Zalma’s Insurance Fraud Letter September 15, 2022
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Quote of the Issue
“Many Of Life’s Failures Are People Who Did Not Realize How Close They Were To Success When They Gave Up.” — Thomas Edison
Conviction Affirmed for Multiple Counts and One Reversed
Small Victory but Stay in Jail
The appellate court modified the judgment, as a matter of discretion in the interest of justice, by vacating the conviction of insurance fraud in the third degree under count 57 of the indictment and the sentence imposed thereon and dismissing that count of the indictment; as so modified, the judgment is affirmed.
The defendant waived his claim that one count of insurance fraud in the third degree with respect to a certain insurance policy issued by GMAC Insurance, of which he was convicted, was barred by the statute of limitations by not making a timely, written motion to dismiss on that ground.
In The People of the State of New York v. Jean M. Davilmar, also known as Jean Myrtho Davilmar, No. 2018-05468, Ind. No. 4334/16, 2022 NY Slip Op 04975, Supreme Court of New York, Second Department (August 17, 2022) the defendant Jean M. Davilmar appealed from a judgment of the trial court convicting him of larceny in the third degree (2 counts), scheme to defraud in the first degree, insurance fraud in the third degree (17 counts), criminal possession of a forged instrument in the second degree (5 counts), and offering a false instrument for filing in the first degree (4 counts), after a nonjury trial, and imposing sentence.
The defendant only partially preserved for appellate review his challenge to the legal sufficiency of the evidence supporting his convictions of grand larceny in the third degree (2 counts), insurance fraud in the third degree (16 counts), and scheme to defraud in the first degree (see CPL 470.05[2]. In any event, viewing the evidence in the light most favorable to the prosecution the appellate court found that it was legally sufficient to establish the defendant’s guilt of grand larceny in the third degree beyond a reasonable doubt (Penal Law §§ 155.05[1], [2][a], [b]; 155.35[1]. Likewise, the evidence was legally sufficient to establish the defendant’s guilt of insurance fraud in the third degree beyond a reasonable doubt (Penal Law § 176.20. Moreover, the evidence was legally sufficient to establish the defendant’s guilt of scheme to defraud in the first degree. Further, in fulfilling the court’s responsibility to conduct an independent review of the weight of the evidence it was satisfied that the verdict of guilt on each of those counts was not against the weight of the evidence.
The sentence imposed was not excessive. The defendant’s remaining contentions were found to be without merit.
Wisdom
“Age is not a particularly interesting subject. Anyone can get old. All you have to do is live long enough.” — Groucho Marx
“What do automobiles, guns, and home-schooling all have in common that makes the liberals hate them? All these things reduce individual dependence on the government and on the grandiose schemes for other people’s lives created by liberals and imposed by government.” —Thomas Sowell
“Better a good enemy than a bad friend.” — Jewish saying
The Coalition Against Insurance Fraud’s Calculation of Insurance Fraud in the U.S.
The Coalition Against Insurance Fraud’s Report Came up With the Following Conclusions:
Final Estimate Of The Cost Of Insurance Fraud In The United States:
All numbers are in billions and figures are as of 2022:
Property & Casualty $45B
Workers’ Compensation $34
Premium Avoidance $35.1B
Healthcare $36.3B
Medicare and Medicaid Fraud $68.7B
Life $74.7B
Disability $7.4B
Auto Theft $7.4B
The report, when dealing with property and casualty insurance reveals that in 220 the industry collected $728.69 billion dollar in premium. If only 10% of that premium was paid to fraudsters – a fairly reasonable estimate used by the Insurance Information Institute (III) – they would receive $72.87 billion. The numbers should change enormously if the calculation follows the Insurance Research Council estimate that casualty fraud accounted for between 15% and 17% of total claims payments for auto insurance. A 15% calculation could result in $109.30 Billion and 17% the fraudsters would take $123.88 Billion.
California Agents & Brokers Must be Trained on Insurance Fraud
California Gov. Gavin Newsom signed bills in September creating an advisory committee to study the effects of extreme heat on workers and requiring agents and brokers to undergo training on how to identify insurance fraud.
S.B. 1242 requires mandatory training agents and brokers must complete to receive or renew a license. This includes at least one hour of study on insurance fraud. It also requires agents and brokers to report suspected fraudulent applications for coverage to the Department of Insurance and to report to the insurer suspected fraud on an active policy.
The effect, if any, of the law will take years to take determine. My guess is that that it will just ad an expense to the licensing process and make money for a few who will create the courses.
