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By Barry Zalma
This One Isn’t Fiction Because No One Would Believe It
My call, in the March 3, 1997, edition of “Insurance Week,” has already been answered. I received a copy of findings of fact and conclusions of law in a case filed in the US District Court for the Central District of California entitled “CIGNA Property and Casualty Insurance Company v. Polaris Pictures Corporation, US Inbanco, Ltd., Continental Pictures Corporation, Paul Ebeling, Kendall Earl Capps, Adrien Wirz and Jacob Wizman, there docketed as case number CV 932259 JSL.
On February 20, 1997, United States District Judge J. Spencer Letts found that a lawyer and others had committed fraud by purchasing a policy of marine insurance for the sole purpose of sinking a boat. The findings of Judge Letts read better than I could ever imagine. Here is part of what Judge Letts concluded:
“The evidence presented to the court convinces the Court, according to the overwhelming weight of the evidence, that defendants, Polaris Pictures Corp. (‘Polaris’) and US Inbanco Ltd. (‘Inbanco’), conspired with at least one of the named defendants in this action, and a nonparty lawyer (the ‘lawyer conspirator’), to engage in a very sophisticated fraud to collect insurance proceeds from plaintiff, Cigna Property and Casualty Insurance Company (‘Cigna’), a marine insurer. In essence, the fraud intentionally concealed from Cigna the material fact that the conspirators’ purpose in purchasing the insurance from Cigna was not to protect themselves against the risk of an unknown future event, but rather to precipitate an accident which would allow them to collect on it. As a result, a judgment of rescission of [the policy] issued to Polaris and Inbanco is warranted.
“On June 9, 1992, the lawyer conspirator signed an Order Contract to purchase a brand new ‘76 Azimut motor yacht for $1.9million.
“Prior to June 1992, the lawyer conspirator had sustained three total losses of yachts that he either owned or held ownership interests in. Each of these prior yacht losses was insured and each prior yacht loss was paid in full by the respective insurer.”
“The lawyer conspirator then arranged for Continental to ‘sell’ the yacht to Polaris. The Continental Polaris transaction was a stock transaction between a company about which little evidence was presented (Continental) and a company with virtually no assets (Polaris). Polaris was formed by the lawyer conspirator and completely controlled by him at all relevant times. It was also located at the same address as the lawyer conspirator’s residence.”
The evidence showed that Polaris never did business of any kind or substance. In addition, the evidence showed that Polaris was placed between the principals of this fraud as a diversion in order to disguise the identity of the person who would get the money in the event of a loss namely, the lawyer conspirator.
“The court finds that defendants’ fraudulent scheme consisted in part of using the insurance proceeds to pay to Inbanco, as a ‘creditor,’ the sham ‘debt’ secured by the vessel.”
“The court finds a conscious plan to defraud Cigna by temporarily distancing the lawyer conspirator from Polaris until the insurance proceeds had been paid. All of the ostensible transactions discussed above, with the exception of the purchase of the boat, were among parties all closely tied to the lawyer conspirator, and the corporate parties did not have any meaningful assets.”
“The reason the lawyer conspirator took such extensive measures to distance himself from these corporations and transactions was to divert attention away from his own personal loss history of sinking vessels.”
“Polaris and Inbanco eventually purchased marine insurance for the yacht, named “Principe Di Pictor,” from Cigna. The application [for the insurance] also failed to state the material fact that Polaris and Inbanco’s purpose for purchasing this insurance was to collect on it, and that a preplanned event for the destruction of the yacht and collection of the insurance was soon and certain to occur.”
“The yacht was scuttled on November 7, 1992 [two weeks after the policy was issued], off the Coast of Italy during its maiden voyage. The lawyer conspirator [was] on board at the time.”
“The account of the scuttling from the lawyer conspirator was that the yacht, allegedly worth $3.5 or $3.62 million, and the lives and bodies of the people on it, was entrusted to a person met for the first time in a dockside restaurant in Naples. This person, whose documents were written in a foreign language, brought with him two other persons who did not speak English and six black duffel bags with undisclosed contents. The three strange men were allegedly applicants for the jobs of Captain and crew.”
“The Court finds defendants’ claim to be wholly preposterous. The Court finds the account of the scuttling so incredible that standing alone it would raise serious questions as to whether the boat was deliberately scuttled.”
“Purchasing insurance, not for the purpose of insuring a risk, but rather for the purpose of collecting the insurance for an event that is being planned, is a highly material fact that should be stated to the insurer.”
“The lawyer conspirator was without any credibility as a witness, and he looked, acted and sounded very much like a conspirator in a dishonest scheme. The lawyer conspirator’s testimony was not cogent and his financial records were very difficult to follow.”
Thank you Judge Letts for seeing through an insurance fraud and recognizing that an insurance company can be a victimized by an insured. Thank you Neil S. Lerner and all the lawyers at Sands Narwitz Forgie Leonard & Lerner who tried the case on behalf of CIGNA.
Send me more stories. The word has to get out if the insurance industry is to have any hope of decreasing insurance fraud especially fraud run by experienced and successful perpetrators like the one described by Judge Letts.
Barry Zalma of the Culver City, California, Law Firm of Barry Zalma, Inc., is also the president of Claim School, Inc., and the publisher of How Your Friends and Neighbors are Screwing You and Stealth Interrogation. He can be reached at (310) 390-4455.
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