycodone.

According to Daughtry's plea agreement and other court records, Daughtry entered into an agreement with co-conspirator, D’Livro Lemat Beauchamp, to obtain illegitimate prescriptions for oxycodone, a Schedule II controlled substance. At the time the conspiracy began, Beauchamp was a physician operating a medical practice in Montogmery, Alabama. Per their agreement, Dr. Beauchamp would sign oxycodone prescriptions made out to either Daughtry or one of his other co-conspirators. The co-conspirators would pay Dr. Beauchamp $350 per prescription.

Once Dr. Beauchamp signed the prescriptions, the individuals named on the prescriptions—including Daughtry—would have them filled at local pharmacies. Daughtry would then collect pills from the co-conspirators, paying each one between $100 and $250 per prescription. Daughtry would then illegally distribute the oxycodone pills he obtained.

Daughtry’s plea agreement indicates that he first received a prescription from Beauchamp as part of the scheme in August of 2012. Thereafter, Daughtry received prescriptions for 90 30-milligram oxycodone tablets approximately once a month. Daughtry specifically admitted during his plea hearing to receiving and filling 54 prescriptions representing a total of 145,800 milligrams of the drug. Documents indicate that the conspiracy continued until April of 2020 and involved numerous co-conspirators, some of whom were operating at Daughtry’s direction.

Daughtry’s prison sentence will be followed by three years of supervised release. There is no parole in the federal system.

Watertown Medical Practice to Pay $850,000 to Resolve False Claims Act Allegations

North Country Neurology, P.C. Admitted that it Submitted Hundreds of Claims to Medicare for Botox that had Been Paid for by Other Insurers and that it Billed at the Higher Physician’s Rate for Services Rendered by a Physician Assistant

North Country Neurology, P.C., a physician-owned medical practice located in Watertown, New York, has agreed to pay $850,000 for what it admitted was “improper” and “reckless” billing to the federal government for medical services.

North Country Neurology employed physicians and a physician assistant who rendered care to Medicare beneficiaries. In certain circumstances, Medicare allows practices to bill for services rendered by a non-physician practitioner (NPP), including a physician assistant, “incident to” the services that are personally rendered by a physician. These services, even though not personally rendered by a physician, may be billed in a physician’s name if several requirements are met. One such requirement is that a physician directly supervise the NPP rendering the services, meaning that a physician is present in the office suite and immediately available to furnish assistance and direction throughout the procedure. Although Medicare will reimburse practices for certain procedures rendered by NPPs without a physician’s direct supervision, such services are reimbursed at a lesser rate than service rendered or directly supervised by a physician.

North Country Neurology admitted that, on 120 occasions from September 2015 through June 2019, it “submitted or caused to be submitted claims for payment to Medicare that improperly listed a physician as the rendering provider for services rendered by a physician assistant when no physician was physically present in the office and immediately available to furnish assistance and direction throughout the performance of the procedure.” The practice further admitted that it “knew or should have known the requirements of incident-to billing and that it was improper to submit claims to Medicare in a physician’s name for services rendered by an NPP when no physician was in the office” because, among other reasons, its billing company had informed the practice’s owner of separate incident-to billing violations several years earlier.

North Country Neurology also improperly billed Medicare for the drug Botox, even though the same Botox had already been paid for by other insurers. From March 2015 through February 2021, North Country Neurology purchased Botox for its Medicare patients, while its other patients purchased Botox at a specialty pharmacy and had it shipped to the practice. The practice admitted that on approximately 761 occasions during this period, its providers administered and the practice billed Medicare for Botox that was paid for by another insurer “in reckless disregard to the fact that Medicare reimbursement for the administration of Botox included reimbursement for the cost of the drug being administered.”

North Country Neurology acknowledged that, during the period covered by the settlement agreement, it “had an insufficient compliance program, and one that was not well-suited to identify fraud, waste, and abuse.”?Shortly after learning of the United States’ investigation, the practice voluntarily retained a third-party compliance and practice-management consultant to help it develop and implement various practices and procedures to ensure compliance with federal rules and regulations going forward.

New Jersey Pharmacy to pay $50 Million for Illegal Distribution of Opioids and Kickback Scheme

Dunn Meadow LLC (doing business as Dunn Meadow Pharmacy) of Fort Lee, New Jersey, a Bergen County pharmacy on August 3, 2022 admitted its role in a conspiracy to illegally distribute prescription opioids and to give kickbacks to healthcare providers, U.S. Attorney Philip R. Sellinger announced.

Dunn Meadow pleaded guilty before U.S. District Judge Julien Neals to an information charging it with conspiring to illegally distribute prescription fentanyl and giving kickbacks to healthcare providers. Dunn Meadow also signed a civil settlement with the United States for violations of the False Claims Act and the Controlled Substances Act.

According to documents filed in this case, statements made in court, and the terms of the civil settlement:

Dunn Meadow was a licensed retail pharmacy that sent controlled substances and other prescription medications to patients via mail throughout the United States, including highly addictive and dangerous transmucosal immediate release fentanyl (TIRF) medications. Dunn Meadow had contracts with and received payments from pharmaceutical companies that marketed and sold TIRF medications, including INSYS Pharma Inc.

