Coalition Against Insurance Fraud Unveils Top 10 Insurance Fraud Cases

The coalition Against Insurance Fraud is a broad-based group established in June 1993 to combat the growing incidence and cost of insurance fraud.  The coalition advocates federal and state anti-fraud legislation and regulation, works to inform the public about the societal costs of this national problem, and teaches consumers how to avoid being victims of insurance fraud.  Their annual list of the top 10 fraud cases for 1993, ranges from mundane, small scams to sophisticted operations involving billion dollar fraud rings.  Some of the culprits come from within the insurance industry; others are medical providers, attorneys or professional con artists.

1. Alan Teale, who used a variety of insurance and reinsurance operations to take in $72 million in premiums for health, disability and business insurance from 5,500 policyholders, then refused to pay claims.  Teale, a British citizen, was based in Atlanta.  Status:  Pleaded guilty to a 41-count indictment.  Received 17 years in prison and restitution of $50 million.  His wife and business parter, Charlotte Cox Rentz, received a 13-year prison term.

2. Norman Branson, of Columbia, MD, built a complex web of nearly 50 insurance companies and sold bogus medical malpractice insurance to hundreds of physicians.  Status:    Arrested in La Jolla, California in July 1993 after a neighbor identified him from the television program, “America’s Most Wanted.”  Currently awaiting sentencing.

3. Michael and David Smushkevich, two brothers who operated hundreds of medical clinics and mobile labs in Southern California that offered free physicals to lure patients, and then billed insurers thousands of dollars per patient for serious medical problems.  Their scams may have bilked up to $1 billion from the insurance system.  Status:   In 1993 the two brothers pleaded guilty to fraud charges.  They were also charged in a 155-count indictment in 1991 along with ten other defendants.

4.  National Medical Enterprises, based in Santa Monica, California, one of the nation’s largest hospital chains, has been charged with admitting thousands of patients to its psychiatric hospitals who did not need hospitalization, then treating them at inflated prices.  Status:   In December 1993, NME agreed to pay $89.9 million to settle charges brought by 13 major insurance companies.  In September, NME settled two lawsuits with six insurers by agreeing to pay up to $125 million.  Two NME hospitals in New Jersey paid a record $400,000 fine to the insurance department in that state in a settlement that did not disclose violations.

5. A network of 100 people in the New York City area led by free-lance insurance adjusters, which conspired to bilk insurance companies out of hundreds of millions of dollars through inflated claims and staged accidents involving commercial insurance.  Status:   A two-year federal investigation of public insurance adjusters in New York resulted, in the fall of 1993, in insurance fraud charges against 100 people.  Charged were adjusters, insurance employees, policyholders and two former police detectives.  All defendents have been charged with mail fraud, which carries a maximum penalty for each count of five years in prison, a $250,000 fine and full restitution of claims settlements.

6. The Kallao family, a roving band of criminals from Las Vegas that staged a variety of “slip and fall” and auto accidents in Illinois, Wisconsin and Ohio.  Eight members of the family have admitted to collecting $1 million in bogus claims.  Status:  A total of 11 people, eight of them Kalleo family members, pleaded guilty to federal racketeering charges in 1993.  Each was sentenced from two to four years in prison.

7. New Jersey “ghostriders,” involving 107 defendants – including alleged bus passengers, medical providers and attorneys who got caught in a three-year sting by fraud investigators who staged bus accidents and watched people hop on and claim injuries.  Status:  A total of 107 people were netted in the sting.  Ten doctors, including physicians and chiropractors, and four lawyers were charged.  Each of the 107 were fined between $5,000 and $30,000.

8. First Assurance & Casualty Co., Ltd., an unlicensed insurance company that sold insurance to small businesses in inner-city Los Angeles, then failed to pay claims following the LA riots.  Status:   Following complaints that claims were not being paid, California regulators reviewed the company’s financial records and found the firm had a negative net worth of $5 million.  First Assurance and dozens of other ‘off-shore’ insurers were thrown out of California following a sweeping review of unlicensed insurance companies.  But, the story is far from over.

9. Rebell Helm Insurance Services Inc., a California firm that collected millions of dollars from small businesses to set up “self funded” health insurance programs, but siphoned the money off into personal accounts, leaving $10 million in unpaid claims.  Status:   The insurance company’s chairman, Michael A. Rubell, pleaded guilty to fraud and tax evasion and agreed to assist investigators as part of a plea bargain.  In June of 1993, a Los Angeles grand jury indicted James B. Helm, Scott Clawson and Douglas Taylor, all of California, on fraud charges and of stealing millions of dollars from a defunct insurance company.  More than 10 million in unpaid claims remain.

10. Gaven M. Cooke, using more than 24 aliases, claimed he staged more than 200 fake accidents throughout the country during his 20-year insurance fraud career.  He boasted of his exploits on national television talk show programs, and was arrested in Colorado.  Status:   Mr. Cooke has fled authorities and is still at large. (Editor’s note:  No relation to John Cooke!)