Zalma's Insurance Fraud Letter - July 15, 2022

Posted 2022-07-15 12:36:56

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Zalma’s Insurance Fraud Letter

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ZIFL - Volume 26, Number 14

THE COURTS ARE BACK CONVICTING FRAUD PERPETRATORS WITH VIGOR - READ ABOUT THE CONVICTIONS IN THIS ISSUE OF ZIFL!

A ClaimSchool™ Publication © 2022, Barry Zalma & ClaimSchool, Inc., Go to my blog & Videos at: Zalma on Insurance, And at https://zalma.com/blog Go to the Insurance Claims Library, Listen to the Podcast: Zalma on Insurance, Videos from Zalma on Insurance, Subscribe to Barry Zalma on Substack.com,

Volume 26, Issue 14 – July 15, 2022, Subscribe to e-mail Version of ZIFL, it’s Free! Read last two issues of ZIFL here. Go to the Barry Zalma, Inc. web site here, Videos from “Barry Zalma on YouTube” , Go to Barry Zalma videos at Rumble.com at https://rumble.com/zalma, @zalma on Truth Social
Quote of the Issue

“If This Is the Best of Possible Worlds, What Then Are the Others?” Voltaire
Greg Lindberg Gets New Trial

Jury Instruction Misled Jury by stating that an “Official Act” Existed as a Matter of Law

Greg E. Lindberg and John D. Gray were convicted of honest services fraud and federal funds bribery in connection with a series of payments and offers of payment, in the form of campaign contributions, made to Mike Causey, the elected Insurance Commissioner for North Carolina. The jury found that these payments were made in exchange for Causey assigning a different Deputy Commissioner to oversee the affairs of Lindberg’s insurance companies.

In United States of America v. Greg E. Lindberg, Nos. 20-4470, 20-4473, United States Court of Appeals, Fourth Circuit (June 29, 2022) the Fourth Circuit granted a new trial.

FACTS

Greg E. Lindberg served as chairman of Eli Global LLC, an investment company, and as owner of Global Bankers Insurance Group, an insurance management company, during the relevant period from April 2017 to August 2018. Lindberg owns several insurance businesses subject to regulation in North Carolina. John D. Gray worked as a consultant for Lindberg during the relevant period. Lindberg and Gray (“defendants”) were convicted of conspiring to commit honest services wire fraud and federal funds bribery for offering millions of dollars in campaign contributions to Mike Causey, the Commissioner of the North Carolina Department of Insurance, in exchange for the reassignment of a Senior Deputy Commissioner assigned to review Lindberg’s insurance companies.

In November 2016, Mike Causey was elected as North Carolina’s Commissioner of Insurance. Several weeks after he was elected, Causey was scheduled to meet with Lindberg and other members of Eli Global’s leadership. Prior to the meeting, he received a phone call from his campaign treasurer notifying him that he had received a $10,000 donation from Lindberg. Causey testified that he thought the contribution was “unusual” both because of the size and the timing, and he decided to return the donation. At the meeting, Gray explained that Eli Global was in the process of purchasing another insurance company based in Michigan and asked Causey to call his counterpart in Michigan “to put in a positive word.” Causey agreed and made the phone call.

Causey testified at trial that Gray then called him to state that Lindberg had donated $500,000 to the North Carolina Republican Party (“NCGOP”) with $110,000 to be sent to Causey’s campaign and that Gray and Lindberg wanted to host a fundraiser for Causey in December. Causey later reached out to the Federal Bureau of Investigation (“FBI”) to express concerns about these offers of donations and agreed to cooperate with an FBI investigation into Lindberg and his associates.

Over the course of several meetings, they discussed Lindberg creating an independent expenditure committee and donating substantial amounts, between $500,000 and $2,000,000 to Causey’s reelection campaign. The day after the meeting, Causey’s campaign received $230,000 from the NCGOP. In total, Causey received $250,000 in donations funneled through the party.

Following the conclusion of the investigation, the defendants were each charged in March 2019 with one count of conspiracy to commit honest services fraud, in violation of 18 U.S.C. § 1349, and one count of federal funds bribery and aiding and abetting the same, in violation of 18 U.S.C. §§ 666(a)(2) and 2. Defendants pleaded not guilty, and a jury trial was held from February 18 to March 5, 2020.

At trial, defendants and the United States both objected to the district court’s proposed jury instruction defining “official act. Both parties agreed that the issue of what qualifies as an “official act” should be left for the jury.

The district court denied both objections. Further, the district court prevented defendants from arguing or putting on evidence to show that Obusek’s reassignment was not an “official act.” After three days of deliberation, Gray and Lindberg were convicted on both counts. Defendant Gray was sentenced to a term of imprisonment of thirty months, and Lindberg was sentenced to a term of imprisonment of eighty-seven months.

Count One: Honest Services Fraud

The trial court stated in no uncertain terms “that the removal or replacement of a [S]enior [D]eputy [C]ommissioner by the [C]ommissioner would constitute an “official act.”

In McDonnell v. United States, 579 U.S. 550, 580 (2016), the Supreme Court “defined honest services fraud with reference to § 201 of the federal bribery statute. In particular, the Court imported the “official act” requirement found in 18 U.S.C. § 201 and found that “the [g]overnment was required to show that Governor McDonnell committed (or agreed to commit) an ‘official act’ in exchange for the loans and gifts.”