From 2015 through 2019, Dunn Meadow dispensed prescription TIRF medications and other controlled substances knowing that the prescriptions were not written for a legitimate medical purpose. Dunn Meadow knowingly filled prescriptions for controlled substances, including TIRF medications, for patients exhibiting suspicious and drug-seeking behavior, including patients that repeatedly requested early refills, paid thousands of dollars in cash for their prescriptions, or requested that prescriptions be sent to suspicious or inappropriate locations including hotels, casinos, and elementary schools.

Despite warnings from third parties, including some of its suppliers, Dunn Meadow continued to fill prescriptions for TIRF medications and other opioids written by doctors with suspicious and problematic prescribing habits, sometimes without receiving an original prescription. After two different pharmaceutical suppliers terminated supply agreements with Dunn Meadow, Dunn Meadow submitted applications to other suppliers stating that no supplier had ever suspended, ceased, or restricted controlled substance sales to Dunn Meadow.?

Dunn Meadow also admitted that it conspired to offer kickbacks to health care providers and pharmaceutical company sales representatives in violation of the federal Anti-Kickback Statute, in the form of lunches, dinners, and happy hours to induce them to send TIRF prescriptions to Dunn Meadow. Dunn Meadow admitted that its violations of the statute caused a loss to federally funded healthcare programs of over $4.5 million.?

In addition, Dunn Meadow and its parent company, Allegheny Pharma LLC entered a civil settlement with the United States to resolve Dunn Meadow’s civil liability for violations of the False Claims Act and the Controlled Substances Act. Dunn Meadow’s criminal restitution payment will be applied to the civil resolution. Dunn Meadow has also agreed to pay up to $50 million dollars over the next five years to resolve its civil liability if it generates future revenue.

Durable Medical Equipment Company Owner Pleads Guilty to Health Care Fraud

Ariel Madero Paez, 56, pleaded guilty August 5, 2022 in federal court in Ft. Pierce, Florida to fraudulently billing Medicare over $2 million for durable medical that was never provided to beneficiaries.?

According to court records, from November 2021 through May 2022, Madero owned Always Medical Supply (“Always”), located in Stuart, Florida. Always, a Florida corporation, purported to provide durable medical equipment (“DME”) to eligible Medicare beneficiaries. In a five-month period in 2022, Always submitted approximately $2.2 million in fraudulent health care claims to Medicare for DME that Always never provided, and that Medicare beneficiaries never requested. As a result, Medicare paid over $1.4 million. After Madero’s arrest on May 6, 2022 at the Miami International Airport, bank accounts for Always and Madero had a sum of over $500,000 derived from or traceable to the health care fraud.

United States District Court Judge Donald M. Middlebrooks will sentence Madero on October 5, at 11:00 a.m. in West Palm Beach. At sentencing, Madero faces a maximum prison sentence of 10 years on the health care charges.

Georgia Nurse Practitioner Sentenced to Prison, Ordered to Pay More Than $1.6 Million In Restitution

Fraudulent Orders Included A Knee Brace For A Leg Amputee

Sherley L. Beaufils, 44, of Conyers, Georgia, a nurse practitioner was sentenced to federal prison and ordered to pay more than $1.6 million in restitution for her role in a massive telemedicine fraud scheme.

Beaufils was sentenced to 87 months in prison after a U.S. District Court jury convicted her of participating in an illegal kickback conspiracy, and five counts each of Health Care Fraud, False Statements Related to Health Care, and Aggravated Identity Theft. Judge Dudley H. Bowen also ordered Beaufils to pay $1,635,161.61 restitution and to serve three years of supervised release after completion of her prison term. There is no parole in the federal system.

As described in court documents and testimony, Beaufils, as a nurse practitioner, facilitated orders for more than 3,000 orthotic braces that generated more than $3 million in fraudulent or excessive charges to Medicare. Co-conspirators captured the identities of senior citizens, identified through a telemarketing scheme, and bundled that information as “leads.”

Beaufils then signed her name to fake medical records in which she falsely claimed she provided examinations of those patients, and then in exchange for money she created orders for orthotic braces for patients she never met or spoke with – including a knee brace for an amputee, and a back brace for a recently deceased patient – and for other durable medical equipment. Beaufils’ fraudulent orders were then sold to companies to generate reimbursement from Medicare.

U.S. Attorney’s Office Recovers Over $5.5 Million in Civil False Claims Settlement

American Senior Communities, L.L.C. (ASC), a provider of skilled nursing and long-term care services throughout Indiana, has agreed to pay $5,591,044.66 to resolve allegations that it violated the False Claims Act by submitting false claims to the Medicare program.

In 2017, a former employee of a hospice services company doing business with ASC filed a sealed civil complaint or “whistleblower” lawsuit under the False Claims Act in the United States District Court for the Southern District of Indiana. The complaint alleged that ASC had engaged in conduct to defraud the Medicare program. Specifically, the complaint alleged that ASC was charging Medicare directly for various therapy services provided to beneficiaries who had been placed on hospice, when those services should have already been covered by the beneficiaries’ Medicare hospice coverage.

