Fraud of the Month

 

Earl O’Garro had it all — and more. The young insurance broker was a rising prodigy in a city known for insurance stars.

O’Garro owned Hybrid Insurance Group, which specialized in expensive, high-risk coverage for businesses and others. He opened Hybrid in a modest suburban office. His business quickly seemed to take off like a flashing comet. One client was the city of Hartford, with O’Garro supposedly buying several liability policies.

Indeed, life seemed good. O’Garro paid himself a high six-figure salary, and bought a six-bedroom mansion in a tony suburb. O’Garro threw himself and hundreds of guests a spectacular wedding at the Ritz Carlton in Jamaica. He had his suits tailored in his office, drove a $100,000 sedan, moved into an $8,000-a-month office suite in Hartford, and hung out at the city’s priciest watering holes. Not to mention the $19,000 of private-school tuition for his toddlers, and soul-food restaurant he bought for his wife.

Upscale lifestyle was addictive, and O’Garro lived far beyond the income he brought in. The grand spending stretched O’Garro dangerously thin. He was sinking in debt, his business was failing.

Spent premiums on luxury

O’Garro began stealing client premiums, using the money for luxury instead of buying his clients their the promised insurance. Trusting businesses had no coverage; they were dangerously exposed if they had to pay for a serious injury or other loss.

He kept spending on high living even as his agency cracked. The breaking point came when he bought a $1-million, 4,000-square-foot waterfront condo in the Dominican Republic. He had to make a series of $100,000 payments that came due within weeks of closing. He didn’t have the money.

Nor was O’Garro paying office rent, his home mortgage, or state loans he took out to hire more employees and move his business into Hartford. Some office staff also was being stiffed.

Turned brokerage into Ponz

O’Garro frantically tried to keep his creaking house of financial cards intact — and avoid having client’s policies cancelled for lack of payment.

His brokerage became a Ponzi scheme as he juggled client premium payments. He stole some of the money to pay for other client premiums and overdue business loans. O’Garro’s accountant quit after being showered with notices from insurers that they were canceling client policies because premiums weren’t paid.

The city of Hartford had paid O’ Garro $900,000 for liability coverage. He diverted the most of the money to pay for his bling lifestyle and other premium payments.

O’Garro desperately invented clients to trick a lender into forking over nearly $850,000 for insurance premiums on fake policies. He hired a design firm to create a phony email address for a real insurer. Posing as an employee of the insurer, he forged email that seemingly verified the policies and convinced the lender that O’Garro needed the loan to help his so-called clients pay for expensive premiums.

His would-be empire collapsed in a smoldering heap. O’Garro stole more than $2 million in premiums and business loans. The house, his agency and reputation vaporized. All he had to show was a large stack of federal charges.

O’Garro offered no defense at trial, and didn’t even testify. A jury needed just an hour to convict O’Garro in 2015. It was one of the fastest decisions in memory. He was handed 6 1/2 years in federal prison. A federal court quickly tossed aside his appeal in November 2017.

“Apologizing and admitting what you’ve done after you’ve already been caught doesn’t mean there’s no crime,” said federal judges Avi Perri said at his 2016 conviction. “In fact, it’s pretty good evidence that there was a crime.”

Scammers grab crash reports to hound victims for treatment

Willis Price and Kevin Kerr were involved in automobile accidents in Memphis. Neither was happy about it. Their anger increased when, within days, they started receiving sales pitches to contact attorneys — possibly to exploit their mishap with bogus injury treatment and fraudulent insurance billings.

The attorneys found their names in local police crash reports. Price and Kerr are the lead plaintiffs in a federal class action lawsuit filed in Tennessee. The suit seeks to quash the sale of police crash reports by the City of Memphis.

Their suit may spur similar filings across the nation, whether or not it succeeds. Personal privacy rights are moving to center stage in today’s cyber-driven world. For years, local police departments and other government agencies have supplemented their budgets by selling the personal information of crash victims as public records. Report sales can earn quite a bit of money for cash-strapped departments and agencies. It’s a revenue stream they want to protect.

But who are the “customers” of the report sales? The U.S. Supreme Court authorized attorneys to advertise for clients in 1974. America’s “personal injury machine” has exploded since then. Shady lawyers, chiropractors, body shops and others use the crash reports to identify crash victims. They hound the victims. The goal is to lure them into getting unneeded — and sometimes medically dangerous — injury “treatment.” Auto insurers are billed for inflated claims. The lawyers may falsely sue insurers to extract yet more money.

It’s a booming scam industry in many states around the U.S.