Section 201(a)(3) defines the term “official act” and the Supreme Court narrowed the definition of the term:

In sum, an “official act” is a decision or action on a “question, matter, cause, suit, proceeding or controversy.” The “question, matter, cause, suit, proceeding or controversy” must involve a formal exercise of governmental power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee. It must also be something specific and focused that is “pending” or “may by law be brought” before a public official. To qualify as an “official act,” the public official must make a decision or take an action on that “question, matter, cause, suit, proceeding or controversy,” or agree to do so. McDonnell, 579 U.S. at 574 (emphases added).

Although the district court properly defined the term “official act” according to the directive of McDonnell, it then instructed the jury in no uncertain terms “that the removal or replacement of a [S]enior [D]eputy [C]ommissioner by the [C]ommissioner would constitute an official act.” The Fourth Circuit found that in doing so, the district court impermissibly took an element of the crime out of the hands of the jury and violated the defendant’s Fifth and Sixth Amendment rights.

The district court erred, however, in interpreting the “official act” inquiry to be a pure question of law.

The Supreme Court was clear in McDonnell that “[i]t is up to the jury, under the facts of the case, to determine whether the public official agreed to perform an ‘official act’ at the time of the alleged quid pro quo.” And the McDonnell Court clearly considered it the province of the jury to determine what constitutes an official act.

Having determined that the district court improperly instructed the jury on the “official act” element, the Fourth Circuit was required to determine whether the error requires vacating the convictions.

A constitutional error is harmless when it appears beyond a reasonable doubt that the error did not contribute to the verdict obtained. [Neder v. United States, 527 U.S. 1, 2 (1999) (emphasis added) (quoting Chapman v. California, 386 U.S. 18, 24 (1967)].

The Fourth Circuit decided that it could not conclude beyond a reasonable doubt that the jury verdict would have been the same absent the error. As a result, the Fourth Circuit concluded that the instructional error was not harmless as to Count One and, therefore, that defendants’ verdicts on Count One must be vacated.

Count Two: Federal Funds Bribery

The solicitation or acceptance by an elected public official of a campaign contribution, the offer of money through an Independent Expenditure Committee, and the giving or offering of a campaign contribution to an elected public official by a donor do not, in and of themselves, constitute a federal crime even though the donor has business pending before the elected public official, and even if the contribution is made shortly before or after the public official takes official actions favorable to the donor. T

In order to satisfy the elements of bribery for this case, the public official need not actually perform an official act, or even intend to do so. When the defendant is a person who is charged with paying a bribe, it is sufficient if the defendant intends or solicits the public official to perform an official act in exchange for a thing of value.

The court’s erroneous “official act” instruction may, therefore, have effortlessly bled into the jury’s consideration of Count Two-federal funds bribery.

“Official Act” Instruction

Defendants also argued that the district court erred because it failed to instruct the jury that an “official act,” as defined by the Supreme Court, is an element of federal funds bribery.

Congress expressed its clear intent to reach the conduct of state and local officials (where such officials are agents of a covered entity that receives $10,000 or more annually in federal funds). Congress is within its prerogative to protect spending objects from the menace of local administrators on the take.

In conclusion, the district court erred by instructing the jury that an “official act”-an element of the crime of honest services fraud-was present as a matter of law. Further, the error is not harmless and, therefore, the Fourth Circuit vacated defendants’ convictions on Count One and Count Two because it found that the verdicts were improperly infected by the instructional error on Count One. The case is, therefore, remanded for a new trial.

ZIFL OPINION

Lindberg’s and Gray’s actions properly caused concern for the newly elected Insurance Commission, Mr. Causey, because of the large dollar amounts from two people who supported and contributed to his opponent. He, to protect himself, called in the FBI who, working with him, caused the U.S. Attorney to indict Lindberg and Gray, tried them to a jury and convicted them. The Fourth Circuit reversed. Lindberg and Gray are still serving time in prison and have moved to be released for the new trial. The court did not comment on their guilt, only that the trial court’s error tainted the verdicts. They could be convicted again as long as the trial court uses an appropriate instruction.
Wisdom

“All you have to do is take a close look at yourself and you will understand everyone else.” – Isaac Asimov

“Science is not only compatible with spirituality; it is a profound source of spirituality.” — Carl Sagan

“There’s nothing more dangerous than a man with nothing to do and no one to live for. This has been true in every place for all of time. our young men are drowning in idleness, purposelessness & godlessness, and we’re paying for it.” —Allie Beth Stuckey

“The Greater the Difficulty, The More The Glory In Surmounting It.” – Epicurus

“Let Us Temper Our Criticism With Kindness. None Of Us Comes Fully Equipped.” – Carl Sagan

“Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected and handed on for them to do the same.” — Ronald Regan

“The supreme irony of life is that hardly anyone gets out of it alive.” — Robert A. Heinlein

“In three words I can sum up everything I’ve learned about life: It goes on.” – Robert Frost

“Wish not so much to live long as to live well.” – Benjamin Franklin

“It was a bright cold day in April, and the clocks were striking thirteen.” –George Orwell

“Discourage litigation. Persuade your neighbor to compromise whenever you can. As a peacemaker the lawyer has a superior opportunity of being a good (hu)man. There will still be business enough.” -- Abraham Lincoln
Criminal Lawyers Should be Disbarred

Lawyer Convicted of Insurance Fraud Only Suspended for Two Years

Insurance fraud is considered, universally, as a crime of moral turpitude. Regardless, the New York State Bar was only asked to join with the New Jersey State Bar who suspended a lawyer, after he was convicted for insurance fraud and other wrongful conduct, for two years rather than being disbarred.