The False Claims Act provides that when a whistleblower files a lawsuit alleging fraud that results in a recovery of funds by the Government, they are entitled to between 15 and 25% of the recovery. This whistleblower provision of the law encourages people to come forward when they believe fraud is being committed. Under the False Claims Act, the Government may collect up to three times the loss it incurred, plus a fine of between approximately $5,500 to $22,000 for each false bill submitted.

Based on the investigation, the estimated loss to the Medicare program was $2,795,522.33 and ASC has agreed to pay $5,591,044.66 to the United States.

Philadelphia Pharmacy and Owner Pled Guilty and Agreed to Pay Over $4 Million

Verree Pharmacy was the Top Retail Pharmacy Purchasing Oxycodone in Pennsylvania

Spivack, Inc., previously operating under the name Verree Pharmacy, and owner-pharmacist Mitchell Spivack, agreed to resolve allegations that they engaged in a years-long practice of illegally dispensing opioids and other controlled substances, and systematic health care fraud. The United States filed the related lawsuit against them and other employees of the pharmacy earlier this year. The pharmacy and Spivack have agreed, subject to court approval, to pay over $4.1 million to resolve their civil liability under the Controlled Substances Act, False Claims Act, and forfeiture. The proposed judgment would also permanently ban them from ever dispensing controlled substances in the future.

The culmination of a multi-year federal-state investigation, the previously filed complaint alleged that Verree Pharmacy, its pharmacist and owner Mitchell Spivack, and other employees of Verree, had a responsibility to dispense opioids and other controlled substances only when appropriate. Instead, the United States alleged that the pharmacy and Spivack dispensed the drugs, even when faced with numerous red flags suggestive of diversion—such as opioids in extreme doses, dangerous combinations of opioids and other “cocktail” drugs preferred by those addicted, excessive cash payments for the drugs, blatantly forged prescriptions, and other signs that the pills were being diverted for illegal purposes. The complaint alleged that Verree—which was the top retail pharmacy purchasing oxycodone in Pennsylvania—has been a nationwide and regional outlier in its deviant purchasing, dispensing, and billing of controlled substances. To avoid scrutiny from the drug distributors that sold them the pills, Verree through Spivack allegedly made false statements to maintain the fa?ade of legitimacy and keep the pharmacy stocked with these pills critical to their profits. Behind that fa?ade, the complaint alleged that Spivack drew millions of dollars from the pharmacy while the public suffered the consequences.

The United States’ complaint alleged that Verree and Spivack were also engaged in an expansive health care fraud scheme involving fraudulent billings for drugs not actually dispensed.?The alleged cornerstone of the scheme was a code used by the pharmacy employees in their internal computer system: “BBDF” or “Bill But Don’t Fill.”?Verree, Spivack, and their co-conspirators allegedly used BBDF as a means to cover their losses on other drugs and further line their pockets with illicit profits by falsely claiming to insurers, including Medicare, that they had dispensed a drug to a patient, when in fact they had not. According to the complaint, this sophisticated fraud—which one of the employees admitted to investigators—resulted in significant damages to Medicare and other federal programs.

The lawsuit seeks civil penalties and damages on Verree, Spivack, and the other pharmacy employee defendants under the Controlled Substances Act, False Claims Act, and civil forfeiture.

The pharmacy and Spivack agreed to resolve this civil liability under terms outlined in the proposed consent judgment, if accepted by the court. Among other things, the pharmacy and Spivack would pay over $4.1 million in civil damages and penalties under the False Claims Act, Controlled Substances Act, and in civil forfeiture, along with the approximately $500,000 Spivack agreed to pay in criminal restitution and criminal forfeiture. The proposed resolution would also permanently prevent the pharmacy and Spivack from prescribing, distributing, or dispensing any controlled substances in the future, and prevents them from ever seeking another controlled substance registration from the Drug Enforcement Administration. The resolution would also impose a 22-year exclusion on the pharmacy and Spivack from Medicare and Medicaid.

The civil complaint relates to criminal charges that were previously filed against Mitchell Spivack. On May 31, 2022, the U.S. Attorney’s Office filed a one-count criminal information against Spivack for conspiracy to defraud the United States based on allegations similar to those in the civil litigation. Spivack pled guilty to that charge on June 29, 2022.

Doctor and Medical Practice Agree to Pay Nearly $2 Million to Resolve Allegations of Health Care Fraud

Azizulah “Aziz” Kamali and his medical corporation, Aziz Kamali, M.D. Inc., agreed to pay $1,963,953 to resolve allegations that they violated the False Claims Act by submitting millions of dollars of false claims to Medicare for surgically implanted neurostimulators and paying kickbacks to sales marketers.

