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Two former officers of Twentieth Century Life Insurance Company have been indicted in Florida. The two are suspected of diverting almost $9.7 million in insurance premiums between 1989 and 1990. The company suspended business in late 1990 and was put into liquidation in 1991 when North Carolina Insurance Commissioner Jim Long found it to be “hopelessly insolvent” due to the actions of the former management. Long noted that he did not expect the indictments to cure the insolvency but he hoped that companies doing business in North Carolina would “receive the clear message that individuals who violate insurance laws of this state will be prosecuted to the fullest extent of the law,”
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An investigation in Ventura County, California, resulted in the arrest of thirteen suspects, including chiropractors, attorneys and a psychologist. Arrested along with these professionals was a 32-year-old security guard from Kerman, California. The guard was suspected of filing workers’ compensation claims in 1990 in spite of the fact he had sustained no new injury since he had filed a claim five years previously while working for another employer. Outgoing Insurance Commissioner John Garamendi indicated that arrests like this one should send a clear message to insurance fraud perpetrators to watch out as they, too, may soon face arrest.
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In Fitchburg, Massachusetts, a woman has been indicted for alleged premium fraud in a workers’ compensation case. The woman allegedly gave false job descriptions and under-reported the payroll for her delivery service from 1989 to 1993. The case was investigated by Liberty Mutual Insurance Company in cooperation with the Massachusetts’ Attorney General’s Office and the Insurance Fraud Bureau of Massachusetts. These are the first indictments brought under the premium fraud provisions of the Workers’ Compensation Reform Act of 1991.
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Common Pleas Court Judge James R. McGregor of Allegheny County, Pennsylvania, was applauded when he sentenced a Whitehall insurance salesman, Daniel Wahl, to 14 to 28 years in prison. The applause came from people who had purchased fraudulent annuities from Wahl’s company, Lifestyles Insurance Services. Many of the victims testified that their losses had affected not only their finances but their health and marriages.
Of the six insurance companies involved, two (Corporate Life of West Chester, Pennsylvania, and First Capital Life of California) have failed and are being liquidated. These two and three others (National Slovak Society, Catholic Knights of America Insurance Company and Pacific Standard Life) are either currently paying or are expected to pay their victims. The sixth company (Denver-based WSA Fraternal Life) was still evaluating the situation.
Wahl, who voluntarily surrendered his insurance license in February, pled guilty to 156 theft charges in September. Although Wahl was ordered to make restitution to his victims, McGregor was not optimistic about the victims’ chances of recovery since McGregor noted Wahl had made no efforts at restitution from the close of Lifestyles Insurance in July 1993 until his arrest in September 1994.
After lengthy litigation, including an unsuccessful appeal to the California Supreme Court, Robert B. Scapa and Michael S. Brown, partners in an Encino, California, law firm, were disciplined for using paid cappers to solicit clients. The two were suspended for 30 months, stayed and placed on probation for four years. Actual suspension of 18 months began on August 20, 1994. The case was investigated by the insurance fraud task force of the State Bar, created in the 1980s to fight insurance fraud.
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A New York warehouse owner paid an arsonist $1,00O to burn down his building so that Ilse owner could collect the insurance. Luis Martinez, the building owner, was arrested when police were tipped off before the building was torched. Martinez flagrantly disregarded the fact that 80 families lived above the warehouse when lie arranged for the building to be burned. He is accused of attempted arson and conspiracy to commit insurance fraud.
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A Philadelphia telemarketing company has been charged with running a boiler-room type operation providing durable medical equipment to Medicare recipients. Telemarketers working for the six companies run by Diane Rooney and John Cocivera called over 5,000 elderly people and convinced them to purchase items such as heating pads and canes. Medicare was charged for reimbursements of $3.4 million.
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Charlotte Referral Service was the subject of a two year investigation by North Carolina and federal authorities. The investigation resulted in Emil Carl Frey Jr., a North Carolina chiropractor, pleading guilty to one count each of mail fraud and money laundering. Frey admitted defrauding insurance companies by providing unnecessary treatment to auto accident victims with either minor or nonexistent injuries. Estimates of insurance company losses from this scheme range from $800,000 to $1.5 million.
Frey was among a group of chiropractors and personal injury attorneys who accepted referrals from Charlotte Referral Service. The service would read accident reports looking for likely cases. Employees would call certain of the accident victims and offer to take them to a chiropractor. From the chiropractor’s office, the victim would then be referred to an attorney’s office. No charges have been filed against any attorneys involved in the scheme, but several have been disciplined by the State Bar.
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A Minnesota man might have gotten away with his workers’ compensation deception if not for his being investigated on a far more serious charge. The investigation of Allen Owen for the death of his 3-month-old son led to his being charged with fraud and perjury in connection with his workers’ compensation claims.
Owen’s 7-year-old son told authorities that lie saw Owen punch the baby in the stomach. Investigators following up on the lead were interviewing Owen’s girlfriend (who is unrelated to the two children) when she told them that Owen had filed workers’ compensation claims with two different employers for injuries to his shoulder that had actually occurred during a skiing accident.
NICB investigator Dick Ward subsequently uncovered hospital records for previous treatment of a dislocated shoulder. Owen, who had neglected to tell the workers’ compensation carrier about the previous injury, had collected over $16,000 in workers’ compensation benefits from Liberty Mutual.
© 1995 John Cooke Fraud Report