In the Matter of Neal Meredith Pomper, an attorney and counselor-at-law. (Attorney Registration No. 1726363); 2022 NY Slip Op 04173; No. 2021-02031; Supreme Court of New York, Second Department (June 29, 2022)

The respondent Neal Meridith Pomper was admitted to the Bar at a term of the Appellate Division of the Supreme Court in the Second Judicial Department on May 6, 1981. The Court directed Pomper to show cause why an order should not be made imposing discipline upon him for the misconduct underlying the discipline imposed by an order of the Supreme Court of New Jersey filed October 21, 2020.

The Supreme Court of New Jersey filed October 21, 2020, Pomper was suspended from the practice of law in New Jersey for a period of two years, retroactive to September 18, 2019, the date of his temporary suspension.

Pomper and the New York Office of Attorney Ethics (OAE) executed a stipulation providing in relevant part, as follows:

The respondent was admitted to the practice of law in the State of New Jersey, under the name Neal M. Pomper, in 1982. The respondent’s disciplinary history in New Jersey consists of a private reprimand in 1986, an admonition in 2004, and a censure in 2009 for assisting his paralegal in the unauthorized practice of law (In re Pomper, 197 N.J. 500, 964 A.2d 299). On September 18, 2019, the respondent was temporarily suspended from the practice of law based on the misconduct underlying this matter (In re Pomper, 239 N.J. 566, 218 A.3d 804), as set forth below.

The respondent stipulated to violating New Jersey Rules of Professional Conduct (hereinafter referred as N.J. RPC) and New Jersey Rules of Court (hereinafter rule), namely, N.J. RPC 1.15(a) (commingling), (d) and rule 1:21-6 (record keeping), N.J. RPC 8.4(b) (criminal act that reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects), and (c) (conduct involving dishonesty, fraud, deceit, or misrepresentation). The basis for the respondent’s violations stemmed from his conviction of, inter alia, insurance fraud (under Docket No. XIV-2015-0391E) and his poor record-keeping practices and commingling of funds (under Docket No. IV-2019-0136E).

THE INSURANCE FRAUD

After the respondent’s home was damaged in a flood in 2011, he contracted with Rivera Remodeling (hereinafter Rivera) to remediate the water damage. At the time, the respondent had a homeowner’s insurance policy with Selective Insurance Company (hereinafter Selective). The respondent’s employee, Larissa Sufaru, sent Rivera’s purported invoice for the remediation to Selective. Sufaru wrote “paid in full” on the invoice to reflect the respondent’s alleged payment of $14,000. Selective investigated the claim. Upon learning that Rivera had not prepared the invoice, Selective denied the respondent’s claim.

On July 10, 2015, a superceding indictment issued by a grand jury in Middlesex County charged the respondent with the following crimes:

third-degree conspiracy to commit insurance fraud;
third-degree insurance fraud;
third-degree attempted theft by deception;
fourth-degree uttering; and
fourth-degree forgery.

Pomper was found guilty of:

third-degree conspiracy to commit insurance fraud based on his agreement with Sufaru to create and transmit a fraudulent invoice to Selective to receive insurance funds;
third-degree insurance fraud based upon the respondent having directed Sufaru to create a “phony invoice” for the purpose of obtaining a benefit from Selective; and
third-degree attempted theft by deception based upon the theory that if Selective had relied on the “phony invoice,” the respondent would have received funds from Selective that he was not entitled to receive.
The respondent was found not guilty of the forgery charge.

Pomper was eventually sentenced to three concurrent one-year terms of probation with mandatory fines and avoided jail.

On or about August 28, 2018, the OAE audited the respondent’s financial records for the preceding 12-month period, which revealed the following deficiencies: client ledger cards were not fully descriptive; legal fees were not deposited into the attorney business account (hereinafter business account); improper business account designation; improper attorney trust account (hereinafter trust account) designation; noncompliant business account and trust account imaged-processed checks; and improper electronic transfers from the trust account.

The audit also revealed that on December 28, 2017, the respondent had deposited into his trust account a $5,675 check for legal fees from client Thomas Paddock (hereinafter the Paddock check). On January 5, 2018, the respondent transferred those funds into his business account.

Pomper stipulated that he commingled personal and client funds when he deposited the Paddock check into his trust account. He also stipulated to engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation by placing the Paddock check into his trust account in an attempt to “reduce his tax liability for 2017 and receive the benefit of a presumably more favorable tax bracket in 2018.”

Pomper also stipulated that he had been the subject of random audits by OAE in 1987 and 2013. He had certified to OAE on April 10, 2013, that he corrected the 2013 deficiencies.

Supreme Court of New Jersey Order to Show Cause

On March 18, 2021, the Grievance Committee for the Ninth Judicial District informed the Court about Pomper’s discipline in New Jersey. The respondent did not notify the Grievance Committee and the Court of his temporary suspension in 2019 or of the discipline imposed in New Jersey in 2020.

To date, the respondent has not responded to the Court’s order to show cause, has not asserted any defenses and has not requested additional time in which to respond.

Findings and Conclusions of Law

Based on the foregoing, the court found that the imposition of reciprocal discipline was warranted based on the discipline imposed by the Supreme Court of New Jersey. In view of the circumstances of this case, the court concluded that the appropriate sanction is a suspension for a period of two years.