Access to public records is a crucial to our democratic governance. Yet does the mere fact that you’re involved in a collision give someone the right to access your home address, phone number, drivers license number, date of birth, email and other sensitive personal information?

For all practical purposes, local law enforcement is feeding personal-injury mills by offering up your sensitive information for sale and profit. Do we need more state laws limiting this practice? Or do existing laws simply need better enforcement? Or both?

President Clinton signed into law the Driver’s Privacy Protection Act of 1994. It allows disclosure of personal information only with the person’s express consent. However, the law has many loopholes. Many states (including Tennessee) have similar privacy laws, though enforcement is minimal at best.

The Coalition supports reasonable limits such as a 30-day blackout period for outsider access to crash reports. It’s an uphill battle, however. Budget-minded pushback by state agencies often stalls state legislation limiting access to the reports. Sadly, budget concerns also trump needed policy debates over the privacy of crash victims.

We need better privacy debates, and stronger state laws. How much of our personal information do we want released by “accident”?

Homes bought cheap, burned for inflated claims

Homes and cars were kindling for Verdon Taylor, the overlord of a crime ring that lit up more than 30 arson fires to score nearly $1 million of insurance money.

Buy cheap and claim big was Taylor’s modus during a 16-year binge that traversed the Richmond, Va. area

Taylor’s rat pack bought homes and cars at auctions and foreclosure sales — all at steep discount prices. Single-family homes and mobile trailers and cars all were rounded up. Taylor’s cohorts often rented houses as well.

They stuffed the homes with old furniture and clothing they bought at flea markets or auctions. Several times they recycled furniture, using the same burned items singed in prior home fires.

They often brazenly set fires just weeks or even days after buying policies. The claims were inflated, as if the dusty old furniture was new. Fire claims ranged from $1,000 to $300,000. Ring members often lied about past home-fire claims when buying new policies.

Nearly entered burning home
Taylor’s son Vershawn bought a house at a steep discount, and set the place afire just eight days later.

A concerned neighbor wanted to risk his life to race into the home and see if anybody needed help escaping.

“Everybody should be mad. This is a crime against all of us,” said Miami-Dade State Attorney Katherine Fernandez Rundle.“He was about to run in the house … I said ‘Don’t.’ … It was engulfed and I didn’t know if it would blow up or anything,” his wife said.

The rescuer wisely stayed outside — he nearly put his life on the line for a home that was empty. Vershawn pulled down $303,000 of insurance money.

The feds started investigating as the fires and claims suspiciously piled up. Taylor issued a gag order to one ring member. “Tell those people to get out of your face,” Verdon ordered. Just hang up the phone whenever federal agents called him, he said.

Taylor will spend up to 50 years in federal prison after being convicted in October 2017. His girlfriend and Vershawn will spend up to 20 years of quality time behind bars.

Arson rings ransack South Florida
Stuffing homes with old furniture and clothing seems to be a habit with some arson rings. Five gangs ran amok in South Florida, launching an eye-popping $25-million insurance crime wave by torching dozens of homes.

Corrupt public adjusters led the rings. The adjusters exploited the insurance system to rubber-stamp false claims for payment. They typically rented homes, often large ones. They recruited cronies as straw owners, waited 90 days for the insurance to kick in, then started the fires.

The arsonists often filled homes with inexpensive old furniture and clothes. The stuff was stolen or bought from thrift shops — just like Verdon Taylor.

Often they placed a burning candle next to a fake plant or other flammable item. That sparked fires and created seemingly plausible excuses for the “accidental” blazes.

The sham renters made inflated claims for the junk possessions.

They even planted the same seared furniture, family pictures, bedding and other personal items in multiple homes they burned.

Closets sometimes were filled with sweaters. That seemed strange to investigators in a region known for year-around heat.

Innocent homeowners foreclosed
Two homes were the main income source for unsuspecting homeowners who rented their places to ring members. When the fires forced the renters out, the owners couldn’t pay their bills and lost their homes to foreclosure.

Home insurance arsons have fallen significantly in South Florida. Some would-be arsonists have fled the state rather than face prosecution and certain convictions. At least 75 others who stuck around were rounded up and have pleaded guilty.

“Everybody should be mad. This is a crime against all of us,” said Miami-Dade State Attorney Katherine Fernandez Rundle.

End times for personal vehicles – and automobile fraud?

If you’re just starting your career as an auto fraud investigator, you might consider broadening your portfolio of skills.

That’s sound advice if you believe the predictions of car guru Bob Lutz. The automobile will go the way of the horse and buggy in 15 years, 20 at the most, Lutz says In its place will be “standardized modules.” Here’s how he sees the future:

“The end state will be the fully autonomous module with no capability for the driver to exercise command. You will call for it, it will arrive at your location, you’ll get in, input your destination and go to the freeway.