According to the settlement, Dr. Kamali and his medical corporation admitted that they submitted claims to Medicare for surgically implanted neurostimulator devices even though they did not perform surgery or implant neurostimulators. Dr. Kamali and Kamali Inc. admitted that they instead taped a disposable electroacupuncture device called “Stivax” to their patients’ ears. Stivax devices do not require surgical implantation and are not reimbursable by Medicare. The government alleges that this conduct violated the False Claims Act.

Dr. Kamali and his medical corporation also admitted that they paid a marketing company a percentage of the reimbursements they received from Medicare for billing implantable neurostimulators, in return for the marketing company arranging for and recommending that patients order Stivax from them. The United States alleges that this conduct violated the Anti?Kickback Statute and the False Claims Act.

Ventura County’s Organized Health System and 3 Medical Providers Agree to Pay $70.7 Million to Settle False Claims Act Allegations

Ventura County’s organized health system and three medical care providers have agreed to pay a total of $70.7 million to settle allegations that they broke federal and state laws by submitting or causing the submission of false claims to Medi-Cal related to Medicaid Adult Expansion under the Patient Protection and Affordable Care Act (ACA), the Justice Department announced August 18, 2022.

The parties that entered into the three separate settlement agreements are:

• Ventura County Medi-Cal Managed Care Commission which does business as Gold Coast Health Plan, a county-organized health system (COHS) that contracts to arrange for the provision of health care services under California’s Medicaid program (Medi-Cal) in Ventura County;
• Ventura County, which owns and operates Ventura County Medical Center, an integrated health care system that provides hospital, clinic, and specialty services;
• Dignity Health, a San Francisco-based not-for-profit hospital system that operates two acute care hospitals in Ventura County; and
• Clinicas del Camino Real, Inc. (Clinicas), a non-profit healthcare organization headquartered in Camarillo.

Pursuant to the ACA, beginning in January 2014, Medi-Cal was expanded to cover the previously uninsured “Adult Expansion” population — adults between the ages of 19 and 64 without dependent children with annual incomes up to 133 percent of the federal poverty level. The federal government fully funded the expansion coverage for the first three years of the program.

Pursuant to contracts with California’s Department of Health Care Services (DHCS), if a California COHS did not spend at least 85 percent of the funds it received for the Adult Expansion population on “allowed medical expenses,” the COHS was required to pay back to the state the difference between 85 percent and what it actually spent. California, in turn, was required to return that amount to the federal government.

The three settlements resolve allegations that Gold Coast, Ventura County, Dignity, and Clinicas knowingly submitted or caused the submission of false claims to Medi-Cal for “Additional Services” provided to Adult Expansion Medi-Cal members between January 1, 2014, and May 31, 2015. The United States and California alleged that the payments were not “allowed medical expenses” under Gold Coast’s contract with DHCS, were pre-determined amounts that did not reflect the fair market value of any Additional Services provided, and/or the Additional Services were duplicative of services already required to be rendered. The United States and California further alleged that the payments were unlawful gifts of public funds in violation of Article IV, Section 17 of the Constitution of California.

As a result of the settlements, Gold Coast will pay $17.2 million to the United States; Ventura County will pay $29 million to the United States; Dignity will pay $10.8 million to the United States and $1.2 million to the State of California; and Clinicas will pay $11.25 million to the United States and $1.25 million to the State of California.

Contemporaneous with the False Claims Act settlement, the U.S. Department of Health and Human Services agreed to release its right to exclude Gold Coast and Ventura County in exchange for their agreements to enter into 5-year Corporate Integrity Agreements (CIAs). The CIAs require, among other things, that Gold Coast and Ventura County each implement centralized risk assessment programs as part of their compliance programs, and each hire an Independent Review Organization to complete annual reviews. Gold Coast’s annual reviews will focus on its calculation and reporting of Medical Loss Ratio (MLR) data under Medi-Cal, while Ventura County’s annual reviews will target hospital claims submitted to Medicare and Medicaid, including claims submitted to Medicaid managed care organizations.

The civil settlements include the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Atul Maithel, Gold Coast’s former controller, and Andre Galvan, Gold Coast’s former director of member services.

Home Health Care Business Owner Sent to Prison For $10M Medicare Fraud

Naomi Moore, a 59-year-old Houston woman was sent to federal prison following her conviction of committing and conspiracy to commit health care fraud after she pleaded guilty April 7.

On August 16, 2022, U.S. District Judge Charles Eskridge imposed the statutory maximum of 60 months to be immediately followed by three years of supervised release. In handing down the prison terms, Judge Eskridge noted a variance would not be appropriate given the amount of money involved in the scheme.

Moore was the owner of Friend’s Place and Metro Health Services, both home health care service businesses located in Houston, Texas.

From May 2006 to June 2019, Moore billed Medicare by fraudulently using names of beneficiaries that were not patients of Metro or Friend’s Place. They did not need home health services, were not treated by a physician and had never been patients.

Moore created false documents and billed Medicare for approximately $10.7 million in purported home health services. The federal health insurance paid nearly $6.8 million on those claims.

Moore was permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future.

Pain Management Physician Convicted of Unlawfully Distributing Opioids

Thomas Romano, 72, of Wheeling, West Virginia, was convicted by a federal jury in the Southern District for unlawfully distributing opioids from his Martin’s Ferry clinic.

