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Federal prosecutors in California arrested four attorneys, two law office administrators and one chiropractor on September 28, 1995. They were all charged with insurance fraud. The charges stem from a nine-month investigation into what one investigator called, “the mother lode” of recent insurance fraud investigations.
The story has become almost a cliche. Cappers would recruit accident victims from various ethnic groups: Filipinos, Hispanics, Russians, Vietnamese, etc. After the capper brought the victim to the law office, the victim would be referred to a medical provider. The provider had agreed in advance to kickback a portion of the medical fees, anywhere from one-third to one-half of the amount billed for medical services.
Those arrested included Stanley Baumann, a Beverly Hills attorney; his brother Aaron Baumann, the office administrator for the firm of Baumann and Rose; Jane Baumann, Aaron’s wife; Thomas Patterson, an attorney in Santa Ana; Monroe Zalkin, an attorney who moved from Miami to run the San Diego office of Baumann and Rose; and Andrew Matyas, an attorney with offices in Beverly Hills and Daly City.
The chiropractor, Mordechai Banayan of Hollywood, was arrested and charged on a separate indictment. Investigators allege Banayan had contracts with over 100 California chiropractors. He reportedly received more than $2 million in fraudulent insurance payments from the law firm of Baumann and Rose, and returned $1 million in kickbacks to the law firm. He is also alleged to have forged the signatures of some Baumann and Rose clients and cashed checks made out to these clients at check-cashing facilities.
Almost all transactions between the attorneys and the cappers were in cash. In fact, cappers were alleged to have lined up in the lobby of the law firm waiting for payments. During a good month, the firm would handle as many as 550 bogus claims.
Investigators targeted the law firms and the medical offices in this operation and ignored the claimants. Although some of the accidents may have been staged, the investigators decided to go after the lawyers, cappers and medical personnel who were victimizing both the insurers and the claimants by inflating fees and taking kickbacks.
The seven people arrested were charged with various counts of mail fraud, conspiracy to commit mail fraud and tax fraud. Patterson pleaded guilty to a single count of mail fraud. He claimed he was unaware at first that the administrator he had hired was taking kickbacks from Banayan and that he (Patterson) had eventually called a halt to the practice. However, investigators noted he allowed the practice to go on for 18 months. Jane and Aaron Baumann also made plea bargains. Authorities expected all defendants except Banayan to cooperate. Banayan, in fact, has disappeared and his whereabouts are unknown.
Banayan, who also worked with other law firms, claimed he had done nothing wrong and that the insurance companies were influencing the federal government to treat him as a criminal. His legitimate business dealings were none of the insurance companies’ business, he claimed.
The investigation that resulted in these arrests—and is expected to result in many more—was a joint effort between state and federal investigators and insurance companies who had noticed an inordinate number of claims coming from both the offices of Baumann and Rose and from Banayan.
© Copyright 1995 Alikim Media