ZIFL OPINION

The New York State Bar was kind to Mr. Pomper who admitted to conviction of a crime or moral turpitude and to actions of moral turpitude by misusing client’s funds, and still he was not disbarred. Although the state may have felt sorry for him since he stipulated to his wrongdoing, a lawyer should not be allowed to practice law after being convicted of insurance fraud including creating a false document in support of a false insurance claims.
Free Insurance Videos

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://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
Chutzpah: Admit Fraud & Claims Fraud Exclusion Ambiguous

Insured Convicted of Fraud but Still Sought UIM Benefits

“Chutzpah” is a Yiddish term meaning “unmitigated gall” where, for example, a defendant convicted of murdering his parents asks for clemency because he is an orphan.

Kevin Muir made a claim for underinsured motorist benefits after being injured in an auto accident that fit the definition of Chutzpah. His insurance company denied the claim because Muir had admittedly previously made fraudulent statements in an effort to obtain personal injury protection benefits related to the same accident and was convicted of a crime relating to the claim. Although the policy, like all insurance policies, excluded claims related to fraud, Muir still sued the insurance company after it denied his claim. The insurer filed a motion for summary judgment and the district court dismissed Muir’s lawsuit.

In Kevin Muir v. Cincinnati Insurance Company, 2022 UT App 80, No. 20210289-CA, Court of Appeals of Utah (June 24, 2022) the Court of Appeals found the fraud exclusion clear and unambiguous.

BACKGROUND

Muir is listed as a “covered driver” under an auto insurance policy (the Policy) issued to him by Cincinnati Insurance Company (Cincinnati). The Policy provided several types of coverage, including liability, personal injury protection (PIP), uninsured/underinsured motorist (UIM), and collision.

In 2017, Muir was riding as a passenger in a vehicle that was rear-ended by another vehicle. Muir suffered injuries and received $25,000 in damages from each of the two drivers’ insurance companies-amounts that represented the policy limits of those policies. Cincinnati also paid out PIP benefits to Muir under the Policy.

THE FRAUD

In connection with his PIP claim, Muir “stated that he was not working due to the injuries he sustained,” but this statement was false: Muir was, in fact, “working as a self-employed truck driver.” As a result of his false statement, Muir “was charged criminally with insurance fraud and entered ‘no contest’ pleas to reduced Class A misdemeanors.”

THE CLAIM

Muir subsequently made a demand for UIM benefits under the Policy. However, Cincinnati denied coverage, relying on the Policy’s fraud exclusion, which reads:

‘We’ do not provide coverage for any ‘covered person’ who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.

Following this denial, Muir sued Cincinnati for breach of contract and breach of the duty of good faith and fair dealing. The parties filed cross-motions for summary judgment on the question of whether the Policy’s fraud exclusion precluded Muir’s claim for UIM benefits.

The district court granted Cincinnati’s motion and denied Muir’s.

ANALYSIS

Muir claimed that the Policy’s fraud exclusion was ambiguous and asked the court to construe the ambiguity in his favor.

The Court of Appeals noted that an insurance policy is merely a contract between the insured and the insurer and is construed pursuant to the same rules applied to ordinary contracts. An insurer may exclude from coverage certain losses by using language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided.

The Policy contains a fraud exclusion that bars coverage when a claimant makes a fraudulent statement in connection with any accident or loss for which coverage is sought. Muir acknowledged that he made fraudulent statements in securing PIP benefits in connection with the accident in question but argued that those fraudulent statements should not negate his claim for UIM benefits.

The fraud exclusion is contained in the “General Provisions” section of the Policy, not within any specific coverage provision, so the exclusion is applicable to all types of coverage provided by the Policy. The inclusion of the word “accident” in the fraud clause links the misrepresentation to the accident in question, not just to the coverage sought, and makes Muir’s preferred reading of the provision unreasonable, especially given Muir’s admission that his “fraudulent conduct was indeed ‘connected’ to the accident” at issue.

The accident for which Muir sought UIM coverage is the same accident for which he made fraudulent statements in seeking PIP coverage. And the Policy precludes coverage sought in connection with any accident for which a covered person has made fraudulent statements.

The Court of Appeal, therefore, agreed with the district court’s determination that Cincinnati was, as a matter of law, within its rights under the Policy to deny Muir’s claim for UIM coverage.

ZIFL OPINION

This case teaches that there is no such thing as a small or inconsequential fraud. The fraud language of the policy was clear and unambiguous as it applied to the entire policy. Muir fraudulently collected on his PIP claim when he succeeded in his attempt to defraud Cincinnati and was convicted criminally of the attempted fraudulent claim. His chutzpah in seeking UIM coverage under the same policy where he was, because of his fraud was unmitigated and not worthy of a law suit let alone an appeal. In fact, Cincinnati should seek to recover as restitution the money paid in PIP benefits.
Good News From the
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Land Rovers and a Porsche piled up in Tanya Parrish Grant’s garage after she falsely billed Medicare more than $50M for back braces and other rehab equipment. The Raleigh, N.C. woman included 422 dead people in her bills. She paid firms in India and Pakistan to give her lists of Medicare patient names and personal identifiers. The lists came from overseas call centers that contacted Medicare patients to ask if they needed the equipment. Grant’s firms — Carolina Rehab Produces and Atlantic Brace — then billed Medicare. She charged Medicare without physician orders, and without shipping products. Even when patients received equipment in the mail and returned the equipment, Grant didn’t reimburse Medicare for the stuff. When audited by Medicare contractors, Grant forged physician orders if no orders existed in her files. She used the money to buy a home near Raleigh; a townhome in Ft. Lauderdale; a Porsche; and several Land Rovers. She also amassed more than $1M in cash and investments. Grant pled guilty and will spend up to 10 years in prison when sentenced later this year.