According to court documents and evidence presented at trial, Romano, 72, of Wheeling, West Virginia, owned and operated a self-named pain management clinic where his clients traveled hundreds of miles to obtain prescriptions for opioids and other controlled substances. For his opioid and other controlled substance prescriptions, Romano only accepted cash—$750 for an initial prescription and $120 for subsequent monthly prescriptions. The evidence offered at trial demonstrated that the prescriptions Romano issued for opioids and other controlled substances greatly exceeded recommended dosages and were in dangerous, life-threatening combinations which served to fuel the addiction of his clients. According to evidence introduced at trial, between January 2015 and June 2019, Romano prescribed over 111,000 pills, including opioids, benzodiazepines, and muscle relaxants, to nine of his clients.

Romano was convicted of 24 counts of unlawful distribution of a controlled substance, outside the usual course of professional practice, and not for a legitimate medical purpose to these nine clients. He faces a maximum penalty of 20 years in prison for each charge. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. A sentencing date has not yet been set.

California Doctor Sentenced in $38 Million ‘Body Broker’ Workers’ Comp Fraud Case

Randy Rosen, a Beverly Hills surgeon was sentenced to 10 years in state prison for stealing nearly $38 million in an insurance fraud scheme.

This is the largest prison sentence for a provider in California workers’ compensation insurance fraud according to Orange County District Attorney Todd Spitzer.

Rosen pleaded guilty to eight felony counts of insurance fraud and two aggravated white collar crime enhancements for a loss over $500,000 in two separate cases in connection with the recruiting and hiring of “body brokers” to find and pay patients to have medically unnecessary Naltrexone implant surgeries and cortisone shots, said Spitzer.

Rosen was also ordered to pay $9.1 million in restitution and lifted more than $22.35 million in outstanding workers’ compensation liens which frees that money for other injured workers.

The fraud involved hiring body brokers to pay patients at Southern California sober living homes to undergo medically unnecessary surgeries, medical testing and other medical procedures, Spitzer said.

Rosen’s girlfriend Liza Visamanos, 43, of Los Angeles, pleaded guilty to two felony charges of insurance fraud and was sentenced to one year of home confinement and formal probation and was ordered to pay restitution, Spitzer said.

Insurance companies were fraudulently billed about $600 million and paid about $50 million, he said.

Rosen and Visamanos were arrested in June 2020 by the Orange County District Attorney’s Office on nearly $52 million warrants.

In addition to submitting patients to medically unnecessary procedures, Rosen required that the patients undergo unnecessary drug tests. Those tests were sent to Lotus Laboratories, which is owned by Visamanos.

California law prohibits such referrals where the physician or his immediate family has a financial interest with the person or entity receiving the referral. It is alleged Lotus Laboratories fraudulently billed at least 22 different insurance providers more than $3 million.

Thomas Douglas, of Playa del Rey, Shea Simmons, of Jeanerette, Louisiana, and Patrick Connolly, of Los Angeles, also face felony charges for their involvement in the scheme.

National Health Insurance Company Agrees to Pay More Than $1.9 Million Over Prescription Drug Practices

National Health Insurance Company (National Health) settled with the California Department of Insurance who had alleged that, since 2015 the company continuously violated California law by failing to post a list online of covered prescription drugs (known as a formulary) and incorrectly placing certain drugs into higher cost tiers, denying consumers information needed to make critical care and coverage decisions.

The company has agreed to pay the Department a $1.995 million penalty for prescription drug and patient information practices that the Department contended were unfair and discriminatory.

The Department’s ongoing regulatory review found National Health committed a number of violations of California law in its small and large employer group coverage. When National Health did finally post its drug formulary online in 2019, it was not the current list of prescriptions drugs covered, but an outdated list of previously covered drugs. The Department alleged this practice discouraged the enrollment of individuals with certain health conditions. The incorrect formulary gave the appearance of reduced benefits for consumers with particular conditions, potentially dissuading policyholders from submitting claims or persuading those who were looking for a policy to seek coverage elsewhere.

Another example of National Health apparently diminishing benefits for consumers with particular conditions was when, in its July 1, 2019 formulary, it placed almost all immunosuppressant drugs for transplant rejection as well as all covered drugs that the Department examined for multiple sclerosis, HIV, hepatitis B, and hepatitis C in the highest cost-sharing tier, regardless of generic or brand name status. By placing all of these drugs into the same tier, chronically ill individuals may have been discouraged from enrolling in coverage due to prohibitive costs, and this may have further resulted in lower adherence to a prescription drug treatment regimen.?

Additionally, the Department found National Health’s formulary illegally required prior authorization for all HIV drugs. Prior authorization allows the insurer to determine whether a drug is medically necessary before it will be covered, rather than leaving the determination solely to the consumer’s doctor. The requirement to obtain prior authorization can result in delay and denial of coverage of a drug for a consumer whose doctor determined a prescribed drug was medically necessary.