“On the freeway, it will merge seamlessly into a stream of other modules traveling at 120, 150 mph. The speed doesn’t matter. You have a blending of rail-type with individual transportation.

“Then, as you approach your exit, your module will enter deceleration lanes, exit and go to your final destination. You will be billed for the transportation. You will enter your credit card number or your thumbprint or whatever it will be then. The module will take off and go to its collection point, ready for the next person to call.

“Most of these standardized modules will be purchased and owned by the Ubers and Lyfts and God knows what other companies that will enter the transportation business in the future.”

So … no human control means no staged crashes, no auto giveups and likely very few accidents because 99 percent are caused by human error.

Still, don’t count out the creativity, flexibility and skill of the fraudster community. Where there’s a will — and insurance dollars — they’ll find a way. Fortunately for us all, so will fraud investigators.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Taking a “whack” at insurance fraud

Have you ever played the carnival game “Whack-A-Mole”? As the pesky little creatures pop-up from holes on the game board, the players holding a mallet in hand get points for how many moles they whack on the head before time runs out.

If you’ve played the game, maybe you were trying to escape work, but there really is a good comparison here. Fighting insurance fraud is amazingly similar to playing a game of “Whack-A-Mole.”

When a state insurance department, local law enforcement or insurers “whack” down a fraud ring or fraudulent service provider, the unsavory “creature” often soon pops back up from another hole. And the fraud game begins again.

We repeatedly see this with unethical medical providers simply changing a clinic name to secure a new tax ID number and popping up as a “different” entity. Meanwhile, nothing has changed “down in the hole” where the fraud occurs. Dishonest body shops do the same. Even disbarred lawyers “pop up” as “paralegals” in their former law firms.

On a larger scale when Florida began a more-serious crackdown on PIP automobile fraud, especially in South Florida, many medical clinics simply packed up and began popping up in and around Louisville, Kentucky. Why? Was it Kentucky’s great business opportunities? A rising population tide? Better weather? NO … a simple look at the “game board” holds the answer. Kentucky is the next state north of Florida with PIP auto coverage. The fraud game just picked up and moved to the next “hole” on the game board.

Any experienced fraud fighter has seen this game in action. Whether within a state, even a city or across the nation, fraudsters don’t give up. They often simply disappear and move on to “pop” out of a new “hole.”

So, what do we do? Giving up is certainly not in our DNA, or in our ethics. First, we must be aware of this issue, then do a better job of sharing more information — through sources like the Coalition, NICB and IASIU — of fraudulent activity so others are alert to watch out before the fraudsters “pop-up” somewhere else.

Next, insurer investigators need to notify their claims, SIU and both inhouse and panel counsel with the same information. Being informed, they can better watch for, and track, the spread of fraudulent activities and players.

Finally, we need to partner wherever possible with local, state and federal prosecutors. They have the power to “pull the plug” on the fraud game, and put the little varmints in a special hole covered with bars where they can’t pop out for a long time to come.

About the author: Matthew J. Smith serves as general counsel and associate director of government affairs for the Coalition Against Insurance Fraud.

Association health plans open door to premium theft

Last time the Trump Administration forayed into health insurance, it created an ill-advised executive order allowing sales across state lines. The administration went further this week by announcing an order to allow association health plans (AHPs).

Both ideas likely will do little to expand coverage or lower premiums, most experts say. The proposals also could open the door to the worst type of insurance fraud.

Trump’s latest order would allow creation of health plans that bypass state regulation and important safeguards on solvency standards. We’ve gone down this road before, and the scenery isn’t pretty.

Trusting consumers bought thousands of such lower-priced policies15 years ago. People wanted to save money or get coverage that wasn’t available from standard health plans. Many plans were legitimately offered through trade and professional associations.

Thousands of consumers didn’t get health claims paid, though, when some plans went belly up. Other plans were outright frauds. They often paid small claims to pacify policyholders in the beginning. then refused to pay larger claims. The con artists collected millions of premium dollars and fled. Consumers by the thousands were defrauded. Many were left in financial ruin, stuck with large medical bills they had to pay from their own pockets. One couple had a child with brain cancer, only to discover they’d bought into a fake health plan.

That’s one reason the Coalition adopted a position opposing AHPs back in 2003.

If association health plans catch on this time around, state regulators and others will have their hands full helping consumers steer clear of the inevitable fraudulent ones.