Eight years in prison await Linda Morrow for a $44M healthcare theft. Staring at a lengthy prison term after being convicted, Linda and her hubby Dr. David Morrow sold their $9.5M home in Rancho Mirage, Calif. and bolted for freedom in Israel. Morrow and Linda ran a cosmetic surgery clinic in Rancho Mirage, Calif. They billed insurers as if the elective procedures were medically needed. The pair forged records. They billed tummy tucks as hernia repair or abdominal reconstruction surgeries; rhinoplasties as deviated septum repairs; and breast lifts and augments as fixing tuberous breast deformities. Seven insurers were billed, 10 patients were injured or disfigured, medical IDs of two patients were used illegally, and 20 patients had their health info illegally disclosed. The Morrows also conned patients into signing false testimonials that their cosmetic procedures were medically necessary. The couple sold their mansion and luxury car fleet, then wired millions to fund their escape to Israel after being arrested. David used a fake Mexican passport to enter Israel, and a bogus Guatemalan passport while living there. Linda applied for Israeli citizenship using a false identity. They were extradited back to the U.S. for trial. David received 20 years while on the run, and is now serving his federal sentence. The California insurance department played a key role in the investigation.

California’s fraud law doesn’t prohibit ensuing lawsuits against the same defendant doc when the actions involve different victim pools or schemes of fraudulent activity, a state appellate court has ruled. State Farm filed a state whistleblower suit under the fraud law (the insurer is represented by Coalition member Katten Muchin Rosenman LLP). Pain doc Sonny Rubin and his medical affiliates had fraudulently billed for other procedures and services in connection with epidural steroid injections and MRIs, State Farm alleged. Allstate had sued the Orange County doc for $34.1M over the epidurals a month earlier, though not the MRIs. The state’s “first to file” rule doesn’t prevent two insurers from filing separate civil actions seeking penalties for separate sets of false claims, the appellate court ruled. The two lawsuits involve separate victim pools. “Allstate is the only overlapping victim,” the published opinion says. “Thus, even if the two complaints allege the same fraud, State Farm is only precluded from pursuing [fraud law] penalties for the false claims that defendants billed to Allstate.” The appellate court also made clear that “an insurer-relator can pursue [fraud law] penalties for all the insurance claims submitted to any insurer that are part of the same fraud. Nothing in the statute suggests an insurer-relator can only pursue penalties for the false claims involving its own insureds.”

A husband and wife teamed to bleed federal disability of more than $167K by faking his health. Stephen Schwartz claimed he was injured and unable to work, so he started receiving federal disability money. Yet the Fort Smith, Ark. man secretly worked as a school bus driver. Social Security learned he was working, then stopped sending him disability money. Schwartz and his wife Rebekah jointly asked for disability reinstatement. He couldn’t drive a big truck, keep log books, follow maps or directions, carry on a conversation, count, or concentrate, they lied. All the while, Schwartz drove for a roofing company, counted roofing materials for delivery and pickup, and followed his employer’s delivery and pick-up instructions. Schwartz had his income paid to Rebekah to hide it from Social Security. The couple received six months in federal prison.

A corrupt CFO disguised bribes in a $500M scheme that inflicted painful and unneeded spinal surgeries on thousands of workers comp patients. George William Hammer was the financial chief for a hospital and other medical firms headed by Michael Drobot in Southern California. Hammer facilitated more than $40M of bribes paid to Drobot’s cronies in the largest workers comp fraud case in California history. Hammer disguised the bribes as legitimate expenses on Drobot’s tax returns. Drobot’s bribes greased the patient referrals, false claims and worthless surgeries at Pacific Hospital, which Drobot owned. Docs, chiros, patient recruiters and others feasted on the patients’ misery with the bribes. Drobot paid $15K of kickbacks for lumbar fusion surgery and $10K per cervical fusion surgery. He also owned a spinal-implant distributorship and required docs who referred patients to use implants supplied by his company. He then charged insurers inflated rates for the devices. Drobot falsely billed at least 150 workers comp insurers for more than $500M. Drobot ended up with five years in federal prison in 2018. Hammer received 15 months for tax fraud this week. The California insurance department played a key role in the massive case.

Marc Sporn used his telemed and telemarketing firms to peddle unneeded DNA tests falsely charged to Medicare — while playing a shell game to avoid taxes. The Delray Beach, Fla. man’s telemed firms cold-called seniors to convince them they needed the tests, which can show indicators of potential medical conditions. Labs paid Sporn kickbacks for the prescriptions generated by docs who were on the take, as were pharmacies that filled the scripts. The kickbacks and stolen Medicare money piled up. So Sporn opened bank accounts for one of his firms, Medi Biotech, and another account in the name of a shell corporation called Walmol Holdings. Diverting the money into Walmol’s accounts helped Sporn avoid more than $4M of taxes. Sporn used stolen Medicare money to buy luxury items. Among the glittery stuff were high-end Rolex watches, diamond jewelry, classic and exotic cars like a Bentley convertible, two yachts, and other items. The IRS tried to collect back taxes. So Sporn hid assets by transferring property to trusts and individuals, and by repeatedly opening and closing companies. Sporn was given 14 years in federal prison, and must repay more than $4M to the IRS.