Lastly, the Department found that National Health placed many preventive drugs, contraceptives, and other pharmacy items that must be covered without cost into tiers subject to patient cost-sharing.?

In California, health insurance companies cannot offer coverage that unreasonably discriminates against chronically ill individuals and must provide coverage that ensures affordability of outpatient prescription drugs. California law also requires that copayments, coinsurance, and other patient cost-sharing for outpatient prescription drugs be reasonable so that patients can access medically necessary outpatient prescription drugs.

• Link to settlement
• In 2014, National Health started offering nongrandfathered health insurance coverage, which is coverage that complies with the federal Affordable Care Act and existing state law, in the employer group health market. National Health eventually provided coverage to approximately 500 small employer group insureds and 1,100 large employer group insureds.
• As of December 31, 2021, National Health Insurance Company is no longer offering health coverage in the small and large employer group markets. If National Health does reenter the medical health insurance market, there is a term in its agreement with the Department requiring the company to maintain a compliance program consistent with industry standards for the major medical health insurance line of business

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Florida Sting Operation Busted 13 Contractors Without Workers’ Comp

In an attempt to save the few remaining insurers doing business in Florida, the state has taken aim at unlicensed contractors who some claim have increased the cost of repair to property in Florida.

Unlicensed contractors, all without proper workers’ compensation insurance on their workers, were charged in a law enforcement sting operation in Florida.

The state’s chief financial officer and the Pasco County Sheriff’s office announced Thursday that 13 people were arrested after a sting in Tarpon Springs in April. The news release did not explain how the operation worked, but in previous stings, authorities have advertised for bids on construction work, posing as property owners. When contractors showed up to look at the job, their contractor licenses and workers’ comp were checked – and found to be lacking.

The National Insurance Crime Bureau also was involved.

The sting operations are conducted every few months and appear to be done most often in southwest Florida. The CFO statement did not indicate why these arrests were not announced sooner.

Other Insurance Fraud Convictions

Florida Staffing Firm Head Sentenced to 24 Years for Off-Book Labor Scheme

Mykhaylo Chugay from 2007 to 2021 according to federal prosecutors said, operated a number of shady staffing companies in south Florida that avoided paying more than $25 million in federal taxes. Last week, a federal judge sentenced Chugay to 24 years in prison for his June conviction on crimes that included fraud, harboring illegal aliens and money laundering, according to prosecutors and news reports.

Chugay was not charged with avoiding workers’ compensation insurance on laborers, but in similar schemes, the employer has failed to obtain comp insurance or has underreported payroll to insurers.

Chugay and associates owned labor-staffing companies in south Florida, including General Labor Solutions, Liberty Specialty Service, Paradise Choice, Paradise Choice Cleaning, Tropical City Services, and Tropical City Group, the Department of Justice said. The firms provided unauthorized alien workers to hotels, bars and restaurants in Key West and other places.

The companies paid the hotel and bar workers an hourly wage, then charged the establishments a fee of $1 to $3.50 for each hour worked, the Herald reported.

A jury convicted Chugay in June with the help of a government witness who made a deal with prosecutors, the Herald reported. After Chugay’s trial, Volodymyr Ogorodnychuk was sentenced to four years in prison for his part in the scheme that he helped run from 2016 to 2020.

Ogorodnychuk pleaded guilty to one count of conspiracy to defraud the United States and the IRS out of more than $3.5 million.

Louisiana Woman Pleads Guilty to FEMA Fraud

Schshinetia Anderson, age 44, a resident of Slidell, Louisiana, pled guilty on August 11, 2022 to FEMA fraud. The defendant is scheduled to be sentenced before the Honorable Mary Ann Vial Lemmon on November 10, 2022. The defendant faces a maximum sentence of 5 years imprisonment, up to a $250,000 fine, up to 3 years of supervised release, and a $100 mandatory special assessment fee.

According to court documents, on or about August 18, 2016, Anderson filed a fraudulent request for financial assistance due to a natural disaster related to the alleged loss of her primary residence. In truth and in fact the house she had been renting did not sustain any damage and she prepared false records claiming that it had. She also prepared false and inflated rent lease agreements to increase the funds she received from FEMA. Anderson received approximately $22,104 as a result of her fraud.

Wife of Ada Pastor Sentenced for His 2021 Murder

Kristie Evans, an Ada woman has been sentenced to life in prison, after pleading guilty to taking part in her husband’s 2021 murder. Evans was sentenced August 11, 2022 for the first-degree murder of 50-year-old David Evans.

?Evans was the pastor of Harmony Free Will Baptist Church in Ada. He was found shot in the head at the home he shared with Kristie in March 2021. Kristie had told investigators at the time that an intruder had come in and shot her husband. Court records later show the man arrested along with Kristie, Kahlil Deamie Square, was actually her lover but also described as David’s lover.

Court documents show Kristie told her daughter she “begged Kahlil to kill David” saying he was “verbally abusive and controlling.” The affidavit continues to say the three met at a Super 8 Motel on several occasions. Kristie pleaded guilty in April.