STOLI Fraud Victims & Return of Premium
Lack of Insurable Interest Makes Life Policy Void from Inception
Policy Acquired as Part of a STOLI Fraud Never Existed as a Matter of Law
In Geronta Funding, a Delaware Statutory Trust v. Brighthouse Life Insurance Company, No. 380, 2021, Supreme Court of Delaware (August 25, 2022) the Supreme Court was asked to determine whether premiums paid on insurance policies declared void ab initio for lack of an insurable interest should be returned. The trial court agreed with Brighthouse and relied on the Restatement (Second) of Contracts (the “Restatement”) to determine whether Geronta was entitled to restitution. Specifically, the court held that Geronta may obtain restitution under Section 198 of the Restatement (“Section 198”) if it could prove excusable ignorance or that it was not equally at fault.
ANALYSIS
Overview of Potential Remedies for an Insurance Policy That Is Void Ab Initio for Lack of an Insurable Interest
A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end. A court may never enforce agreements void ab initio, no matter what the intentions of the parties. Thus, when an agreement is void ab initio as against public policy, the courts typically will not enforce a remedy to any extent against either party. In other words, the courts typically will leave the parties where they find them.
Was Rescission Available?
ZIFL OPINON
By waiting two years after inception of the policy for the fake insured the fraudsters defeated the ability of the insurer to rescind. However, since Mansour Seck did not exist the policy was not real, it was a gamble, that the criminal invested a great deal of money, sold the risk to another and profited from the crime only to have the victim sell again until Geronta found itself paying premium on a void policy. To do justice the Delaware Supreme Court has provided a means to determine who is free of guile and who is not when deciding who gets the premium back, if anyone.
Good News From the Coalition Against Insurance Fraud
Handed nearly 12 years in federal prison for doling out addictive opioids, Dr. Kurt Moran is lucky he didn’t get twice that time. Two of the Scranton, Pa. doc’s patients OD’d and died on drugs he prescribed them. He prescribed the potent opioid Subsys to 13 patients overall. Subsys is a fentanyl-based drug used by cancer patients who have excruciating pain. Yet Moran’s patients didn’t even have cancer. A drug company paid Moran $140K of illegal kickbacks to prescribe Subsys, disguising the bribes as speaker fees. Moran also liberally prescribed oxycodone. Dozens of patients testified they grew addicted to pain meds Moran handed out. He could’ve received double the prison time under federal sentencing guidelines.
Johnson & Johnson Has Agreed To Pay $40.5 Million To Settle New Hampshire’s Claims re Opiods
The September 1, 2022 settlement resolves a lawsuit brought in 2018 accusing Johnson & Johnson and its Janssen Pharmaceuticals unit of aggressively marketing opioids to doctors and patients, misrepresenting that the drugs were rarely addictive when used to treat chronic pain, and targeting vulnerable groups like the elderly.
Conviction for Insurance Fraud Affirmed in New York
In The People of the State of New York v. Jean M. Davilmar, also known as Jean Myrtho Davilmar, 2022 NY Slip Op 04975, No. 2018-05468, Ind. No. 4334/16, Supreme Court of New York, Second Department (August 17, 2022) Jean M. Davilmar, also known as Jean Myrtho Davilmar, appealed from a judgment of the Supreme Court, Kings County (Danny K. Chun, J.), rendered March 13, 2018, convicting him of larceny in the third degree (2 counts), scheme to defraud in the first degree, insurance fraud in the third degree (17 counts), criminal possession of a forged instrument in the second degree (5 counts), and offering a false instrument for filing in the first degree (4 counts), after a nonjury trial, and imposing sentence.
Health Insurance Fraud Convictions
Idaho Provider Sentenced to Jail for Defrauding State Medicaid Program
Janna Lyn Miller, 58-year-old of Kuna, Idaho, pleaded guilty on May 12, 2022. She was sentenced on Thursday, August 25, 2022 for executing a scheme to defraud the Idaho Medicaid program.