Two men bought small, struggling hospitals then used them as pipelines for billing insurers $1.4B of false urine tests. The rural hospitals were ideal targets for takeovers in Florida, Georgia and Mississippi by Jorge and Ricardo Perez. The hospitals could charge insurers higher rates under agreements to better serve rural communities. The Perez’s converted the hospitals to testing labs then billed insurers for phantom or inflated urine tests. The scheme made the hospitals appear to be testing the urine of addicted patients. In fact, other labs did the testing. Much of the lab testing billed through the rural hospitals involved unneeded urine drug testing for vulnerable addiction treatment patients. Often the patients were recruited through kickbacks paid to recruiters and med providers — frequently at sober homes or substance abuse treatment facilities. After private insurers began to question the bills, the Perez’s moved on to another rural hospital. They left the one they took over in the same or worse financial status as before. Three out of four rural hospitals closed shortly after. The Perez’s were convicted and will be federally sentenced later.

Insurance settlements never reached often-seriously injured clients when their personal-injury lawyer stole $3.4M she held in trust for them in Portland, Ore. Lori E. Deveny forged client signatures on settlement documents she sent to insurers, and made unauthorized transfers of funds to her personal accounts. Many of Deveny’s clients never received their insurance payouts. Many clients were vulnerable, suffering serious injuries in car crashes or other incidents. Margaret Medley was 68 when a car crashed into her electric wheelchair as she crossed a street. Deveny strung her along for years, making a partial payment only after Medley complained to the Oregon State Bar. Deveny made elaborate excuses to clients, including: insurers typically are slow to settle claims; she was following up with insurers about their delays in paying settlements; settlements were delayed by medical liens; she was ill; and other family members were ill. Deveny spent client money on personal credit card and loan payments; big-game hunting trips to Africa and taxidermy costs; her husband’s photo business; home remodeling; expensive cigars and other luxury expenses. This was the largest fraud by a single lawyer in Oregon history, officials say. Deveny will be federally sentenced in November. Prosecutors will seek 10 years.

Up to six years in prison await contractors Salvador and Pamela Chiaramonte. They fleeced homeowners who lost everything in the 2017 Tubbs Fire in Central California, which scorched and ruined 4.6K homes. Yet part of the sentence also could merely include three years of supervised release. Victims are irate. The Chiaramontes could get an undeserved break after imposing so much hardship on at least homeowners who just wanted to rebuild their ruined homes from the ashes, victims say. Residents paid for work that was shoddily performed or not done at all. The Chiaramontes also missed deadlines, broke promises on construction start dates, and let their rebuilds drag on with no progress. In a bait-and-switch, the couple also quoted flat costs then jacked up the prices. Heating vents were supposed to go on the floor of one home, but ended up on the ceiling. And a front porch kept failing inspection and had to be torn up three times. No one worked on the inside of their house for five weeks. Another homeowner, Jacqueline Scott, was excited to drop by and find laborers at work. Then she realized they were using her living room to paint someone else’s cabinets. With another family, a half-dozen trusses were put in backward, so the furnace ended up in the wrong spot. Workers also had to rip out part of the roof, and nearly 80% of the inside walls, because they were improperly framed. The Chiaramontes demanded $80K from the insurer of yet another family, though did only $60K of work. The couple pled no contest and will be sentenced in July.

A new law in Louisiana addresses unfair claims practices. Fines levied by the insurance commissioner may now increase from $250K to $500K for persons engaging in unfair competition, or unfair or deceptive acts or practices. The commissioner may also levy repeat fines every six months for continuing violations. The other provisions of the state’s unfair claims practices act remain unchanged.

Washington state’s insurance department shares two cases: Attawwaab Fard’s girlfriend was involved in a collision while driving Fard’s vehicle. The Kent, Wash. man’s vehicle didn’t have insurance, so he bought a policy from Progressive Insurance after the wreck. Fard later filed a claim, trying to have the vehicle damage repaired. Progressive denied the claim because Fard bought the policy after the accident. Two weeks later, Fard said his vehicle was stolen and damaged during the theft. The damage was the same damage Fard reported in his prior denied claim. Progressive investigated both claims, then referred them to the insurance department’s Criminal investigation Unit when Fard didn’t cooperate. He received 30 days of electronic home monitoring. Abshir Ali: The Tukwila man was involved in a collision when his vehicle wasn’t insured. Ali bought a policy from The General three days later, saying the collision happened the day after he bought the policy. The General discovered the collision pre-dated Ali’s coverage, and thus denied his $8.6K repair claim.

Pumped up and bodybuilding at the gym, Anthony Ragusa stole more than $200K of disability money by claiming he was too injured to work anymore. The New York City muscle man said he fell while working as an electrician. Ragusa lied he was so banged up he couldn’t bend over to put on his shoes, sit for more than 30 minutes or walk for more than 15 minutes. All the while he pumped weights at the Bev Francis gym, a popular gym on Long Island. Ripped and tattooed, Ragusa trained for bodybuilding competitions. Not so smartly, he posted numerous photos and videos of himself pounding weights. Ragusa even appeared on the Instagram account of his wife Loly, who’s a pro and member of the International Federation of Bodybuilding and Fitness. Ragusa also worked while claiming he was crippled — he ran the WhiteStar Limousine company all the while. Ragusa pled guilty, received three years of probation and must repay the stolen disability money.