In the meantime, some con artists who got caught in the last round of bogus health schemes are just getting out of prison. They may revert to selling more fake health plans. So the administration’s timing couldn’t be worse. AHPs are one health reform consumers can do without.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Dying Medicare scammer handed 75 years

Debates over fairness of jailing offenders typically traverse highly emotional concerns such as over-packing prisons with African-American men and nonviolent drug users.

How about terminally ill mothers of kids?

A federal judge’s recent decision turned a $13-million Medicare crook into a sympathetic figure.

Marie Neba deserves prison. But 75 years worth?

The Houston woman looted Medicare of $13 million. Neba co-owned a home healthcare firm. She recruited healthy seniors — lying they were frail, homebound and needed her firm’s expensive care.

Neba blew our taxpayer money on a pasha’s lifestyle. She was caught and rightfully convicted. Neba should’ve been quietly shuttled to federal prison for at least several years. Yet another cheater swept up by an protracted federal smackdown of Medicare criminals.

Instead, Judge Melinda Harmon inexplicably handed Neba 75 years.

The next-largest Medicare sentence is 50 years, for Lawrence Duran’s $205-million looting of mental-health services in the Miami area. Dr. Farid Fata got 45 years. He inflicted massive doses of painful and disfiguring chemo on healthy patients in the Detroit area.

Neba’s also dying. She has breast cancer that has spread to her lungs and bones. And she’s the mother of twin seven-year-olds.

Harmon struggled to justify 75 years. “I am not a heartless person. I think I am not. I hope I am not …” she told Neba at sentencing. “It’s just the way the system works, the way the law works.”

Justice should be fair, and tough when needed. It’s when sentencing appears robotic and punitive for its own sake that we erode the fairness and public trust that distinguish America from banana republics.

Neba is appealing. It’ll be vigorous debate about judicial discretion and strict adherence to sentencing guidelines. Her appeal deserves a very close look.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud

Celeb skin doc bills nose jobs as insured medical repairs

Patients found Dr. David Morrow’s offer an easy sell — he’d pretty them up with free or discounted cosmetic surgery.

Insurers would pay most of the tab, the celebrity skin doc told patients at his clinic in Rancho Mirage, Calif. Except health insurance generally doesn’t pay for plastic surgery. Beautifying the body is more an elective personal pleasure than than true medical need.

So Morrow blithely invented medical diagnoses he knew insurers would pay — falsely billing $50 million for trumped-up surgeries. He billed nose jobs as fixing deviated septums. Tummy tucks magically became hernia repairs or abdominal reconstructions. Breast lifts were surgeries for “tuberous breast deformities.”

Morrow forged test results, medical notes and surgical records to back up his fantasy world. He even covered up the text of records for a patient’s “abdominoplasty” (tummy tuck) — hand-writing “umbilical & ventral hernias” on top of the original wording.

Insurance made doc wealthy

Compliant patients herded to Morrow. He fashioned himself as a high-profile, high-end skin doctor. “One of the top cosmetic surgeons in the world for skin and facial rejuvenation,” Morrow lauded himself on the now-shuttered website for his defunct Morrow Institute.

Pinterest postings are also an online temple to status, wealth and opulent living off of stolen insurance wealth. Morrow had his own line of beauty cosmetics, and claimed the world’s first laser face lift. The couple founded a Jewish day school, and donated handsomely to the symphony and other cultural causes.

Morrow also pressured some patients to get surgeries they didn’t want in exchange for “free” cosmetic upgrades. Patients believed Morrow played by the rules, giving them honest surgery and lodging honest insurance billings.

Far from it. On top of camouflaging cosmetic operations, Morrow also stole patient names, medical information and signatures to secretly charge insurers for surgeries he never bothered performing.

Tried to steal $50 million

The insurance spigot opened wide. Morrow charged patients’ insurers more than $50 million all told.

Morrow billed up to $150,750 for a single surgery. He ransacked insurers for as much as $700,000 if he did several procedures on a patient. The hefty payouts cascaded into his bank account — $24 million worth before he was caught. Morrow and his wife Linda owned a $9.5-million mansion and fleet of cars.

Morrow also botched some surgeries, disfiguring patients and inflicting ongoing discomfort.

Some insurers refused to pay up. So if the patient was a public employee, Morrow demanded the government agency pay him directly. He went after the California Highway Patrol, Desert Sands Unified School District, Palm Springs Unified School District and City of Palm Springs.

Handed 20 years, bolted for freedom

Investigators and prosecutors did their job well. The evidence of insurance scheming and tax evasion was so strong that Morrow pleaded guilty to federal charges. So did Linda, who was executive director of his operation.