Kahlil Square was also charged with murder. He is set to have a status hearing Aug. 25.

Buy Broken Down Cars & Use Them in Bogus Claims

Michael Smith, 47, of Southgate, U.K. reported to his insurer that his vehicle had been involved in a road traffic collision. Shortly afterwards, Smith informed another insurance company, Aviva, that the same car had been stolen from outside of his home. Checks run by the two companies uncovered the two claims for the same vehicle, leading them to refer the case to the City of London Police’s Insurance Fraud Enforcement Department (IFED).

Smith was sentenced on Wednesday 17 August 2022 at Central Criminal Court to two years imprisonment suspended for 18 months and 120 hours of unpaid work. He was also ordered to pay ￡6,318.78 in compensation and costs.

He previously pleaded guilty to three counts of fraud by false representation on Wednesday 1 June 2022 at Westminster Magistrates Court.

Smith took out a three-day car insurance policy for a Toyota Rav-4 in the name of Michael Gold on 29 September 2019. On the final day of the policy, Smith called the insurer to report that he had been involved in a road traffic collision earlier that day in the Chelmsford area. He claimed that his vehicle had skidded in the rain and hit a tree, causing significant damage to the front of the car. Smith also alleged that he had a nosebleed and headache as a result of the collision. Smith amended a separate existing policy he held with Aviva to cover the same Toyota Rav-4 on 22 October 2019. Two days after amending the policy, Smith called Aviva to report that the car had been stolen overnight from outside his home address. During this call he confirmed that he had purchased the vehicle on the day that he amended his policy.

After running checks with a number of companies, Aviva was notified by a car auction company that they were already storing a Toyota Rav-4 with the same number plate in relation to a claim with another insurer. Aviva attended the storage site where the car had been held for three months and confirmed that the car was the same vehicle, therefore could not have been stolen from Smith’s home.

In the meantime, Smith provided Aviva with a copy of the receipt, showing that he had purchased the vehicle from a lettings company on 22 October 2019.

IFED officers traced the ownership of the car, which revealed that it had been purchased from a salvage car dealer on 29 September 2019 in a damaged state.

On 20 August 2019, Smith amended his Aviva policy to cover a Mercedes-Benz. He contacted Aviva the next day to report that he had been involved in a road traffic collision whilst driving to a MOT test in Borehamwood. A vehicle in front of him had indicated to turn but continued driving straight ahead, which caused Smith to swerve and collide with a large stone in the process. There was substantial damage to the vehicle and the airbags had been deployed.

Smith provided Aviva with proof of purchase for the Mercedes-Benz from the same company he would later claim to have bought the Toyota Rav-4.

Massachusetts Contractor Sentenced for $1.8 Million Payroll Tax Scheme

George Vasiliades, 58, was sentenced by U.S. District Court Judge Allison D. Burroughs to one year of home confinement and three years of supervised release. Vasiliades was also ordered to pay more than $1.8 million in restitution and a $200,000 fine. The government recommended a sentence of 30 months in prison.

Vasiliades, an Ipswich, Mass. man who owned and operated numerous Massachusetts businesses was sentenced June 8, 2022 for manipulating his payroll to evade over $1.8 million in taxes.

In December 2021, Vasiliades pleaded guilty to 17 counts of failure to collect, account for and pay over federal employment taxes; 17 counts of aiding and assisting the filing of false tax returns; and one count of making a false statement to the Social Security Administration.

Vasiliades operated several businesses, including Alpine Property Services, Boston Central Management, Delta Labor Company, Olympic Painting & Roofing and Turnpike General Contracting. Between 2008 and 2013, Vasiliades concealed the true size of his companies’ payroll from the Internal Revenue Service (IRS) in order to reduce the cost of doing business and thereby increase his profits. Among other methods, Vasiliades directed certain employees to create shell corporations and then paid employees through these corporations as if they were independent contractors. Vasiliades also paid some employees from bank accounts that were not connected to his corporate payroll reporting software and, as a result, would not be reported as wages to the IRS. In addition, Vasiliades paid part of an employee’s hourly wages or salary in nontaxable, and false, expense reimbursements, such as truck or fuel reimbursements. In total, Vasiliades’ scheme resulted in more than $1.8 million in tax losses.

CEO of Taunton Insurance Agency Pleads Guilty in Connection with Fraud and Embezzlement Scheme

David G. Pietro, age 67, of Sandwich, Mass. and his company, DGP-Miles Insurance Agency, of Taunton, each pleaded guilty in Bristol Superior Court to five felony counts of Larceny by Embezzlement. Following the guilty pleas, Judge Daniel O’Shea sentenced Pietro to two years of probation, ordered him to perform 100 hours of community service, and ordered him to pay restitution to the victims in an amount to be determined. The judge also ordered DGP to surrender its business entity insurance license, effectively barring the company from continuing to operate as an insurance agency or producer in the industry.

The CEO and President of the Taunton-based insurance agency pleaded guilty in connection with an embezzlement scheme that left client companies uninsured.