A new national estimate of insurance fraud losses — an amazing $308.6B stolen every year.

On June 6-7, the Coalition Against Insurance Fraud held its first in-person Midyear Meeting since 2019 – gathering over 120 attendees from across the country! Over the course of the event, we hosted 28 speakers and panelists with expertise on the latest fraud trends and leaders who delivered incredible insights that provided attendees with a deeper understanding of various anti-insurance fraud topics.

The most significant takeaway from this year’s meeting may be our members’ ability to get a first-hand look at the Coalition’s efforts to update our widely cited 25-year-old “$80B in annual fraud” statistic. The new estimate was revealed along with exclusive access to the accompanying report titled The Impact of Insurance Fraud on the U.S. Economy.

The Coalition worked with “Dr. Fraud,” Dr. J. Michael Skiba, Ph.D. of Colorado State University Global, and his team of researchers to produce the research report and the new estimate. The Coalition extended its most profound appreciation for the support and contribution of our partners in this study: IASIU, APCIA, NICB, and III. The full report and estimate will be published this coming July.

An incorruptible insurance commissioner takes down an insurer exec who tried to bribe him. Better protecting insurer data security and privacy to prevent insurance scams. A trove of 187 state fraud bills being carefully monitored. Encouraging more diversity among fraud fighters. These were just some of the newsmaking presentations during the Coalition’s Midyear Meeting in Orlando. The Coalition updated members about news and ambitious and game-changing projects we’re pursuing in 2022 and beyond, says the latest FraudBlog by A.D. DuVall, the Coalition’s Deputy Executive Director, in recapping our first face-to-face midyear meeting since 2019. “Over the course of the event, we hosted 28 speakers and panelists with expertise on the latest fraud trends and leaders who delivered incredible insights that provided attendees with a deeper understanding of various anti-insurance fraud topics,” A.D. writes. She also plans to leave the Coalition in December to pursue other career opportunities.

Dying may not be the happiest way to wiggle out of arson fraud charges, though for Felix Berjemo it was certainly effective. Prosecutors offered the Pottsville, Pa. man four-12 years for torching his house for an insurance payout. The blaze was intentionally set on the basement couch. Berjemo had just bought a $50K policy and told investigators he wasn’t at home when the fire broke out. Yet his own security camera showed him opening the back basement door, and the fire behind him. A man adds something to the fire, leaves through the back door and shuts the door behind him. When confronted with the video, Bermejo said he would have exited the home through the back door but didn’t see fire or smoke as he left. Berjemo died before his trial started. He was free on bond at the time.

Paul Andrecola sold $2.7M of a pesticide that he claimed was a cure for COVID-19. The Maple Shade, N.J. man said his toxic brew was registered with the EPA as a proven cure for the virus. Andrecola made 150 sales. Among them were a medical clinic in Georgia, police department in Delaware, Virginia fire department — and numerous federal agencies including the Department of Veterans Affairs. Andrecola brewed disinfectant liquids and wipes with the brand name GCLEAN. They were pesticides not registered under FIFRA and not on the EPA’s “List N of Disinfectants for Use Against SARS-CoV-2.” He used another firm’s EPA registration numbers for his products. Andrecola lied his products were EPA-approved to kill Coronavirus by creating numerous false documents to support his claims. Andrecola pled guilty and will spend up to 20 years in federal prison when sentenced.

Iowa has revoked the license of a nurse convicted of conspiring to steal $5M from Medicare. Mark Hill provided telehealth consultations with patients for Integrated Support Plus Inc., a telemed company in Florida. Hill provided telehealth consultations with patients for Integrated Support Plus, a telemed company in Florida. Hill collected bribes from medical-equipment suppliers in exchange for prescriptions for their products. Many prescriptions weren’t based on patient exams or any other personal interview. Hill and a crony ordered 14K orthotic braces over 19 months — an average of 865 orders each month, or 29 orders per day. Hill signed nearly 7,100 brace orders, leading to $10M of charges to Medicare. Hill was paid close to $125K for orders he processed.

Financially strapped romance novelist Nancy Compton-Brophy shot her husband Daniel for $350K of life insurance in Portland, Ore. Daniel was a chef at the Oregon Culinary Institute. He was found dead with chest and back wounds in the institute’s rear kitchen soon after he arrived at 7:30 a.m. Nancy claimed she was home all morning, yet surveillance cameras placed her downtown between 6:30 a.m. and 7:28 a.m. Just days after the shooting, Nancy asked detectives working on the case to send her a letter stating she wasn’t a suspect. She wanted to give it to her life insurers and collect on the policies. The couple also earlier bought a Glock handgun. Nancy then bought ghost gun parts on eBay. She reassembled the parts on the Glock so it wouldn’t be traced, then shot Daniel. Next, she put the original gun parts back together so the Glock wouldn’t match the shell casings connected to Daniel’s murder. Nancy also self-published numerous novels — including “The Wrong Husband.” And she wrote an essay, “How to Murder Your Husband.” She also bookmarked an article, “10 ways to cover up a murder,” on an iTunes account she shared with Next, Daniel. Brophy got life in prison. Now 71, she’s eligible for parole in 25 years.