Seven-Year Prison Sentence Against San Joaquin County Doctor for Medi-Cal Fraud Scheme California
Boca Raton Chiropractor Sentenced To Four Years’ Imprisonment For $20 Million Fraud Scheme
Those convicted in the scheme include:
Sam Anderson, Novus VP of Marketing, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 33 months in federal prison
Patricia Armstrong, Novus triage nurse, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 84 months in federal prison
Slade Brown, Novus Director of Marketing, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 48 months in federal prison
Dr. Mark Gibbs, Novus Medical Director, was convicted at trial of one count of conspiracy to commit healthcare fraud, two counts of healthcare fraud, and one count conspiracy to obstruct justice and was sentenced to 156 months in federal prison
Amy Harris, Novus VP of Patient Services and wife of Bradley Harris, pleaded guilty to one count of conspiracy to obstruct justice and was sentenced to 38 months in federal prison
Bradley Harris, Novus CEO, pleaded guilty to one count of conspiracy to commit healthcare fraud and one count of healthcare fraud and aiding and abetting and was sentenced to 159 months in federal prison
Dr. Laila Hirjee, Novus Medical Director, was convicted at trial of one count of conspiracy to commit healthcare fraud, three counts of healthcare fraud and one count of unlawful distribution of a controlled substance and was sentenced to 120 months in federal prison
Dr. Charles Leach, Novus Medical Director, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 57 months in federal prison
Tammie Little, Novus Registered Nurse, was convicted at trial of one count of conspiracy to commit healthcare fraud and three counts of healthcare fraud and aiding and abetting and was sentenced to 33 months in federal prison
Jessica Love, Novus Registered Nurse, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 102 months in federal prison
Melanie Murphey, Novus Director of Operations, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 66 months in federal prison
Ali Rizvi, Express Medical owner, pleaded guilty to one count of wrongful use of individually identifiable heath information and was sentenced to 18 months in federal prison
Taryn Stuart, Novus Licensed Vocational Nurse, pleaded guilty to one count of conspiracy to commit healthcare fraud and was sentenced to 96 months in federal prison
California Man Sentenced to Federal Prison for Role in Health Care Kickback Conspiracy
Vincent Marchetti, Jr., 58, was found guilty by a jury on December 16, 2021, following a month-long trial. He was sentenced to 48 months in federal prison by U.S. District Judge Robert W. Schroeder, III, on August 30, 2022.
The Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal health care program, such as Medicare, Medicaid or TRICARE. Claims submitted to these programs in violation of the Anti-Kickback Statute give rise to liability under the False Claims Act.
Quit Tam Suit Brings Down Maranatha Human Services Who Agreed to Cease Operations and Pay $850,000
Maranatha Human Services, Inc. (“MARANATHA”) entered a settlement with the United States for falsely claiming that millions of dollars expended to benefit for-profit ventures owned and controlled by MARANATHA and its founder Henry Alfonso Coley (“Coley”), as well as payments to cover Coley’s personal expenses and excessive payments to Coley’s family members, were reasonable and necessary costs in connection with MARANATHA’s provision of Medicaid-funded services to individuals with developmental disabilities. MARANATHA is a non-profit organization based in Poughkeepsie, New York; Coley founded MARANATHA in 1988 and served as its chief executive officer until last year.
Colorado Springs Company and Owner Pay $400,000 to Resolve Allegations That They Submitted False Claims For Aquatic Therapy
Dynamic Physical Therapy, LLC (“Dynamic”), a physical therapy company, and its owner, Emad Yassa, have agreed to pay the United States $400,000 to resolve allegations that they violated the False Claims Act by falsely billing federal health care programs for aquatic therapy services.
This civil matter arose from an action brought under the whistleblower provisions of the False Claims Act. Pursuant to that Act and the settlement agreements, the whistleblower will share in the United States’ financial recovery.
Pill Mill Operator Convicted For Oxycodone Diversion
PURIFICACION CRISTOBAL, was found guilty by a federal jury verdict September 7, 2022 for her participation in a conspiracy to distribute oxycodone without a legitimate medical purpose acting outside the usual course of professional practice. CRISTOBAL was also convicted of two counts of oxycodone distribution pertaining to specific prescriptions. She was found not guilty of other counts of oxycodone distribution pertaining to other prescriptions. Cristobal will be sentenced by U.S. District Judge Katherine Polk Failla, who presided over the approximately two-week trial.
Guilty to Insurance Fraud in Iowa
D’Alan Thurmond, age 41, of Waterloo, pled guilty on April 25, 2022, to one count of Presenting False Information, a class “D” Felony, following an investigation by the Iowa Insurance Division’s Fraud Bureau.
Other Insurance Fraud Convictions
Nebraska Farmer Ordered To Pay $1 Million For Crop Insurance Fraud
Ross Nelson, a farmer of Newman Grove, Nebraska was ordered to pay $1 million in restitution for profiting off a fraudulent crop insurance claim.
The U.S. Attorney’s Office for the District of Nebraska said Nelson provided false losses of soybeans and corn when he filed a claim in 2015 to an authorized insurance provider. Court documents revealed that he received more than $700,000 in reimbursement for losses, and the USDA’s Risk Management agency launched an investigation because Nelson’s losses didn’t match neighboring farms in Holt County.
Guilty Because a Hitting a Tree is not a Deer
Jared Simmons, age 42, of Davenport, pled guilty on September 1, 2022, to one count Presenting False Information, a class “D” Felony, following an investigation by the Iowa Insurance Division’s Fraud Bureau.
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.
Barry Zalma, Esq., CFE
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455;
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