Pietro, a licensed insurance producer and broker, collected insurance premiums from commercial clients through DGP, but repeatedly failed to remit those premium payments to his clients’ insurance carriers, as they had entrusted him to do. Instead, he misled his clients as he used their money to pay for his own business and personal expenses. As a result of the embezzlement scheme, several client companies had various commercial insurance policies cancelled and were left uninsured, as well as uncompensated for the premium payments they had entrusted to DGP.

In total, Pietro and DGP stole $295,278 in insurance premiums from five commercial clients, mostly small businesses.

Why this felon was only given probation makes no sense.

Another Ridiculous Sentence of Probation – This one for Arson

Harry Sano Jr. admitted in Berkshire Superior Court to charges he set fire to 232 Stockbridge Road in Great Barrington on July 7, 2021. Sano set the blaze while a sale was pending to a buyer who planned to tear down the structure.

Sano, an 86-year-old pleaded guilty in July to setting ablaze the site of his former “Wonderful Things” yarn store in south county last summer. He was sentenced to two years of probation and fined $5,000.

Judge John Agostini said in court documents Sano was by all accounts an “exemplary citizen.”

Arson – regardless of the quality of the person who causes it, is committing a crime of violence that could have resulted in the injury or death of firefighters, tenants or neighbors.

Insurance Fraud in the U.K.

On August 25, 20200 the Association of British Insurers and the Insurance Fraud Bureau Announced:

• The number and cost of fraudulent claims fell in 2021, but the average scam uncovered at a record level of over ￡12,000.?
• Motor insurance claim fraud still the most common insurance con.

The sustained crackdown on insurance fraud is paying dividends, with a fall in both the number and cost of dishonest claims uncovered last year according to data out today from the Association of British Insurers (ABI). However, the average detected fraud was at a record ￡12,283, due to the slower fall in their total value.

The figures highlight that in 2021, compared to 2020:

• The number of fraudulent claims detected at 89,000 fell by 5% to their lowest since 2007. Their total value at ￡1.1 billion dropped 2% to the lowest level since 2012.
• Motor insurance claim frauds continued to be the most common, albeit that last year saw a fall in their total volume and value. There were 49,000 frauds detected, down 7%, although their value, at ￡577 million, fell by only 1%. The number of organized motor frauds uncovered at 10,617 rose by 8%. This rise in part reflected initiatives by the Insurance Fraud Bureau to tackle crash for cash staged motor scams.
• While the number of property insurance frauds dropped to 18,000 compared to 24,000 in 2020, their value rose to ￡124million, up 9%. This was driven by a rise in the value of commercial frauds uncovered.
• The number of fraudulent liability insurance claims uncovered at 12,978 dropped by 10%; their value, at ￡378,000, fell by 8%.

Some of the more unusual insurance cheats exposed include:

Cancer con. A woman lied to family, friends, and her insurer when she reported that she had been diagnosed with terminal cancer and had approximately one year to live. Her claim, which would have paid over ￡130,000, fell apart when the hospital confirmed that they had no record of her as a patient. She was sentenced to two years imprisonment suspended for two years, with a six-month electronically tagged curfew.

Pyramid scheme. A woman pretended to be a passenger in a genuine vehicle collision to make a bogus personal injury claim for nearly ￡4,000. However, investigations revealed that she was in fact on holiday in Egypt when she was supposedly receiving medical treatment.??

Own goal 1. A professional footballer received a sentence to serve one-year community order after admitting taking out a one-hour motor insurance policy to try and cover his tracks after colliding with another vehicle while driving uninsured?

Own goal 2. A semi-professional footballer in Scotland was filmed scoring a hat trick, despite claiming he had suffered whiplash in a car crash only hours before.?

D.I.Y. vandal. A man who claimed that his car had been vandalized was found to have caused the extensive damage himself.??

Ghost broker exposed. ?A man was convicted of pocketing over ￡50,000 in just over 15 months by selling hundreds of fraudulent motor insurance policies. He was sentenced to 21 months imprisonment suspended for two years and ordered to complete 180 hours of unpaid work.

Blocked by a black box. A trio attempted to defraud insurers of over ￡48,000 with a crash for cash scam but were foiled when their in-car telematics (black box) showed that the damage had been caused on a different date while the vehicle was stationary. The group were sentenced, with one receiving 12 months imprisonment.

Not so fast and furious. Two men were found to have grossly exaggerated a minor accident. They both made personal injury claims after being hit by a drunk driver at around 40 mph but were foiled when the driver revealed that his foot had slipped from the brake and had rolled into the car at no more than three miles per hour. Both men were sentenced to 4 months imprisonment, suspended for 18 months.??

Shop till you get caught. A mother of two received a suspended prison sentence after being caught claiming for items worth over ￡3,000 after alleging her luggage had gone missing following a Caribbean cruise. Not only was the claim fake, but she had also already been refunded for many of the items after informing the online retailers that they had never been delivered.?

The name claim game. A fraudster was ordered to pay back the ￡58,000 in compensation after claiming twice for the same car accident to the same insurer under two different names. He was sentenced to 22 months in prison suspended for 18 months.??

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