Anxious to bolt his marriage and scam $1.7M of life insurance, Joe Fitzpatrick drowned his wife Annemarie in a creek then said she died when they crashed their ATV in the water, prosecutors say in York, Pa. Hours before her death, Annemarie wrote, dated and signed a note in her day-planner at work saying “If anything happens to me — Joe.” She also wrote an email to herself: “if something happens to me” saying the couple had marital problems. Suspiciously, a huge log also nearly fell on her the night before. The trial judge set aside the jury verdict, saying prosecutors didn’t present enough evidence to support a conviction. An appeals court reinstated the conviction. Annemarie’s note was allowed as evidence to show the victim’s state of mind, an exception to the hearsay rule. Yet the note did more than reflect the woman’s fear, it also asserted that her husband would be responsible “if something untoward or violent happened to her,” the state Supreme Court ruled. Offering the note as proof would be inadmissible hearsay. Fitzpatrick awaits a new trial back in lower court.

The pandemic has triggered a rash of dodgy claims against California’s employment disability agency — overwhelming the system and delaying claims to legitimately disabled workers. Calls to the Employment Development Department’s call centers surged to 12 times their normal volume in late 2021 and early 2022, with large volumes of claim calls suspect. Many calls went unanswered, leaving some Californians in the lurch for months. Less than half of unique phone numbers calling the agency’s disability insurance call centers were answered on average between November 2021 and April 2022. That’s down from about 80% between May and October 2021. In January, the department said it suspended about 27K suspicious medical provider registrants and 345K claims from those supposed providers or other suspicious activity. The department also typically receives 70 new medical provider registrations per week. Yet the department received about 30K registrations from late November to early December 2021.
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Barry Zalma has created at Locals.com a series of insurance educational materials most of which are free to anyone. The free materials include more than 441 videos and more than 4200 digests of recent appellate court opinions and more than 81 videos dealing with true crime stories of insurance fraud.

In addition to the free materials, for a paid subscription of only $5 a month or $50 a year to Zalma on Insurance at Locals.com you or your staff of claims personnel can receive important, more detailed and informative information needed by everyone interested in insurance, insurance claims, insurance law or insurance fraud.

Each video will run from five to twenty minutes and can be viewed by each claims person with a first cup of coffee or glass of orange juice once or multiple time if desired.

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Zalma on Insurance will provide materials on insurance, insurance claims, insurance law and insurance fraud. Some material, like the daily blog posting, will be presented free while the Excellence in Claims Handling will require a Locals subscription.

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Become a Professional Claims Handler

In search of profit, insurers have decimated their professional claims staff. They laid off experienced personnel and replaced them with young, untrained, unprepared people. A virtual clerk replaced the old professional claims handler. Process and computers replaced hands-on human skill, empathy and judgment. Money was saved by paying lower salaries. Within three months of firing the experienced claims people gross profit increased.

The promises made by an insurance policy are kept by the professional claims person. Keeping a professional claims staff dedicated to excellence in claims handling is cost-effective over long periods of time. A professional and experienced adjuster will save the insurer millions by resolving disputes, paying claims owed promptly and fairly, and by so doing avoid litigation.

The professional claims person is an important part of the insurer’s defense against litigation by insureds against insurers for breach of contract and the tort of bad faith. Claims professionals resolve more claims for less money without the need for either party to involve counsel. A happy insured or claimant satisfied with the results of his or her claim will never sue the insurer.

Insurers who believe they can professionally, fairly, and in good faith with young, inexpensive, inexperienced and untrained claims handlers should be accosted by angry stockholders whose dividends have plummeted or will plummet as a result. When an insurer compromises on staff, profits, thin as they may have been previously, will move rapidly into negative territory. Tort and punitive damages will deplete reserves. Insurers will quickly question why they are writing insurance. Those who stay in the business of insurance will either adopt a program requiring excellence in claims handling from every member of their claims staff, or they will fail.

Insurance is a business that must change if it is to survive. Insurers must rethink the firing of experienced claims staff and reductions in training to save “expense.” Insurers should, if they wish to succeed, adopt a program to promote excellence in claims handling that can help insurers keep the promises made by the insurance policy and avoid charges of breach of contract and the tort bad faith in both first and third party claims.

True Crime Stories of Insurance Fraud
There are now available at https://rumble.com/zalma more than more than 81Video True Crime Stories of insurance fraud.

Barry Zalma, Esq., CFE presents videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud. This Video Blog of True Crime Stories of Insurance Fraud with the names and places changed to protect the guilty are all based upon investigations conducted by me and fictionalized to create a learning environment for claims personnel, SIU investigators, insurers, police, and lawyers better understand insurance fraud and weapons that can be used to deter or defeat a fraudulent insurance claim. You can see all the True Crime Stories of Insurance Fraud and insurance law with a total of more than 420 videos at https://rumble.com/zalma.

Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/
New Books:
The Equitable Remedy of Rescission of Insurance

An Effective Tool to detect, deter and defeat insurance Fraud Hardcover – June 17, 2022

The Equitable Remedy of Rescission

Rescission is an equitable remedy first created in the ecclesiastical courts of Elizabethan England. When the United States was conceived in 1776 the founders were concerned with protecting their rights under British common law.

The judge in a court of equity can weigh many different sides to a case and explore different perspectives to arrive at a judgment.

Available as: A Kindle book A Paperback or a hardcover.

Barry Zalma, Esq., CFE

Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455;

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

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