They faced dozens of years in jail. Morrow was scheduled for sentencing first. Everyone showed up at the court for a hearing except the Morrows. They’d carefully plotted an elaborate escape.

The couple secretly sold their mansion and car fleet, wired millions of dollars to secret bank accounts, then disappeared. They’re still on the run, and the feds are hunting. Any potential for leniency evaporated. The court handed Morrow 20 years in federal prison in absentia. Linda awaits sentencing.

In Morrow’s high-rolling world of cosmetic scalpel work, the celebrity skin doctor proved that insurance fraud and bodily beauty both are only skin deep.

Coalition partnering for stronger government affairs

We all know today’s business mantra is to do more with less … the “less” meaning fewer personnel, less funding and stretching of resources. While accepting this “new reality,” many of us are quick to criticize these changes from what we were accustomed to for many years.

Without debating the pros and cons of the financial and human resources limits facing today’s fraud fighters, many positive things are occurring as well under new business models. These often require more-creative thinking and working cooperatively to achieve results.

While it is far too early to tell if this will be a major and continuing trend, one positive thing the Coalition is monitoring is the increase in our member (and organizations looking to strengthen their partnership with the Coalition. Jointly, we’re working to expand our impact on legislative initiatives and government-affairs efforts.

We regularly meet with our fraud-fighting partners, and non-traditional partners when necessary, to help move an anti-fraud agenda forward.

Partnerships are an important tool as we fight insurance fraud. For instance, we partner in several states including Kentucky, Virginia and New Mexico as members of statewide insurance advisory boards. We partnered with NICB to push for funding of dedicated fraud prosecutors in Virginia. We also partner with non-traditional groups like the carpenters union on workers compensation premium-avoidance schemes, and with Honda America to help thwart counterfeit airbags.

Working in partnership helps bring the anti-fraud message forward more forcefully. The message is good both for consumers and insurers. The Coalition is ready and able to partner and achieve shared legislative goals to help protect America’s consumers from both being victims of, and paying for, insurance fraud.

The more we work cooperatively as a multi-faceted team in approaching government affairs the more impactful, and successful, our efforts will become.

The Coalition remains a unique voice uniting America’s consumers, insurers and government agencies to let our message and concerns be known from the halls of Congress through 50 state legislatures. And now we’ve expanded those efforts with a program of amicus briefs in key U.S. federal and state courts.

We are here to serve all our members — and the American public — and welcome partnering with you to fight fraud.

About the author: Matthew J. Smith serves as general counsel and associate director of government affairs for the Coalition Against Insurance Fraud.

11 years ago there was a troubling disturbance in the anti-fraud force

As the Coalition prepares to celebrate 25 years of combating insurance fraud, let’s glance back and explore milestones, key successes and discuss the great progress the fraud-fighting community has enjoyed.

But such wasn’t the case 11 years ago this month when plans were being drawn up to fold the three major anti-fraud organizations into one. A proposal to combine the Coalition, NICB and International Association of SIUs had been pursued aggressively for more than a year. The plan created controversy and deep distrust among the organizations.

The idea for a single organization to focus on fraud in the property/casualty arena arose from the consulting firm of McKinsey & Company, which sold the proposal to members of the Chief Claim Officers Roundtable.

On the surface, it seemed having one organization would improve efficiencies and create a united front against fraud. But digging deeper, which McKinsey failed to do, would’ve found three organizations with different missions and divergent constituencies. It was a half-baked idea that likely would have ended in disaster.

The dance of dealing with efforts to combine organizations lasted a full year. Our vital work on combating fraud slowed to a snail’s pace. Momentum was lost, and no one knew if the Coalition or IASIU would survive. There were hard feelings all around. The Coalition lost about $100,000 in dues revenue from insurers who wanted no part of consolidation. At least one insurer subsequently quit because it favored the proposal.

Fortunately, IASIU members came to the rescue in September 2006 and voted to stay independent. The merger then was abandoned.

While it wasn’t the finest hour for the fraud-fighting community, there was a silver lining. The merger discussions helped the three organizations know each other much better. All three soon signed a memorandum of understanding to work together against fraud crimes.

Since then, the three groups have been active partners working jointly on a variety of projects that have greatly benefited our common cause in curbing fraud. All three also have flourished in achieving great success — and we expect that will continue for the foreseeable future.

On an ironic side note, the lead consultant in this boondoggle from McKinsey & Company — the guy who came up with the merger idea — was convicted earlier this year of a $500,000-plus fraud scheme. He’ll be sentenced next month in federal court — while our three anti-fraud organizations continue thriving.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.